With Agents, Know What You're Signing Up For

Q: We have lived in our house for more than 20 years and have decided it is time to move to a smaller place. We have interviewed a number of real estate agents, but we do not know what questions to ask. What is the difference between an agent and a broker? What is a listing?

A: Let's start from the beginning. You have decided to sell your house. Do you have any idea what it is worth? Obviously, you do not want to sell for too little, but you also do not want to set the price so high that potential buyers will be turned off. As you know, the real estate market is sluggish. Have you considered holding off until the market rebounds?

There are several ways to determine market value. You can hire an appraiser, who will give you a written analysis of your house, and his or her best estimate of what it is worth. An appraisal costs $300 to $500. I usually do not recommend that potential sellers obtain an appraisal -- this is just an additional cost -- but in your case it could make sense.

Some people use the assessment from the local government, which is performed for real estate tax purposes. Don't rely on that number, because it may not reflect the current value of your house.

One of the most common ways to estimate value is to interview several real estate agents, and ask them to prepare an evaluation. There is nothing wrong with soliciting several real estate companies before you decide which to use.

Meet separately with each agent you are considering. Each should be able to give you an estimate of market value. You may get a wide range of estimates. Some agents will low-ball the property, while others may want to impress you with a high valuation. This may be yet another reason to have your own appraisal before you start the interviews.

You asked about agents and brokers. Oversimplified, an agent -- often called a salesperson -- works on behalf of a broker. The broker technically earns the real estate commission; he or she then pays the agent. Keep in mind that when you hire a real estate agent, you are really engaging the broker, although it may be the agent who is in constant touch with you. This is a technical legal distinction that generally should not concern you.

Here are some questions you should ask all the agents you interview:

· When did you get your license?

· What do you think our house is worth, and why? Show us the documentation on which you based your estimate.

· Why should we retain you instead of some other agent?

· If we retain you, how will you market our house?

· Can you give us some references?

When you decide upon an agent, you will sign a contract. That contract is called a real estate listing agreement. In effect, you are authorizing the real estate company to list your house for sale. If the agent is successful, he or she will earn a commission.

What should the real estate listing contract include? The real estate agent will hand you a form agreement for you to review and sign, but this form is not carved in stone. You have the right to add and delete paragraphs to meet your needs. Here are some suggestions for items to include in any listing agreement:

· "The commission will not be earned until and unless settlement actually takes place." The standard listing agreement often states that should the broker bring you a purchaser who signs a contract to buy the house, a commission will be earned. But what happens if that buyer does not go to settlement? Without the language I suggest, the agent could legally claim a commission, even though you have not sold your house.

· The listing should not be for more than 90 days. You can always extend the listing if you are pleased with the agent's services. However, if you tie your house down for a long time, and are dissatisfied with your agent, it can be difficult to terminate the listing agreement.

· Make sure that all terms are included in the listing agreement. These terms include things such as price, and any other seller concessions you are willing to make. Additionally, if there are certain items that will not convey with the house, these items should be specifically spelled out in the listing agreement. For example, if you want to take your favorite chandelier with you, you must advise the agent, in writing, at this early stage. You should understand that any item that is affixed to the house, such as light fixtures, mirrors and plumbing, legally must convey to your purchaser unless both sides specifically agree otherwise. In the Washington area -- in contrast with the custom out West -- washers, dryers and refrigerators generally convey, but not always. To be on the safe side, spell out your intentions in the listing agreement, then again on the real estate contract when there is a potential purchaser.

· How much will you pay the agent if your house is sold? Negotiate the commission before you sign the listing. Remember: Everything in real estate is negotiable.

· Will you allow a for-sale sign in front of your house? Will you allow the agent to hold open houses? If so, how many per month? How often will the agent advertise the house? All of these are important and must be included in the basic listing agreement.

I also recommend that you hire a competent real estate lawyer to help you through the process. Your lawyer should review all documents before you sign them.

It should be noted that unless there is a written listing agreement, a real estate broker or agent may not collect a commission from the seller. This was recently affirmed by the D.C. Court of Appeals in a case involving a complex commercial transaction. ( CB Richard Ellis Real Estate Services Inc. v. Christian J. Spitz, et al, decided on June 19).

Selling a house should not be complex. However, there are many players involved in the real estate game -- and most of them are primarily looking out for themselves. Make sure that you have players that are on your team, and will be working for you.

Benny L. Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, Suite 1100, 1050 17th St. NW, Washington, D.C. 20036. Readers may also send questions to him at that address or contact him through his Web site, www.kmklawyers.com.