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Buying and Selling a Home
 
Copyright © 2004 Zegarelli Law Group. All rights reserved.
Written by Gregg R. Zegarelli, Esq.

 


Although not at all necessary, sellers and buyers of real estate often use real estate agents.  Real estate agents work for real estate brokers who coral agents into the brokage.

In a real estate transaction, there is a buyer and a seller.  Usually the seller has a broker and agent.  The advantage for the seller is that the property will be "multi-listed" meaning that the opportunity will be centrally identified in listings that are jointly managed by most or all real estate brokerages.  Commissions are negotiable, and so is the term of the listing agreement.

So, let's play it out.  Joe Seller lives in Town Greenacre wants to sells his home.  He knows John Sagent, his buddy, who happens to be a real estate agent with a local brokerage, RealSell.  Seller calls Sagent, who is more than happy to take the listing for his employer, the broker, RealSell.  Seller's property is now multi-listed. 

Jane Buyer lives in Town Whiteacre.  She received a job transfer and will be moving to Town Greenacre.  She needs to find a home in Town Greenacre.  She could do two things: a) She could drive to Town Greenacre and look for "for sale" signs.  Then she can call the listing agent.  For example, she might drive by Joe Seller's property, see the for-sale sign with John Sagent's name and call him directly.  b) She could call her friend, Mary Bagent, who happens to be a real estate agent with a local brokerage, RealBuy.  Bagent is ecstatic to receive a call for business and might respond in either of two ways: i) if Bagent is familiar with Town Greenacre property, she would take begin working with Buyer; or ii) if Bagent is not familiar with Town Greenacre, she might refer the business to an affiliated agent in Town Greenacre.  (Being familiar with the community is an important quality for the agent working with the buyer.)

A couple of terms.  Sagent, the agent contacted by Seller and entering into the "lising agreement," is called the "Listing Agent."  Bagent, the agent contacted by Buyer, is called the "Selling Agent."

Without delving into the complexities of dual agencies, both Sagent and Bagent work for Seller.  Even though Buyer called her friend, Bagent works for Seller.  This is important because when Buyer tells Bagent, "I don't want to pay $250,000, but I will..." it's like telling Seller.

Seller Buyer Result
No Agent No Agent Buyer and Seller work together to consummate the deal.  Usually one or both have attorneys draft the Agreement of Sale.
Agent Agent The two agents work together and split the commission 50/50.
Agent No Agent Buyer works with the Seller's Agent.  The advantage is that the commission does not get split, thereby leaving the agent a bit more flexible to adjust their own commission to achieve a deal.  Since, usually, there is a commission split, if there is only one agent, anything better than 50% is still a win for the agent.

The agents then split the commission with their brokerage.  Therefore, for example, if there is a Listing Agent and a Selling Agent, then, for every $100 in commission, the two agents and the two brokerages each make $25.  This split is a general rule, but different brokerages have different deals for agents determined by annual production, etc.

Some states permit dual agencies.  This is a situation where the Listing Agent or the Selling Agent works directly with the buyer and is charged to not advocate either side.  That is, anyone who consents to dual agency is saying that they permit the agent to represent both sides.  Be very careful before permitting dual agency; sometimes it is a smart thing to do and sometimes not so smart.

Remember that a real estate agent cannot practice law.  That is, a real estate agent cannot tell you the legal consequences of the terms contained or to be contained in the agreement of sale. 

Whenever a buyer is obtaining financing to buy property, the lending institution will ensure many aspects of the closing and the property are handled.  The buyer can benefit from this significantly, but it is incidental.  The lending institution is protecting their security for the loan; they want the property to be free and clear of liens for their own protection.  However, the lending institution is concerned for itself and this does not mean that the buyer should not have an attorney.

In the event of an all-cash deal or a private loan, it is important for the buyer to obtain title insurance.  Lending institutions require title insurance.  Title insurance protects the buyers title, but only in the sense that the title insurer insures that the record is as good as they say it is; that is, they guarantee their statement of the title.  If something exists that the insurer did not identify or disclaim, then coverage proceeds will be granted.

Our firm regularly handles many real estate transactions for our clients.


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