I'm planning to sell my home, with the help of a real estate agent. I keep hearing that I should avoid "dual agency." What’s dual agency and why should I avoid it?
As a home seller, you want your real estate agent to represent your interests and help you achieve your goal: to sell your home quickly and smoothly, for as much money as you can get.
On the other side of the table is the buyer, who’s hoping for nearly the opposite: to get the property for as little as possible.
Price isn't the only issue, either. Let's say, for instance, that you can't afford to buy another home until you've sold this one, but don't have a place to stay after the house is sold. You might be willing to go down a great deal on price in order for the buyers to grant you a "rent back," allowing you to stay for some weeks. But do you really want your agent to know that, and possibly to signal your desperation to the buyers?
As you can see, it would be difficult for one agent to represent the interests of both the buyer and the seller, in what’s called a dual agency. Of course, you hired the agent, so his or her first loyalty is to you; but nevertheless, in a dual agency relationship, the agent is expected to attempt to serve both parties fairly.
Some agents prefer dual agency, because it means they don’t have to split the commission with another agent. (The seller normally pays their agent a percentage of the selling price, as much as 5% to 6%, and then that agent splits the commission with the buyer's agent.) In some regions of the U.S., dual agency is quite common.
But if you’re going to pay a full commission, don't you want someone who fully represents your interests? If an agent asks you to consent to a dual agency, make sure there's a compelling reason to go ahead with this.
Somewhat less onerous than the dual agency is a designated agency. In this situation, the buyer is represented by another agent in the same brokerage as your agent. Technically, this is a form of dual agency, because each agent works for the same broker. Unlike a dual agency, you get personal representation from a designated agent. But you must fully trust your agent to represent your interests and not divulge your bottom line to the buyer’s agent.
If you’re willing to participate in a designated agency, you might request a reduction in the commission, based on the fact that the brokerage will make twice as much as it otherwise would have on the deal.
While a listing agreement is advantageous for the real estate agent, because it obligates you to work with that person for at least a minimum amount of time, it also protects you, the home seller. It formalizes your relationship, and explains the agent’s responsibilities and what to do if the agent doesn’t meet them.
Don't worry that you'll have to spend a lot of time working out the language of the listing agreement. Your agent will have a standard form for you to review and sign, containing a lot of boilerplate that's used by all agents industry-wide. Nevertheless, it's boilerplate that has been developed over many years (with a few lawsuits thrown in), and it's important.
If, for example, your relationship eventually goes sour, you'd definitely want to go back to the listing agreement to remind yourself how and when you can cancel the contract.
Here are some of the most important terms covered by the standard real estate listing agreement.
Most real estate listing agents use standard forms created by state or local Realtor associations to create their listing agreement. Don’t sign without reading carefully, however—and don’t be afraid to ask for changes or amendments.
Agents sometimes resist changing their standard agreements, having used them many times in the past without incident. Nevertheless, if you’re uncomfortable with something, there’s no reason it can’t be changed. Small changes can be written right on the contract (make sure you get a copy) and initialed, and large changes can be added on separate addendums and referred to in the contract itself.
For more on working with a real estate agent when you sell your house, see the book Selling Your House: Nolo's Essential Guide by Ilona Bray (Nolo).
]]>In a typical home sale, each party—the buyer and the seller—works with their own real estate agents. But it's the seller who normally pays the commission for both agents, from the proceeds of the sale, per a written contract signed with that agent.
When entering into the listing contract, you, as the seller, have an opportunity to set the amount of commission both agents will receive. The commission is set as a percentage of the home's sales price. By tradition, most selling agents ask for a commission of around 5%, to be split with the buyer's agent. That split is sometimes 50-50, but often cut unevenly, so that the buyer's agent (who puts in far less work) will receive around 2.5%.
Those figures might change even without negotiating on your part. Consumer dissatisfaction, particularly with the amount sellers must pay to buyers' agents, led to a major 2023 court ruling. A Missouri court found that the National Association of Realtors (NAR) had, along with some residential brokerage firms, conspired to artificially inflate home-sale commissions. The court ordered damage payments totaling $1.78 billion. That case will wind its way through appeals courts for some years, but similar lawsuits are already being filed in other areas. What's more, real estate agents could find themselves facing new and tough questions from clients.
No matter how this all plays out, reducing the commission you'll pay to your real estate agent by as little as 0.5% could result in big savings—for example, saving 0.5% on a $400,000 home sale would be an additional $2,000 in your pocket.
Studies have found that sellers who negotiate to cut their real estate commission can do so with little risk of getting worse service. Many real estate agents are hungry for business and willing to find financial middle ground.
