Home Seller’s Guide – How To Sell A Home
Selling your home can be one of the most important decision-making processes of your life, in terms of both time and money. At stake are large monetary gains (and losses), as well as a bevy of legal requirements. This home-selling guide will help you address the ins and outs of the selling process, highlighting specific issues which can be detrimental to the sale of your home and how to avoid them. It discusses topics such as:
- how to choose a real estate agent
- how to market and prepare your home for sale
- the right professionals to contact (there are more people involved in a home sale than just your agent and lawyer)
- optimum market conditions for the sale of your home.
With the right information and organization, the home-selling process can be made to run smoothly like a well-oiled machine; however, when things go wrong—and things can go wrong—sellers will often liken the experience to a nightmare. From inexperienced agents to poor planning and the hazards of overpricing, the home selling process can be full of potential pitfalls. Ultimately, the sale of your property should be a weight off your shoulders; it should not become a burden in and of itself. This guide covers how to get through each phase easily—no matter if you’ve hired a real estate agent or are going it alone. Done right, your home sale will leave you satisfied with your selling price, and financially solvent for your next purchase.
Choosing Your Agent
Interviewing a Listing Agent
Discussing a Listing Agent’s Fees
Your Listing Agreement
Developing a Good Relationship With Your Agent
Understanding a Real Estate Agent’s Role in Dual Agency
Many first-time sellers don’t exactly know where to start when it comes to selling their property. But jumping into (possibly unnecessary) home repairs or staging open houses are not the proper starting points. So where precisely does one begin?
One of the first distinctions to make is that there is a difference between knowing you want to sell and knowing you have to sell. Simply wanting to sell can have its perks, as it doesn’t add the pressure of time to the sale of your home. This extra time will most likely leave you with more room for price negotiations when that part of the process arises.
The biggest reasons why people want to sell include:
- moving out and up: a growing family or an upswing in employment often put people in search of a new home; some homeowners begin looking for their "dreamhome" before listing their own (see Buying Before Selling)
- cluster flight: sellers sometimes cite their neighbourhood or cluster (a group of homes in their area) as not being what it used to be, whether economically or socially, and desire a different sense of community
- empty nest syndrome: once children are off on their own, many couples or single-parents say their home is simply too much space and desire something more manageable
- retirement: pensioners are a sizeable demographic of sellers, with many looking for a retirement-style community offering more forms of social entertainment and easier maintenance
- time to flip it: when the real estate market’s strong and an investment property is ripe for the picking, home owners will take advantage of just such a seller’s market, and hopefully turn a profit
However, it’s important to keep in mind that a lax attitude about selling your home can be a big turnoff for buyers who are looking mainly for motivated sellers. If a potential buyer feels as though you’re not motived enough to engage in downward price negotiations, they might not even bother with an offer. As a seller, you want to leave room for such negotiations; ultimately, you want buyers to know you’re determined enough in wanting to sell your home to be at least somewhat flexible on price.
On the other hand, knowing you absolutely must sell makes for an entirely different ball game. Such motivating factors often give the homeowner no choice but to put their property on the market. Exigent circumstances can include:
- Job: whether an income-earner has been fired or transferred, job-loss and transfer are two major factors that can force a home into sale
- Relationship ending: a divorce or separation can force a home into the market, as one party alone may not be financially capable of maintain the home independently
- Health or disease: an aging family member may no longer be able to climb the stairs of a two-story house, or injuries from an accident may require wheelchair access; whatever the reason, an accident or illness in the family can force a move
Not only can the reasons above rapidly force you into making decisions for which you may not be entirely ready, they may also push you into reviewing less than ideal offers. If you find yourself in a position where you must sell and sell quickly, try and make the most of your sale by remaining positive about your home sale, rather than vulnerable; stay organized by taking the time to consult the right professionals, while keeping an impartial attitude to their recommendations. Finally, be prepared to address offers you might otherwise reject—that is, if you had the time.
