Trying to Sell Without an Agent? Learn From Another Seller’s Experience

As much as I like to think sellers benefit from listing their home with a Realtor, I understand their desire to try “For Sale By Owner” (FSBO), and I respect those agents who educate FSBO sellers about the value of hiring a real estate professional.

However, this week I was made aware of an apparent “bait and switch” by an agent who secured a FSBO listing by making a promise he didn’t put in writing.  I’ve never heard of this before, but I thought it worth sharing so we can all learn from it. Overall, I’ve found that agents, and especially Realtors (members of a Realtor association), are diligent about law and ethics.

I only know what the seller told me, but I have no reason to question what he told me. He told me that he had posted his home on craigslist starting last fall. In May an agent convinced him to sign a listing agreement, promising the seller he could still sell the home himself and not owe any fee or commission.

Such an agent-seller relationship is referred to as “Exclusive Agency” instead of “Exclusive Right.” Yes, it’s a little confusing.  The relationship involves executing both the standard listing agreement and an addendum which contains the following: “...this Listing Contract does not apply to a Sale or Lease of the Property to a buyer or tenant procured solely by Owner without the assistance of Broker....”

The seller called me for advice after he told his agent that he had secured a buyer through his craigslist ad, and the listing agent said he would handle the transaction and a commission would be charged per the signed contract. 

As I investigated further, I discovered that the agent had presented the standard listing agreement without that addendum.  Did he do that on purpose?  His actions suggest so.

Sellers shouldn’t have to know the ins and outs of the different contracts and addenda used in the sale of residential real estate. We licensees must know these contracts and utilize them responsibly, explaining their provisions to our clients.  What this particular licensee appears to have done was unconscionable,  unethical and possibly illegal.

Fortunately for the seller, the agent had included a provision in the listing agreement that the seller could terminate the contract for any reason if he was “dissatisfied” with the agent’s performance, so I advised the seller to send the agent an email terminating the contract under that provision. The agent then claimed that the seller had violated the contract by not referring a buyer to him and by terminating the contract in order to avoid paying a commission.

Because the seller had signed the contract without the addendum, this was factually true, but I couldn't believe that the agent was compounding his bad behavior by pressing that point.

The agent said he would pursue legal action against the seller, and file a complaint against the seller with the Division of Real Estate, which makes no sense since the DRE only disciplines licensees, not consumers.  He also threatened to file ethics charges against me for my role in advising the seller. 

It is regrettable that there are Realtors such as this one who, if this story is true, brings dishonor on our industry and on the Realtor association by this kind of  behavior.

I sent the seller — who I still haven’t met, only spoke with him on the phone and exchanged emails — a link on the DRE website for filing an online complaint against the licensee, and the seller did file a very articulate complaint, which I hope results in the agent being disciplined if the investigator verifies the complaint.

If you have been similarly victimized by the unethical and/or illegal behavior of a real estate licensee, don’t just accept that. Contact the Division of Real Estate and/or the local Realtor association. Please don’t let such behavior by one real estate professional sour you on the benefits of employing an honest and ethical agent, which most of us are.  We really do offer value when we obey the rules.

Published June 16, 2016, in the YourHub section of the Denver Post and in four Jefferson County weekly newspapers.

 

What Are the Services You Can & Should Expect a Listing Agent to Perform?

The biggest cost of selling a home is the commission you pay to the agent who lists your home.  That fee is typically in the 5 to 6% range.  All your other fees, primarily title insurance, add up to less than 1% of the sales price of the home.

No one says you have to list your home with a real estate professional.  You could always put a “For Sale by Owner” sign in your yard and put it on craigslist. You can pay a few hundred dollars to put it on a FSBO (For Sale By Owner) website, and post it on Zillow.com as a “Make Me Move” listing. You can shoot your own pictures, maybe even a video.

However, if you choose to hire a professional, it would be nice to know what you’ll get for your money and whether you’ll net more for your house while saving yourself all that FSBO effort and expense.

 

So this week I thought I’d lay out the services you can and should expect from the agent you choose to hire for this job — both the legally required minimum services and those extra services which a good listing agent performs.

 

The biggest expenditure made by your listing agent will be to pay the agent representing the buyer. Roughly 95% of the time, the buyer is represented by a “buyer’s agent” who does not get paid by the buyer or by you — that agent is paid by your listing agent. Whether you are paying your listing agent 5% or 6%, that agent typically offers 2.8% “co-op” commission to the buyer’s agent, leaving your own agent from 2.2% to 3.2% commission for himself.

 

Even if you take the FSBO route, you could find yourself paying 2.8% commission to a buyer’s agent, saving yourself only the listing portion of a listing commission. (Indeed, the majority of FSBO sellers end up listing with an agent after struggling with the by-owner approach.)

 

What if you hire an agent at 5 to 6% commission and he/she doesn’t have to give 2.8% to a buyer’s agent?  Hopefully, you will have negotiated a listing agreement in which the commission is reduced by, say, one percent. This saves you on the commission while still rewarding and incentivizing your agent to sell the home.

Okay, having covered compensation issues, what tasks are you paying your listing agent to perform?  The mandatory services required by the Colorado Real Estate Commission (CREC) are spelled out in Section 5 of the listing agreement. They include presenting in a timely manner all offers, accounting for earnest money received, keeping you fully informed throughout any transaction, disclosing any material facts about the buyer known by the listing agent, and advising you to obtain expert advice on matters beyond the agent’s expertise, such as legal and tax matters.

Those are “uniform duties” of your listing agent, even when he or she functions as a “transaction broker,” which a listing agent must do when he has a client relationship with the buyer.  If he does not have a client relationship with the buyer, then your agent has an obligation to promote your interests with “utmost good faith, loyalty and fidelity” and to share with you anything regarding the buyer which gives you a negotiating advantage, such as how desperate the buyer is to find a home, etc.

 

Nothing else is required by the CREC, but here are tasks which you should reasonably expect a full-service listing agent to perform:

¨ Assess the market and help you price your home to get the highest price for it

¨ Put your home on the MLS and other online resources to maximize its exposure

¨ Shoot quality photos and video as part of a comprehensive marketing plan

¨ Help you prepare (“stage”) your home to show its best

¨ Advise you of likely inspection issues and recommend trusted vendors to fix them

¨ Install lockbox and engage showing service to manage showings and provide feedback

¨ Evaluate and negotiate competing offers

¨ Negotiate inspection demands

¨ Negotiate when home appraises for less than contract purchase price

¨ Guide you through the closing process

Published June 9, 2016, in the YourHub section of the Denver Post and in four Jefferson County weekly newspapers.