Homeowners: Don’t sign until you’ve read the fine print.
This article explains why you need to think long and hard before you choose an agent and before you sign their listing agreement.
What is a listing agreement or ‘agency agreement’? It is the contract you sign when you hire a real estate salesperson to market your home.Find out more on the REA website.
The standard duration is 90 days and therein lies the problem.
When you analyze all residential property sales in Wellington since 2013…
50% of all houses sold within 36 days of going on the market.
1 in 3 properties took more than 50 days to sell.
20% of all properties took more than 80 days to sell.
10% took more than 136 days to sell.
What’s even scarier? These stats only include the homes that actually ended up selling, not the ones where the owners gave up and took their home off the market.
How would you feel if your home was on the market for more than 19 weeks? Who wants to tidy their house and get it ‘open home ready’ 19 times?
Why you should never agree to the standard 90-day listing agreement when selling your home…
We all understand that when a house sits on the market for a long time, it generally isn’t a good thing for anyone involved. Buyers get suspicious that something is wrong, owners get frustrated and stressed, the salesperson runs out of ideas. The ensuing ‘breakup‘ between agent and owner at the end of the marketing period is rarely amicable.
Why then, do most owners agree to sign up with their chosen salesperson for a whopping 90 days?
Most owners believe their home will sell in a matter of days or weeks. We maintain an optimistic outlook in the hope that another couple or family will fall in love with our home the way we did. We hope for the best but we rarely put insurances in place in case of a less than favourable outcome.
How many things in our life do we agree to, just because that’s the way it’s always been done?
Standard real estate listing agreements call for a 90 day sole or exclusive agency period (‘sole’ meaning ‘only that company’). It’s hidden in the small print and salespeople like to gloss over it, with words like:
“Our standard listing agreement is 90 days, but I really don’t expect your beautiful home to be on the market that long…”
But sometimes, things don’t always go to plan.
By signing up for 90 days you are locked in with that company for that entire time. You can’t switch unless they release you from that agency or you risk paying two commissions. What happens if they don’t deliver on their promises? What happens if they were blowing smoke up your bum with their lofty appraisal of value?
In most circumstances, your only choice is to withdraw your property from the market and wait out the 90 days before you can list with another company and try again.
Owners usually agree to a 90-day contract for 2 reasons:
- They really don’t believe their home will be one of the unfortunate ones that stay on the market a long time.
- They believe in the ability of their chosen salesperson and the promises they make.
You have to remember that salespeople are born optimists. Of course, they believe your home will sell for a premium in 3 weeks with multiple offers. It’s their job to believe. As an owner, you want to hire someone who believes in the potential of your home so they can pass that enthusiasm onto your potential buyers.
The problem is, that salesperson isn’t the one buying your home. They can try as hard as they like, but sometimes, the market just doesn’t produce a buyer in that first 30 days that sees value at the same level you do.
What happens to your sale price if you don’t sell in the first 60 days?
The results aren’t great. This plot shows the relationship between % over RV and days on the market. Each line represents a different part of Wellington. Eg. Northern Suburbs, Western Suburbs, etc.
Source: We used REINZ data – all sales in Wellington in the last 12 months (March 2017 – Feb 2018 = 3,266 total sale).
Moral of the story? Don’t muck around in Miramar! Or anywhere in the Eastern Suburbs. A long stretch on the market could cost you, big time.
Next time you hire an agent, insist on a 60-day exclusive agency, or shorter if you can. At the end of that period you can always sign an extension and keep that agent on if they are doing a good job, but at least the power is in your hands.
In an upcoming follow-up article, we will tackle what to do if your home isn’t selling. You can subscribe via email to get early access to new content.
Main photo by: Alejandro Escamilla on Unsplash