Once you’re certain you want to sell your home, one of the first places to start is with your current mortgage. Uunless you own your home outright, you’ll have to settle your mortgage upon selling. Many mortgages come with penalties for early payout; contact your lender or mortgage borker to find out what penalty charges you will be facing and discuss out your options upon selling. If you’re in a position to purchase a new home directly after selling—and your rate is better than current rates—then ideally you want to transfer or "port" your mortgage to your new home penalty-free. However, if you’re not planning on buying another home, paying off your mortgage, or setting up a pre-payment plan for a specific pay-off date, might be your best option.
- Assumable mortgage: depending upon how low your interest rates were when you first bought your home, an assumable mortgage can be a pragmatic option, as it basically entails having the new buyer of your current home take over your existing mortgage. However, this option hinges on your potential buyer’s credit. Should they need more money to broker this deal, once eligible they can finance at current rates with a weighted interest rate, so you can keep your existing mortgage’s expiry date. If you do choose this option, you cannot then take your current mortgage to your new home. Depending on province, your name may or may not be completely erased from the mortgage paperwork, until it is paid in full.
- Portable mortgage: Porting your mortgage means you take all of your rates and conditions on your existing mortgage and carry them over to your new property. This can be an attractive way of handling your mortgage, as long as you’re able to sell your existing home and purchase another within 90 days. Should your existing mortgage be too large, depending on your lender, you may have the option of paying 10% of your existing balance without a prepayment charge (tacked on when you discharge your mortgage early). You can’t, however, port your mortgage and use it as an assumable mortgage at the same time.
- Early pay-off: Retiring free of mortgage payments is an alluring future, but depending on your lender and financial situation, it may not be ideal for you. Early pay-off is an attractive option for many home sellers, but it hinges on a few things—namely, current rates need to be unattractive (higher than your current rate), you’re not subject to prepayment charges, and you’re not looking to buy a home again.
This is a frequently asked question, and the answer depends largely on your own financial situation. Financially maintaining two homes simultaneously can be expensive, and you will have to gauge whether the home you are so keen on buying is worth it.
Knowing the market is an important criterion when deciding whether to purchase before you’ve put your home on the market. If it’s a seller’s market, there’s not as much risk in purchasing first because you can be assured your home will most likely sell once you get it listed. There are perks to buying your new home before selling, but generally speaking they’re somewhat limited. They include:
- jumping on a great deal—not feeling the burden of needing to get into a home, buying before selling can sometimes allow you to play hardball during negotiations, saving you money in the end
- buying before selling may help you avoid renting after closing the sale of your current home, while you wait to find your new one
- you and your family can take your time moving, as you’ll already have the keys to your new home
If there is a gap between the closing date of your purchase, and the closing date of your sale, a bridge loan can help tide you over. A bridge loans—also known as swing loans, caveat loans or interim loans—are a kind of short term loan used by home buyers to purchase a new home before they sell their old. The loan itself can range from anywhere between a couple weeks to a couple years. They are generally more expensive than a home equity loan, in terms of higher interest rates (usually between 12% and 15%) and other fees, but are nonetheless becoming more and more attractive to home sellers.
By taking out equity on your current home (even if it’s in the process of being sold), a bridge loan allows you to make the down payment on your new home before the closing date of your current listing. The loan is usually repaid with the money from the sale of your old home. Bridge loans are particularly favored when a discount is offered on a property, as in a short sale, or a foreclosure auction in which a buyer may have only a couple weeks to purchase the property.
|Note: Some agents may pressure you to buy before selling, as it gives them the added bonus of representing two property transactions, meaning they also receive two commissions. As with any major purchase in your life, be wary of an agent’s motivating factors and never let anyone rush you into a sale. Go with your gut and take your time to understand the transaction from all angles.|
This is the by far the more common chronology for the home seller, as it avoids pulling equity out of your existing home, as well as covering payments on two homes all at once. Home sellers often relish the "safety" of selling first before buying, as it doesn’t put as much pressure on the seller to settle for an undesirable offer. Other reasons homeowners choose to sell prior to buying, can include:
- getting the price they feel they deserve for their home
- legroom to negotiate without feeling the pressure of time constraints
However, once your home is sold, unless you are planning to rent, or have inherited a home, there is also the pressure to find a new home to move into by the closing date. Not doing so can mean renting until you do find the right home, having to place your furniture in storage, and pay movers twice. This can also make it an expensive proposition, and may force you into putting in an offer on a less than ideal home. It helps to make sure the closing date on the sale of your property allows you enough time to comfortably shop around for your next home, if you do intend to buy again.
