Understanding Real Estate Terms

July 31st, 2007 category: Real Estate News, Real Estate Philosophy

Terms in real estate are widely misunderstood. While often the result isn’t clear, the best approach in the current market is to make decisions based on a complete comprehension of the verbiage.

OFTEN USED REAL ESTATE TERMS:

Agency: this is the legal relationship established when one party (seller or buyer), called the principal, authorizes another (the real estate broker/agent) called the agent, to act in the principals behalf. Exclusive agency: A listing in which the seller gives one broker authority to procure a buyer for the property, but also retains the right to sell the property without the broker’s services.

Exclusive right-to-sell: A listing in which the seller gives one broker authority to procure a buyer for a property, but the broker is entitled to a commission if the seller procures the buyer.

In the above agency agreements with the seller, the listing broker will either be a Realtor, with access to the mls system and an open door policy to Realtors that bring buyers, or the broker will sign up your house as an exclusive to the listing company, in which case only the agents in the office are able to show and sell the property. While efforts may be made to provide exposure, the commission to you, the seller, typically remains the same in either agreement. In the first scenario, you are reaching hundreds of Realtors with buyers; in the other, a handful by comparison.

FIDUCIARY RELATIONSHIP:

If you have signed on with a broker that displays the Realtor logo, your agent has agreed to operate in a fiduciary relationship with you, per the National Association of Realtors requirement for membership.

The fiduciary relationship is very simple: the agent has agreed to operate solely in the best interests of, and on behalf of, you, the seller (principal). Simply put, the only agenda that matters financially is YOURS, the seller. This includes exposure for your home; marketing of your home; negotiating that occurs with your home.

Why Do Real Estate Signs Often Have The Words “Exclusive” On A Sign Rider? An Exclusive sign rider is cause for confusion. The sign that you have in your yard has nothing to do with the agreement that you’ve signed with your broker, short of providing a conduit for interested parties. Prior to the Multi List Service coming to the North Fork, many listings were “exclusive listings.” Consumers realized that being denied full internet access, such as the MLS and Realtor.com provide, was NOT in their best interests. As a result, the North Fork recently jumped on board with acceptable marketing. The result was an effective end to “exclusive” listings. Unless you have signed up with one company doing the listing and selling, you should not have an “exclusive” sign rider. An “exclusive” sign rider could also confuse potential buyers and other Realtors, who may wonder, is this an “exclusive” (no outside participation). The listing agent that you’ve chosen to sell your home has a fiduciary relationship to you, the seller, to determine the best possible listing agreement for you. What Is Buyer Agency?

The buyer of your home has no representation (becoming a customer of your listing company) or has signed a buyer agency agreement with a Realtor. A Buyer Agency means that the broker for the buyer has a responsibility to the buyer to act as his principal, in much the same way that your listing agency represents you, the seller. Either way, the commission that you, as a seller, pay remains the same. If you want your home sold, think hard about excluding the important contingent of “buyer agents”.

In the interest of maintaining integrity in the industry for BOTH sides, BUYER AGENCY is becoming an accepted method of providing a buyer for your home. That their own real estate agent represents them does not harm you, the seller. As it stands in New York, both sides have attorney representation. The buyer compensates their own Realtor through the commission that you have offered the real estate community via your listing company. It is typically split between the two brokers.

Deciding how to list is entirely up to you, the seller. If you believe that the more prospects that visit your home, the more likely an offer, sign up for an Exclusive Right To Sell with a Realtor that participates in the MLS service. If you have been talking with people about your home, write into the listing people that are yours (if they buy, you pay no commission).

What Is A Pocket Listing?

One last real estate term: “Pocket Listing”. If you expect that your home will be in the MLS, request a copy of the id # within three days. A pocket listing is a listing by which the selling agent holds off on exposing your property to other Realtors by not entering it in the MLS in hopes of locating a buyer that will provide them with both “sides” of the commission.

definitions provided above are courtesy of Real Estate Law, authored by James Karp and Elliot Klayman.

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This entry was posted on Tuesday, July 31st, 2007 at 5:13 pm and is filed under Real Estate News, Real Estate Philosophy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

One Response to “Understanding Real Estate Terms”

1. Louisville Real Estate Says:
   August 10th, 2007 at 12:38 pm

   Great article. These are terms that most average people wouldn’t be familiar with, and this is a perfect resource for them to reference!

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