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In Alabama, you have two basic options for working with a real estate professional when selling a home - (1) Listing Agent or (2) Transaction Broker. If you sign a listing agreement, you agree to work exclusively with one agent who is referred to as your listing agent in a single agency relationship, and you become his/her client. However, if you do not sign a listing agreement, the agent helping you sell your home is referred to as a transaction broker, and you become his/her customer.
Note: Although it is possible to work with a transaction broker to sell your home, it is rarely done.
Customer or Client?
The most important thing you need to know when working with a real estate licensee is whether you are a client or a customer. A licensee owes certain duties to a client that are different from the services the licensee performs for a customer.
Agent and Client
An agent is a person who acts for or represents you in negotiations with other parties. The client or principal is the person the agent represents. The licensee when acting as an agent must loyally represent the best interest of the client by placing the interests of the client ahead of the interests of any other party. In a real estate transaction, when a real estate salesperson is employed as an agent, the salesperson is obligated to negotiate the best price and terms for his or her client.
What is a Customer?
A customer is a person who is provided services by a real estate broker, but who is not a client of the broker. In this case, the real estate licensee is not acting as an agent. The actual services you receive from a real estate broker depend on the arrangement that is established between you and the licensee. There are basically three types of real estate brokerage relationships that can be established between the consumer and a real estate licensee: Single agency, limited consensual dual agency, and a transaction brokerage arrangement. These relationships are described below.
Transaction Brokerage (not usually selected by sellers)
Transaction brokerage describes a brokerage arrangement whereby the real estate licensee assists one or more parties, who are customers, in a contemplated real estate transaction, without being the agent, fiduciary, or advocate of that party to the transaction. This means that real estate brokers and salespeople can act as intermediaries between buyers and sellers. With this type of brokerage arrangement, home buyers and sellers are customers and not clients of the licensees with whom they are working. The basic function of the transaction broker is to bring buyers and sellers together so that a real estate sale can be completed. Sellers will employ the licensee to help market their real estate by identifying qualified buyers and showing their properties to prospective purchasers. This will usually also involve advertising properties for sale in newspapers and other media. Sellers will commonly also rely on the expertise, experience, and advice of the real estate licensee to help make their property ready for sale and determine an appropriate asking price. Transaction brokers may also help finalize the real estate sale and recording the deed and other documents associated with the sale.
Transaction brokerage arrangements are usually best suited for consumers who are primarily interested in the marketing services and expertise that can be provided by real estate professionals, but who do not need an agent to represent them in the negotiations for the sale or purchase of real estate. Under transaction brokerage, the licensee must provide brokerage services to all parties honestly and in good faith and avoid showing favoritism to either buyer or seller. Alabama law also requires all licensees to exercise reasonable care and skill when providing brokerage services, answer all questions completely and accurately, and present all written purchase offers to sellers promptly and in a truthful manner. Licensees must also keep confidential any information given to them in confidence unless disclosure of this information is required by law. For sellers, this means that licensees must answer a buyer's questions about the condition of the property completely and honestly.
Single Agency
A single agency arrangement describes a relationship whereby the real estate licensee represents only one party in a real estate sales transaction. In the case of a single agency brokerage arrangement, the real estate licensee represents either the buyer or the seller, but not both parties to the real estate transaction. This type of brokerage arrangement is most appropriate for consumers who need the advice and negotiating skills of real estate professionals in addition to their marketing services. If a seller enters into a single agency agreement with a real estate broker, the broker is referred to as the listing agent. Under this arrangement the broker must represent only the seller in the negotiations with buyers. When the seller has a single agency relationship with a broker, the broker may help determine an appropriate listing price, put the property in MLS and advertise it using internet advertising capabilities (e.g., website marketing, email marketing campaigns, search engines, etc.), for sale signs, open houses, etc. Here the broker will seek the highest possible price and best possible sale terms for the seller. This type of brokerage arrangement can involve the use of subagents (rarely if ever used for the sale of residential property in Alabama), especially in situations where properties are marketed through a multiple listing service.
Limited Consensual Dual Agent
Limited consensual dual agency is an agency relationship where the real estate brokerage company represents both the buyer and the seller in the same real estate transaction. Consensual dual agency requires the licensee to obtain the written consent of both the buyer and the seller to act as their agent. The two most common circumstances where dual agency is encountered are (1) when two or more salespersons licensed under the same broker each represent a different party to the transaction, and (2) when one licensee/salesperson within a brokerage company represents both the buyer and seller in the same sales transaction.
One major advantage of limited consensual dual agency is that it allows broader marketing opportunities than single agency arrangements. With this type of contract, salespeople can show houses of owners that they represent as agents to their buyer clients. Consensual dual agency is common in the larger real estate markets where real estate companies often have many properties listed for sale. Many of these properties may be desirable to their buyers. With a dual agency agreement, these properties can be shown to their buyer clients.