In either situation, there are conditions that can be built into the sales contract that protect you as either a buyer or seller. If you feel as though you’ve found that perfect dream home and can’t posibly imagine losing it to someone else, there’s not much more you can do than purchase, even if your existing home hasn’t sold. If indeed this is your situation, talk with your real estate agent or financial advisor about a contingency contract with the seller, making your offer to purchase contingent upon the sale of your current home. Contingency offers are more common in a seller’s market; and they can go either way: a seller can also request a buyer to enter into a contingency offer, as it ensures the seller will have a property once the sale closes. These sales are also referred to as concurrent closings.
Selling a home requires a great amount of organization, time and money. Ask yourself if you think you could take on another part-time job. The majority of home sellers don’t have a lot of patience or extra time in their daily lives to do everything it takes to sell a home in a reasonable time frame. Instead, these sellers hire the assistance of a real estate agent for a percentage of their selling price.
In general, a licensed real estate agent or broker will use their industry expertise and time-earned knowledge of the housing market to help you do a number of things in order to sell your home.
They will help you properly price, market, and promote your home. A licensed real estate broker or agent will also screen and negotiate with potential buyers precisely so you don’t have to. On top of that, as outlined by the Canadian Real Estate Association (CREA), which regulates real estate licenses throughout Canada, agents and brokers are required to put you in touch with trusted industry professionals, such as home inspectors or insurance brokers.
Using an agent means you will be "represented" through the selling process. Knowing the real estate industry is an ever-changing industry with numerous laws, many sellers like the idea of being able to depend upon an expert intermediary. In the same vein, many buyers and buying agents prefer to deal with someone who is represented, to ensure a smoother process.
Represented sellers prefer representation for a number of reasons. For instance, some feel overwhelmed by the industry’s complex details, while others fear negotiating price. Others feel like they simply can’t commit the time needed to undertake such an important task alone.
One of the first things any home seller should be made aware of is CREA’s real estate database called the Multiple Listing Service, or MLS. This is a national repository of properties for sale, which in the past was an exclusive online catalogue viewed only by brokers and realtors (and agency associates) licensed under CREA. Your agent will set up a listing of your property on this database as part of their marketing strategy. Conservative estimates say MLS listings account for about 70% of Canadian home sales, and a listing on their site ensures maximum exposure of your home—not only locally, but nationally. If you have any interest in reviewing provincial real estate statistics, CREA maintains a monthly record of national figures as relayed by local real estate boards and association, including cities’ average prices, all of which can be found in CREA’s section MLS® Statistics online.
Information on both national and local housing markets—discussing trends as broad as national employment and interest rate changes—is also made available to the public by CREA, in their online Media Centre. This centre is extremely user-friendly, explaining information generated by Canadian MLS systems through easy-to-understand charts and graphs. If you consider yourself a motivated seller, going through this type of information—market balances, your local residential sales activity and other economic and real estate trends—will better prepare you for discussions with your agent about listing price and negotiations.
As a home seller it’s a good idea to understand the basics of the local, provincial and national real estate market. Your agent will help supplement your understanding with their experience and insight into particular neighbourhoods, perks, what people are looking for at any given moment and how you can best slot your home into this mix.
Home selling depends a great deal on market conditions, and these can change at the drop of a hat. Factors like the overall economy, a drop in local production, a natural disaster, even the opening of a new school or university can significantly affect the values of homes in the area. Checking the listing and selling prices of similar homes in your area, referred to in the industry as comparables, is a great way to keep tabs on the market.
