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What a Seller's Agent Does

Fact: About 7 million homes sell in the U.S. every year. That’s a lot of For Sale signs, which makes marketing your house all the more important.

People see me running around, putting up signs and showing houses, and they think that that’s all real estate agents do. It’s way more than that.
                                                                                    – Michele T., real estate agent

Remember back when you bought your home? After weeks or months of looking, you came across a house you liked, made an offer, and soon found yourself signing the biggest stack of papers you’d ever seen in your life. Afterwards, you took your new keys, unlocked the door, and, with a big sigh of relief, said to yourself, “Welcome home!”

And now, it’s time to sell. Maybe you’ve built up some equity and want to step up to someplace bigger. Or maybe you’d rather find someplace smaller, reduce your mortgage and maintenance costs, and put that money to other uses. In the end, the reason doesn’t really matter — why you’re selling is as individual as you are — but how you sell your home can have a huge effect on the outcome.

It can be a bit intimidating, especially since there seem to be more options all the time. Full-service agents and FSBO (For Sale by Owner) programs. Discount brokers and flat-fee services. The fact is, four out of five home sellers will use a real estate agent at some point during the process, so it makes sense to understand exactly what real estate agents do.

One Agent, Many Hats

At the simplest level, a real estate agent represents buyers and sellers in the purchase and sale of "real property" (e.g., a house). When you were looking to buy, the agent you worked with probably spent most of his or her time showing you houses, which is probably why so many people think that’s primarily what agents do.

When you’re selling, though, showing your house is actually a very small part of an agent’s job. Assuming you’re working with a full-service agent and that they’re doing a good job, they’ll also be doing most or all of the following:

  • Help you price your house: A good real estate agent will understand the local market in general and conduct a Comparative Market Analysis or CMA to help set a specific price. The trick is to get the highest price you can without scaring off potential buyers.
  • Provide advice on how to present the house: From curb appeal to emptied closets, agents know how to highlight the amenities buyers want.
  • Market the house to buyers: For Sale signs, Internet advertising, direct-mail fliers, newspaper ads, and showings — they’re all tools to get buyers to take a closer look.
  • Market the house to other real estate agents: Truth be told, an agent’s most important target market is not home buyers, but rather other agents. And their most powerful weapon is the MLS or Multiple Listing Service, which, by the way, got its name from “listing” agents.
  • Represent you during negotiations: Once an offer is made, your agent becomes part messenger, part manager, handling counter offers and contingency issues and following the paper trail from initial offer to final closing.
Needless to say, it can be a huge job. (Time-consuming, too, which, come to think of it, may be why you see those agents running around every weekend.) So, when it’s done well, it deserves decent compensation. The trick is determining what’s decent for you.

Commissions, Discounts, and a la Carte Services

Traditionally, the real estate industry has operated under a fairly standardized model: A seller would sign a contract with a real estate agent who would agree to market the seller’s home (via the above methods) in exchange for a percentage of the selling price when the deal closed. That commission — typically 5–7 percent — was split (typically 50/50) between the seller’s agent (the listing agent) and the agent who delivered the buyer.

Consider an example: Let’s say you sold your house for $250,000 with the help of an agent who charged a 6-percent commission. Of the proceeds, you’d owe the agent $15,000, who, in turn, would owe the buyer’s agent $7,500. And remember, the listing agent is responsible for their expenses (e.g., advertising, etc.).

Now, let’s say you were fortunate to sell in a sizzling-hot market and the sale price hit $500,000. The agents’ commission? A total of $30,000, or $15,000 each. That’s twice the payday, even though it’s highly unlikely anybody worked twice as hard.

Welcome to the new world of real estate, where that question has helped spawn an explosion of alternative approaches to the marketing and selling of homes. Each has its pros and cons; all have their proponents and detractors; and at least one will probably fit your style:

  • Traditional service: The standard-bearer of full-service realty, this refers to the one-agent-many-hats scenario described above. A real estate agent handles all aspects of the marketing and selling of your home in exchange for the standard 6–7 percent commission. (Even though it may not feel that way, this commission percentage is negotiable. Discuss it with your agent.)
  • Discount commission: Similar to the traditional model, discount brokers offer comprehensive services, but for a lower commission (generally 3.5–5 percent). Proponents of discount realty say higher home prices (and other factors such as efficiencies created by the Internet) allow them to make good money on a lower commission; detractors suggest you get what you pay for.
  • Flat-fee service: As the name implies, these providers offer their services for one flat fee. That can mean anything from an MLS listing for a few hundred dollars to a comprehensive, full-service program for tens of thousands of dollars. The point is that the commission expense is a fixed amount regardless of the sale price.
  • A la carte service: Like flat-fee service, this system charges set fees, with the option of choosing from a menu of services and providers. From yard signs to MLS listings, open houses to closing assistance, home sellers pay for the services they choose to use.
  • FSBO assistance: Once upon a time, FSBO (pronounced "fizz-bo") had a pretty strict definition: For Sale by Owner. The home seller did all the work (advertising, negotiating with buyers, managing the paper trail, etc.) and kept all the money. These days, however, all sorts of companies offer fee-based programs for FSBO sellers, which actually puts them in the a la carte category.
If it sounds a bit confusing, just remember: Choice is a good thing, and more choices are even better. When you start talking to real estate agents, you’ll quickly discover that there are variations within each category and even multiple choices within individual companies. Explore the options, ask questions, and don’t be fooled by either empty boasts or insinuations about the other guys. Armed with the appropriate information, you’ll be well set to make the right choice.

Making Sense of the MLS

Typically owned and operated by a local association of brokerages, the Multiple Listing Service (MLS) is a database that allows real estate agents to share information about property for sale. As originally configured, it was closed to the public with home buyers only seeing those listings their agents showed them.

Thanks to the Internet, though, that’s no longer the case, with large swaths of the MLS available to anyone with n Internet connection. That’s good news for sellers, who get great exposure whether their home is listed as part of a full-service, commission-based contract with an agent or via a flat-fee, MLS-listing-only arrangement.

Still, full disclosure, it’s not. For example, only licensed agents can see how commissions are split, which, it turns out, can have a major impact on your home’s marketability. Think about it: If your agent offers a split that buyers’ agents think is inequitable, they may not be so eager to show their clients your home. It’s something to consider when you’re ready to negotiate a sales contract.

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