In the case of dual agency, the principal function of the licensee is to help both parties reach mutually satisfactory outcome to their negotiations. The dual agent must avoid showing favoritism to either party and refrain from revealing confidential information that could prove detrimental to one side or the other. Although buyers and sellers may not benefit from the full range of services or agent loyalty that could otherwise be provided with a single agency arrangement, consensual dual agency does offer consumers more assistance and guidance than would be possible under a transaction brokerage arrangement.
When considering signing a dual agency agreement, it is very important that you talk with the broker to determine the types of services that will be provided, and what types of information you will share with the broker and broker's other clients.
Conclusion
Alabama law requires you, the consumer, to be informed about the types of services which real estate licensees may perform. The purpose of this disclosure is to give you a summary of the services you may select. This disclosure is expressed in a Brokerage Services Disclosure form that is presented to you when you start working with an Alabama real estate licensee.
After reading the Brokerage Services Disclosure form provided to you by a real estate licensee, you decide the types of services you want him/her to provide for you in your efforts to sell a home. You either choose (listing) agent or transaction broker services. If you choose agent, you will sign a listing agreement and agent and you become his/her client. If you choose to go the transaction broker route, there is no agreement to sign, and you by default become his/her customer.
Ask your real estate licensee to clarify and explain anything that you do not fully understand before signing a contract for real estate brokerage services. You are encouraged to sign the Brokerage Services Disclosure form and retain a copy for your records.
DISCLAIMER: This section contains links to articles related to Preparing Your Home for Sale. Any advertising included in the article(s) for which links are provided below are not endorsed by Jerry Mungle, Associate Broker or Exit Total Realty. The links to the articles are provided for information purposes only.
So you want to sell your house; what should you do to prepare it for sale? If your house is old and outdated, and if economically feasible, you should update and/or remodel your house before putting on the market. Some remodeling examples of things you can do to an old, outdated house to improve its value before putting it on the market are provided below:
You should also strongly consider making significant, needed repairs before putting your house on the market. Some examples of repairs that can increase the probability of sale and add value are provided below:
It may be too expensive to make all the renovations/remodeling changes and repairs that are needed before putting your house on the market. If that is the case, you need to prioritize the renovations/remodeling projects and repairs and do as many of them as you can (based on their return on investment). For example, according to https://www.zillow.com/sellers-guide/roi-for-bathroom-remodel/, bathroom remodels yield the biggest returns in terms of boosting your home’s resale value. For minor cosmetic changes, you’ll see a $1.71 increase in home value for every $1 you spend. This includes things like painting and refinishing cabinets, swapping out the mirror or upgrading hardware.
To get an idea on which home improvements pay off, you might want to read the article below:
HGTV: Which Home Improvements Pay Off?
https://www.hgtv.com/lifestyle/clean-and-organize/which-home-improvements-pay-off
Links to additional articles on preparing your house for sale are provided below.
Forbes Home: 10 Home Improvement Projects with High ROI that You can do in 2022 without Breaking the Bank
https://www.forbes.com/home-improvement/home/affordable-roi-home-projects-2022/
Open Door: How to Prepare Your House for Sale
https://www.opendoor.com/w/guides/how-to-prepare-your-house-for-sale
HGTV: 15 Easy Ways to Prep Your House for Sale
https://www.hgtv.com/lifestyle/real-estate/15-easy-ways-to-prep-your-house-for-a-sale
Sellers need to have a good understanding of the sale contract and the closing process. Both the sale contract and the closing process are addressed below.
Sale Contract
Some of the key elements of the sale contract are listed and discussed below.
1. Buyer and Seller Names: Seller’s name(s) should the same as the name(s) of the
owner(s) on the deed.
2. Sale Price: The sale price gives you an idea of how serious the buyer is. If it is
notoriously low, you can outright reject it or you can make a counteroffer.
Although sale price is important, there may be times when the seller is justified in
not accepting the highest offer. For example, if there are no contingencies (e.g., no inspection or appraisal required, no contingency on the sale of the buyer’s home, sale is “as is” with no repairs required, etc.) or closing/possession date is unacceptable. If you have a client relationship with the listing agent, take advantage of the listing agent’s negotiation and pricing skills and advice when making the decision to accept, reject, or counter the sale price/offer.
3. Down Payment: Down payment can be another indicator of how serious the offer is, or it may be that the buyer just wants to leverage his/her money and put the least money down that is possible. Obviously, the bigger the down payment, the better the offer and the more likely financing will be available.