A seller’s market is the term used when there are fewer homes on the market than there are buyers. The fewer homes there are, the greater the competition between buyers, and the higher prices will climb as a result. If you’re a motivated seller, chances are this is the market in which your final price will come as close as can be to your listing price. This real estate trend is also often referred to as a "hot" market, a term which leads many a real estate agent to consistently refer to a market’s "temperature".
It’s your real estate agent’s job to know the exact temperature of the housing market, as it’s a key factor in their determining a fair market value for your home. Some basic indicators of a seller’s market include:
- average home prices are going up
- real estate agent’s sucess ratios (listing versus selling price) for their last 3 homes are strong
- the number of homes on the market is considerably lower than before
- homes are priced higher than area comparables
- homes are selling before they’re listed in the MLS database
- sellers offering buyer-incentives are slim to none
A seller’s market comes from greater demand churning greater price, but when that demand equalizes, prices also balance themselves out, resulting in a balanced or neutral market. Neutral market conditions occur when there are about as many buyers in the market as there are homes for sale. Homes will usually sell within 1-2 months of their listing, but could take longer; and the price of area comparables come quite close to fair market value for homes already listed on the market. This market condition usually forces banks to lower their interest rates, making rates notably more affordable than those in a seller’s market.
If you find yourself in a neutral market at the time of your listing, prepare yourself for some downward negotiations and even a slow sale, as there will be a goodly amount of inventory to compete with.
Also called a "soft market" or a "cold market", a buyer’s market is usually bad news for the seller, giving buyers the upper hand and driving home prices downward.
Here are some common indicators of a buyer’s market:
- homes are staying on the market for more than 6 months
- you note that other sellers in your area are offering numerous incentives (whether it be kicking in for closing costs or leaving a good amount of chattel with the home)
- a noticeable amount of inventory is out on the market, meaning home ads/classifieds are getting bigger and bolder as they try and reach the few buyers still in the market
A good real estate agent will know exactly when and how to capitalize on current market trends. Ask yours to be blunt, never to sugar coat market conditions; trust in the fact your agent will know when to play hardball—they should also know, however, when to encourage taking a fair offer during a soft market.
Note: One good way to gauge the market’s temperature is to track the real estate market’s months of inventory. This is the rate at which homes are "absorbed" into a market.
This is a simple computation, which measures market liquidity by dividing the number of active listings for the last full month by the total number of homes sold in the same period. The end figure is your market’s months of inventory, and the time frame you may be facing in which to sell your home. If there is more than 5-6 months of inventory, this is generally considered a neutral market. Anything over 6 months is a buyer’s market, whereas anything under 5 months’ inventory is advantageous to sellers. Provincial real estate figures—both actual and seasonally adjusted data—can be found on the MLS database run by the Canadian Real Estate Association (CREA). Their numbers pertain only to residential homes, however, and are not categorized by residence-type, such as townhouse, single-family, etc.
Like any other commission-based industry, real estate is an extremely competitive business. Agents come in all shapes and sizes; with varied experience, success ratios, flexibility with regard to commission, and level of transparency toward their clients. A licensed listing agent or broker acts as your eyes, ears and expert, meticulously guiding you toward a painless, well-priced and timely sale.
This section will discuss how to properly interview an agent, negotiate an agent’s fees, and address any concerns you may have with them.
As a seller, you’re bound to sift through both consummate professionals and rank amateurs. The important thing is that you do the sifting: though it takes time out of your schedule, interviewing a few different agents will give you a better idea of who should really be handling the sale of your property.
Here are some things to keep in mind about agents:
- No fixed commission: An agent’s commission is negotiable. There is no such thing as "provincial rate" or "municipal-regulated commission rate"; though, your agent’s rate may be somewhat fixed according to his or her brokerage, it is never an excuse not to negotiate commission. If an agent says they’re not at liberty to negotiate with you, talk to their broker who can.
