Q: We have been waiting to sell our house until the market improved. With the rise in local housing prices over the last year we finally decided to list it. I should tell you at this point that we are not upside down. We own our house outright. So we listed our property with a local real estate office for $435,000. It was on the market for about a month and a half when our Realtor brought us an offer of $372,000. We really wanted more but we went ahead and accepted the offer. When we closed escrow last week we discovered that the Realtor took her entire 6 percent commission. I immediately called her and complained that she hadn’t earned the full 6 percent since she didn’t sell the house for the full $435,000. She said it didn’t make any difference because her commission was based upon whatever price the house actually sold at. If that’s true, and please tell me if it’s not, why did she spend all of that time showing us comparable sales and negotiating over the listing price? What incentive does the agent have to sell the house at the contract price? What’s to keep the Realtor from just making up a high number to get us to list with them?
A: These are all very good questions.
One of most common complaints made by good, competent Realtors is that they are continually losing listings to less honest or competent agents offering an unreasonably high listing price.
It goes like this:
You call a couple of Realtors to come out to your house and tell you how much your house will sell for. The first Realtor shows you comparable sales from the neighborhood and concludes your home will sell for around $300,000.
The second agent shows up and learns from you the price the first Realtor recommended. The second agent then tells you your house is worth $350,000. That’s an increase of $50,000.
Who would you list with?
But then, during the course of a six month long listing, nothing happens. Slowly but surely the second agent gets you to drop your price until finally, at the end of the six months, the house sells for $300,000.
The second agent gets the commission while Realtor number one, the one who told you the truth from the beginning, gets nothing.
You can usually tell the two types of Realtors apart because agent number two, while he may sell a lot of homes and makes a great deal of money, almost never gets any referral business. Their business usually comes from flashy and frequent advertising.
Good and experienced Realtors are often recommended by their past clients.
However, while unscrupulous agents are an unfortunate reality, I certainly don’t want you to think that a majority of the Realtors operate like agent number two in my example. In fact, given the housing market over the past five years, most of the agent-number-two types went broke, leaving only the good, hardworking ones standing.
While Realtors may legitimately disagree regarding the value of your home, most are honest and straightforward regarding their recommendations. But remember, recommendations are all they are.
Since the Realtor isn’t buying your house, they never actually get to determine the sales price. Only a buyer can do that.
You, the seller, must take some responsibility for the pricing decisions you make.
The only legal implication of the contractual listing price is the theoretical situation in which your Realtor finds a buyer who is willing to pay the full listing price with no contingencies. If that were to occur, and you then refused to sell the property, your Realtor would be owed her commission.
Otherwise, you’re not obligated to pay the commission unless you accept a lower offer. When you accepted the $372,000 offer the commission became due upon the close of escrow.
Remember, your Realtor didn’t work any less because the offer that came in was lower than you wanted or expected.
Again, the listing price has very little practical effect on the actual selling price. A listing price that is too high will only tend to slow the sale, not put more money in your pocket.
Tim Jones is a real estate attorney in Fairfield. If you have any real estate questions you would like to have answered in this column you can contact him at SolanoScene@TJones-Law.com.