Given the new public attention to this issue, some agents are likely to be especially amenable to negotiation. Some circumstances that you can use as leverage include:
Of course, some agents might push back hard. They're under pressure from the company they work for to keep commissions high, since this money not only pays the agent directly but goes toward office overhead and the numerous costs of marketing the home, such as paying for advertising listings and flyers, photographers, possibly snacks at open houses, and so on. Plus, your agent will still have to work out an agreeable split with the buyer's agent.
Don't want to take "no" for an answer? Go to the top. Seek out the broker, rather than the real estate agent who holds your listing. The broker has the power to pull strings, negotiate their cut with the agent, or otherwise help you get a discount.
If you're hitting a wall, but really want to work with a certain agent, you could offer to play a greater-than-usual role in the process, as described next.
Then again, you might simply look for a different agent, perhaps one that routinely offers a discounted commission arrangement. Before going that route, make sure you'll be getting all the same types of service a regular agent would offer, or at least are willing to do them.
Consider doing a meaningful portion of the agent's work, much as you would with a discount broker in a hot market. For example, you might host your own open house events; perhaps have an informal open house for friends and neighbors (who might tell their friends, and so forth). You'll need to provide brochures, fliers, and information about the property, which your agent might help you prepare. You can refer unanswered questions and bids to the agent.
Also think about how you can reduce the agent's work on the physical condition of your home. Real estate agents know they will have to work harder if your home isn't move-in ready, and might thus be less likely to reduce the commission. Ideally before the agent even sees the place, you can add curb appeal to get shoppers excited about the property and spiff up or stage the inside so that it's clutter free, sparkling like a gem, and laid out for easy navigation.
Selling during the off season is a good time to request a reduced commission. Whether it's the dead of winter in some locales or the pre-school summer doldrums in others, selling in the slowest seasonal periods can be the best times to find a real estate agent who's hungry for work, even at a cut rate. But before you set your selling schedule around this plan, balance the possibility of a reduced commission with the possible negative impact of selling at a time when there are fewer potential buyers to bid the price up.
It is not only legal, but the industry standard for an agent's commission percentage to remain unchanged despite unforeseen costs such as repairs demanded by the home buyer. Your contract probably states that the listing agent will be paid a percentage of the sales price of the property at the closing, with no concessions for surprises or extra costs incurred by the seller. The only time an agent's total commission amount will change is if there is a change in the actual sales price.
To learn more about real estate agent commissions and more, see Selling Your House: Nolo's Essential Guide, by Ilona Bray (Nolo).
]]>We'll discuss all of these in greater detail below.
You should consider only someone who is licensed by your state, meaning the agent has met minimum levels of education, training, and testing. You'll get someone with even more education if you hire a "broker" (someone with the power to oversee ordinary agents). Ask whether the agent is a member of a respected trade association such as the National Association of Realtors (NAR), or has special credentials, such as "CRS" (Certified Residential Specialist).
You're looking for someone who has at least three years’ experience selling residential real estate, and a track record selling homes like yours—both in terms of geographic area and type of property. For example, someone who has sold lots of new homes in a planned unit development might not be the best match for your 50-year old suburban ranch house. And if yours is a luxury home, you'll probably want an agent who specializes in this unique market.
A real estate agent might come to your meeting with a comparable market analysis (CMA) of homes similar to yours (in size, amenities, and location) that are either on the market or have sold within a reasonable recent time period (ideally three months, but no more than six). A CMA should also include comparable houses that were listed but expired (likely because the house was priced too high and no one bought).
Of course, the agent might justifiably wait to actually tour your house to prepare the CMA, but you can certainly ask for a ballpark estimate of both how much you should list the house for and how much it's actually likely to sell for at that time. Also, when it’s close to the date you actually list your house, the agent will update the CMA and suggest a range of figures.
You’ll want to ask lots of questions about the CMA and make sure you feel the listing price seems reasonable. Unless it’s a seller’s market, with little competition and lots of buyer demand, be careful not to overprice the house. Underpricing is usually less of a concern, as prospective buyers will spot a bargain, swarm in, and drive the price up. Whatever you do, don’t choose the agent who thinks they can get the highest price for your house! They might be just trying to get your business with big promises.
Also do your own homework on home sales, by checking out websites containing real estate listings, such as www.realtor.com, by the National Association of Realtors (NAR), and websites that collect data on actual selling prices, such as Zillow or Trulia. For more on the subject, see Listing Your House: What List Price Should You Set?
Asking for listing and sales dates and prices (including addresses) will give you a good sense of the agent’s recent success at selling homes. If there’s a big gap between the listing price and the selling price of homes the agent sold in the past year (in other words, the homes have sold for less than the agent listed them at), the agent might be unrealistic when recommending a listing price. Or if the agent’s listings took an unusually long time to sell (if at all), this could tell you the house wasn’t priced appropriately (or marketed enough).
Of course, if none of the agent’s properties are similar to yours, this might not be a good match.