- Realtors vs Agents vs Brokers: Many people become confused about the semantics of real estate licensing, not understanding that the industry is generally made up agents with different levels of ability. All brokers and realtors are agents, but not all agents can say they are realtors or brokers. So, at the bottom there are agents, who have completed all the required coursework, hours in the field, and passed their licence exam. Agents will work for commission, most often splitting it with a broker under whom they work. Being that some agents can be fairly new to the industry, working for a brokerage allows them access to all of the brokerage’s contacts and databases. A broker is an agent who has continued coursework for a separate license, which gives him or her significantly more charge when it comes to transactions; brokers make sure the agents working under them conduct sales compliant to the real estate guidelines of their province. The next title distinction is that of Realtor®, which is a trademark of the Canadian Real Estate Association (CREA), and is a title reserved for only about half of all licensed agents. To clarify, it is incorrect to call a real estate agent a Realtor® when the agent does not need to follow the Realtor® Code of Ethics. What the Realtor® prestige offers a client is the assurance of legitimate, smooth-running sale, guided by a choice agent following a strict code of ethics.
- Single or dual: Aside from an agent’s experience and title, it’s important to understand how often they put themselves in a position of dual agency, or if they even do at all
It’s recommended to interview more than one agent. Selling your home is arguably one of the single greatest sales you will ever make in your life: you want someone who will keep your best interests at hand, focusing on getting your home the most exposure possible, so you can settle on a comfortable selling price with a legitimate, pre-screened buyer. One way to ensure you’re getting the best agent in your area is to compare agents and agencies. You want to ask agents things like how long they have been in the business and about their success ratio in the current market. You want to know how strong their negotiating skills are and how often they act as a dual agent. Don’t be put off by an agent new to the business, as long as he or she is representing a hard-working agency, and appears bright and motivated.
It’s good to leave yourself open to questioning, as well. Interviews are ways for you to find out if an agent is right for you; however, they also serve as opportunities for agents to understand more about you and your home. Make sure to give an interviewing agent the freedom to ask you questions—if they don’t jump at the chance to know more about your home, including its condition, why you’re selling, and about how much you’re hoping to get from the sale, this should be a warning sign that they are less dilligent..
The following questions will start you off on the right foot in an interview:
- What got you into real estate?
- When did you join your brokerage?
- Can you offer me references?
- What’s your track record as far as listing versus selling price in your past three home sales?
- For how long was each home on the market?
- During how many of your home sales this past year were you acting as a dual agent?
- How familiar are you with my neighbourhood?
- Will you tour my home before I hire you?
- What does your marketing plan usually consist of?
- What do you usually charge for sales commission? And, are you able to personally negotiate your commission?
- What do you offer to buyers’ agents in terms of commission?
- How will you make yourself available to me once the selling process has started?
As with hiring any professional, asking for references is key; any real estate agent should be quick to provide them. Likewise, a true professional will be happy to tour your home before you sign a listing agreement with their agency.
When it comes to asking about an agent’s track record in sales, you want to determine their success ratio. If they consistently listed past homes high and then continuously lowered the listing price, it might be an indication of poor pricing on their part, and/or poor negotiating skills. A good agent will offer sound reasonsing for both the listing and final sales prices.
Listing and buying agents differ from one another, but on many occasion an agent will represent both parties in what’s known as "dual agency". Dual agency (see Understanding an Agent’s Role in Dual Agency) is a somewhat dicey subject; it’s important to know that a licensed agent must make you, as a seller, aware the minute he or she begins representing someone else’s interests in the transaction.
|Note: As with any major purchase or sale in your life, be sure your agent will take the time to go over documents with you before you sign them. You should never be hurried through this process, because, above all else, you want an agent with patience. Before hiring, confirm the duration of the listing agreement; this is a contract you are signing with the agent, and you should be clear how much tme you are willing to give them to adequately sell your home.|
Normally, a listing agent working for a brokerage will collect a commission from your home’s sale. He or she will then split this with their broker, usually right down the middle; however, some agents also act as their own broker, meaning they don’t split the commission with anyone. Knowing how your agent’s commission is to be divided is a good starting point for negotiating commission. If they don’t split it with anyone, they may be a bit more flexible about lowering their cut.