4. Earnest Money: Again, this is another indicator of how serious the buyer is. You may want to set a minimum percent or amount of earnest money required for otherwise, acceptable offers. Return of the earnest money (if for some reason the sale does not close) requires a request to return earnest money from the buyer and approval of the request by the seller. Sometimes it may be best for the seller to approve the request for return of the earnest money, even if the buyer is at least part of the reason for the failure to close, because the house cannot be put back on the active market until the earnest money is returned.
5. Broker Relationships to Buyer and Seller: The sale contract may show agent-client and agent-customer relationships that exist in the contract offer. As the seller, you may want to know the relationship between the buyer and his/her agent.
6. Closing Costs: Who pays closing costs and how much of the closing costs the seller is required to pay are important considerations. Most closing costs are negotiable; do not be shy about negotiating them.
7. Closing and Possession Dates/Deadlines: These dates/deadlines can have a big impact on your decision to accept, reject, or counter an offer. You must evaluate the impact of the closing deadline and the possession date on your personal situation. For example, if you are buying and moving into another house, you must be careful to coordinate the buyer’s closing/possession dates with your move-out/move-in requirements. Ideally, you want to avoid having to move out into a temporary location until your new/replacement house is ready. If the closing deadline is too far into the future, you could be put into the situation of making an extra house payment(s) until closing.
TIME IS OF THE ESSENCE: If the contract has a “time is of the essence” clause written into it, that means that the closing deadline specified is rigid, and if closing does not occur on or before that date, the sale contract may be voided. However, if the sale contract does not include a “time is of the essence” clause, then there is some flexibility in the closing date specified in the contract. Generally, the courts have ruled that if a serious effort is being made to close, and complications prevent closing on or before the specified closing date due to no fault of the buyer or seller, closing may occur within 30 days of the specified closing date without modifying the sale contract.
8. Contingencies: A contingency is a condition that is stated in the sale contract and must be met or satisfied before closing can occur. Two of the most commonly used contingencies in home sale contracts are (1) appraisal and (2) inspection. The buyer often requires that the house must appraise at amount equal to or greater than the amount specified in the appraisal contingency. Buyers also use a home inspection contingency to give them the option to void the sale contract if the results of the inspection do not meet the requirement(s) of the inspection contingency. A separate wood infestation or termite inspection contingency is also used often in the home sale contract.
9. Condition of Property: The sale contract may include a standard Condition of Property clause that requires the following:
a. the seller to agree to deliver all built-in appliances, heating, cooling, electrical,
gas, plumbing, and septic systems in normal operating condition when title is
passed or possession is given, whichever occurs first a
b. buyer to make any inspection he/she deems necessary prior to occupancy or
closing.
c. seller to have the utilities turned on if they have been turned off and to maintain
utilities through the date of closing.
d. seller to leave the house, garage, and outbuildings reasonably cleaned and free
of debris
10. Arbitration: The arbitration clause defines how a neutral third party may be used to settle a sale contract dispute that cannot be resolved between the parties to the contract.
Closing Process
You can receive and accept an offer, but that can be to no avail unless there is a closing. You can get excited about a great offer that is above the listing price with no contingencies, but if it does not close, it is worthless.
There are many activities involved during the closing of a real estate transaction. Some of the key activities associated with the closing are listed (by who performs them) below.
Seller’s Agent/Office
1. Give copies of sale contract to closing attorney and lender
2. Monitor progress toward closing date/deadline and take corrective actions as
required to keep the closing on schedule.
3. Coordinate inspection, repairs, and sign-offs.
4. Conduct final walkthrough before closing.
Lender (Key activities performed, not necessarily in order of their performance)
1. Receive loan application and begin evaluation of the buyer’s ability to pay the loan and the adequacy of the property for collateral. Perform the activities necessary to approve/reject the loan.
2. Provide estimated closing costs within 3 days of receiving the loan application and at least 3 days before closing.
3. Review sale contract and develop a schedule of key milestones (e.g., inspections, appraisal, funding of loan, etc.)
4. Monitor key activities and deadlines to help keep closing on schedule.
5. Order appraisal.
6. Fund the loan – provide funds at closing.
Closing Attorney Office
1. Assign closing attorney and/or closing coordinator.
2. Develop a closing schedule.
3. Monitor progress according to closing schedule.
4. Perform title search – make sure clear title can be transferred.
5. Sell title insurance – to be paid at closing.
6. Develop closing statement of all closing expenses and who pays them.
7. Conduct the closing, deliver deed, and distribute funds.
Seller
1. Provide access to home for appraisal and inspections.
2. Keep utilities turned on for appraisal and inspections.
3. Make repairs as required by contract.
4. Turn off/close out utility account.
5. Cancel insurance.
6. Participate in closing – sign documents, including deed.
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