Find out how the agent plans to bring your house to the attention of interested buyers—and why the agent believes past strategies will work for your home. If the agent doesn’t do open houses or take out ads in local newspapers, and you think those would be good ways to sell your house, find out why.
A good agent will provide specific advice on what would make your house more marketable—such as a major downsizing of house furniture, yard cleanup, painting, and other spiffing up. In cases of older properties, the agent might suggest you arrange a professional inspection by an experienced contractor so that you are aware of any hidden problems. (This won’t be the same person who does an inspection for the buyer, as described in Getting a Home Inspection Before a Real Estate Purchase.)
The traditional expectation has been that home sellers will pay somewhere between 5% and 6% of the selling price, and that this will be split between the seller's agent and the buyer’s agent. The split is normally either 50-50 or, more often, the buyer's agent will receive around 2.5%.
The exact amount could vary depending on many factors, including the selling price of your home and the ultimate outcome of various lawsuits and consumer scrutiny of the real estate industry. See Negotiate the Agent’s Commission When Selling Your House for details.
Your final decision should be based on the above factors as well as intangibles, such as how easy you feel it will be to work with a particular agent and how organized and detail-oriented the agent seems. If, for example, an agent comes late to your initial meeting and is interrupted by constant phone calls, think twice. (Of course, if the agent is in the middle of closing a deal, there might be urgent calls the agent needs to take, but the agent should explain this before you start your interview.) Or if you sense an agent is overbooked and won’t provide the time attention you'll need, keep looking. You don’t want your agent to push you off to a less experienced associate owing to a lack of time to handle key details of your house sale.
Once you’ve found the agent you want to work with, you’ll draw up a formal listing agreement that spells out details, including the commission you’ll pay.
For more on finding and choosing the best agent to sell your home, including checklists of interview questions, see Selling Your House: Nolo's Essential Guide, by Ilona Bray, J.D..
]]>Learn about what the process entails, whether it's a good idea for your situation, and where to get help if you do decide to go it alone. Above all, get to know the market well enough that you don't end up selling the home for less than it's worth.
As of 2023, the standard commission a seller pays to a real estate agent is 5% to 6% of the home's selling price. So if homes are particularly pricey in your area, you could, in theory, save tens of thousands of dollars; with three major caveats:
No law requires you to hire a real estate agent when you sell a house or property. As a practical matter, however, real estate agents might have access to resources that you do not, such as the full scope of the Multiple Listing Service (MLS). (It has information sections that the public cannot see.)
Some states do, however, require a real estate attorney to handle the real estate transfer documents and closing, particularly in the eastern part of the United States. Check with your state department of real estate to find out whether an attorney is required in the state where your home is located.
The closer you look, the more little tasks are revealed as crucial in preparing, marketing, and successfully selling your home. The most important tasks that a real estate agent will normally perform for you include:
Sound like a lot? Indeed, it can be a full-time, nights and weekends job in the days and weeks while your house is on the market.
And as any agent will tell you, it's not all glamorous. Some have been known to get out a mop and give a house a last scrubbing before the open house (but don't count on this!) or drag their own furniture over if it will make the house look better.
Selling a house without an agent is called a FSBO (pronounced "fizzbo"), or For Sale By Owner. As you might have guessed, people who try it usually develop some appreciation for how agents earn their commission. If you want to go it alone, be sure you have the time, energy, and skills to handle all the details described on the above list of what an agent does.
Before you dive in, you should also evaluate the market and your schedule. FSBOs are usually more feasible in sellers' markets where there's more competition for homes, or when you're not in a hurry to sell.
To sell your house by yourself, you must learn the legal rules that govern real estate transfers in your state, such as what forms you'll need to fill out, who must sign the papers, who can conduct the actual transaction, and what to do if and when encumbrances on your property title are discovered that slow down the transfer of ownership.
Try searching for information online, talking to friends with relevant expertise (unless you already happen to be a lawyer or similarly informed professional), or hiring a lawyer for a few hours' consultation.
You also must find out whether your state mandates that you make disclosures as to the physical condition of your house and related issues such as environmental hazards or legal troubles. (See Required Disclosures When Selling Real Estate.)
Also, if you might end up owing capital gains tax on your home sale, you'll want to familiarize yourself with which costs associated with selling FSBO can be used to offset the amount you owe.
To make sure buyers learn that your home is for sale, you'll want to:
To save on commissions without getting in over your head, you could consider doing most of the work yourself—such as showing the house to prospective buyers—and using a real estate agent to help with such crucial tasks as:
If you take this approach, you might be able to pay by the hour or at a flat rate, or negotiate a reduction off of the typical percentage commission agents charge Or, you might find a company offering discounted real estate services, perhaps in return for you handling part of the work.
For advice on hiring a real estate agent and all other aspects of selling your home, see Selling Your House: Nolo's Essential Guide, by Ilona Bray.
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