You should never feel awkward asking an agent to lower their percentage for you. Listing agents who aren’t willing to adjust their price usually don’t stay in business all that long. Also, keep in mind there is no such thing as a fixed commission. Commission isn’t regulated by province or a real estate board, so make sure to contact their brokerage if an agent says they aren’t at liberty to negotiate their percentage with you.
Nevertheless, simply opting for the agent with the lowest commission is not always your best move. Seasoned agents with a proven track record may well be worth a higher commission rate; the lowest bidder may simply be the most desperate. Be open to the agent’s explanations as to why their fee is justified; you may find you agree.
How long you sign on with an agency is a big part of your listing agreement. Generally, there are 30-day, 90-day, 180-day and 1-year listing agreements. A key factor in determining the length of your agreement will be the liquidity of the market, meaning how long homes are staying on it before selling. A good rule of thumb is the stronger the market, the shorter your listing agreement.
In a seller’s market, where homes are in high demand, your agent might agree to a 30-day listing agreement. A 90-day listing agreement is better suited for more balanced markets, and can give you enough time to tie up any loose ends and complete any repairs if they’ve thrown off your first potential buyers. Your listing agreement may also expire while you’re in the process of negotiating a sale; ask the agent what their brokerage does in such a situation; provincial laws may vary regarding renewing or extending a listing agreement.
If you feel good about your agent, feel as though they’re backed by a sound brokerage with a strong reputation, and you’re facing a neutral or soft market, then you may consider a longer listing agreement of six or 12 months.
Before you sign a listing agreement, make sure the technical points are clearly explained, and whether you have the option to cancel your listing agreement penalty-free.
It is reasonable to expect your agent to respond to your questions in a reasonable time frame, to explain any confusing aspects of the sale; however, that doesn’t mean they are at your beck and call. Since an agent’s income is most often commission-based (it is rare an agent will have a base salary), he/she will be accountable to other clients as well. On the other hand, if ever you feel your agent is not focusing enough attention on your sale, don’t think twice about contacting his or her brokerage. Remember, the less ethical the agent, the more heavily they’ll focus on clients whose sale offers them the higher commission.
Do your best to treat your agent with the utmost respect, keeping in mind the following:
- Agreement: Whenever you work with an agent, sign an agency contract—it will help you understand just what exactly an agent’s fiduciary responsibility to you is, as well as their limits—and if you don’t understand something in the paperwork or fine print, ask your agent to explain it in layman’s terms; if they can’t, their broker needs to be able to do so
- Concerns: If at any point in the selling process you have any concerns, make sure you voice them; additionally, if you feel as though your agent is not giving his or her due diligence to your interests, explain to them you would like to contact their broker and discuss it with them
- Contact: Call your agent during his or her scheduled hours only; use email to contact them during off hours—agents should respond promptly, however, sometimes it helps to establish from the get-go how fast your agent will be able to return calls and emails
- Punctuality: Be on time for your appointments, notifying your agent immediately of any hold ups—small courtesy calls can go a long way
- Viewings: Your agent may or may not want you to be present for your home’s public viewings; respect whatever they feel is most appropriate and consult them if you are ever approached by a buyer or, especially, a buyer’s agent
To augment their sales commission, it’s become increasingly popular for a real estate agent to enter into something known as dual agency. This means the same agent represents both buyer and seller in a real estate transaction.. Such a form of representation is technically referred to as "multiple representation". Dual agency or multiple representation allows an agent to keep the entire commission from a sale (usually it would be split it with a buyer’s agent).
Remember, any agent seeking this type of contract must disclose representation to both parties. They must also receive consent in writing before proceeding with a transaction. Dual agency can happen a number of ways, namely:
- when your listing agent is approached by a buyer without representation and your agent offers their services—contingent upon your written consent
- when you, as a homeowner, want to sell and buy your next home through the same agent and they decide to show you other homes they’re listing
- when two separate agents working for the same brokerage represent a buyer and a seller
Are Dual Agents ever Recommended?
Real estate associations argue that dual agency is fair and that agents always place their commission behind client interests; still, a number of consumer protection groups advise against homeowners and prospective buyers hiring a dual agent, citing situations where an agent failed to protect both parties’ best interests —a number of such claims have ended in lawsuits.
Dual agency, while legal and often ethical, can create—as the Ontario government puts it—scenarios of conflicts of interest. The incentive to close the sale may persuade a dual agent to reveal confidential information about the property or the seller’s motivations for selling, giving an unfair advantage to the buyer, for example.
How do you as a seller handle this type of situation? First and foremost, you remain cautious. If, while interviewing agents, you notice an agent has a long history of dual agency, ask for references from former clients and speak with them directly,, asking specifically about how well they felt their interests were represented during their sale. This will shed light on the agent’s level of professionalism when it comes to dual agency.
In provinces like British Columbia, the government, realizing the potential for conflict of interest, has put sanctions on dual agency. The province’s "limited dual agency agreement" was designed specifically to prevent fraudulent real estate tactics. Once both the selling and buying party consent to this agreement, it means the agent becomes limited in the sense that he or she can no longer disclose personal opinion about what either party is willing to pay, or any other personal information about the parties unless it was deemed acceptable to disclose in writing. Doing so would serve only the agents best interests. Saskatchewan also allows the practise of limited dual agency. Agent Duties, from the Association of Saskatchewan Realtors® has more information on their provincial guidelines.
Though, less stringent, Alberta has specific guidelines for dual agency, allowing Realtors® to function in this capacity. Again, both parties must consent in writing and Realtors® are legally bound to be impartial toward both. More information on Alberta’s real estate laws can be found at the Alberta Real Estate Association’s site online.
In Ontario, dual agency is often referred to as "designated agency" and legally requires the agent to explain why he or she is asking you to consent to dual agency; to fully disclose his or her limitations as a dual agent; and obtain your written informed consent. The agent’s new limitation comes as they are no longer negotiating for either party; they are simply advising as a middleman.
For more information as it pertains to your respective province, check with your province’s real estate board or association. It may also be beneficial to familiarize yourself with the Canadian Real Estate Association’s Code of Ethics.
In addition to your real estate agent, there are a number of other industry professionals whom you’ll need to contact. As stated by their Standards of Business Practices, it’s your agent’s obligation to put you in touch with relevant professionals. He or she will have a list of delegated contacts, including information for appraisers, inspectors, and other home consultants. It’s always good to look into which services their agency is recommending; and, if you’ve dealt with, for example, a mould inspector in the past and would prefer to offer your business to them again, make sure you inform your agent.
The following is a short-list of industry professionals that may be involved in the sale of your home:
- real estate lawyer: a real estate lawyer (or notary in Quebec) is a required participant in the sale of a home, providing professional legal services during home selling such as processing paperwork, holding funds in escrow, ensuring the legitimacy of any documents to be signed, transferring title, and thorough legal representation throughout your property transaction
- lender/mortgage broker: at the onset of selling your home, you will need to discuss your financial status, including the current state of your mortgage and practical options for how to take care of it before selling
- accountant or tax lawyer: some home sellers hire an accountant to go over their future listing and what it will mean in terms of both federal and provincial taxation—this is especially an area of concern if at any time your property was not your principal residence (more information on capital gains can be found at the Canada Revenue Agency’s Line 127-Capital Gains section)
- registered home inspector: usually the buyer will foot the bill for a home inspection, but in some cases in may be in your best interest as a seller to know ahead of time about any issues which might affect your listing price or ability to sell
- home appraiser: a professional home appraiser can offer you a fair market value assessment of your home, which can be used by buyers’ lenders or to establish a listing price
- land surveyor: some mortgage companies may require that a buyer provide proper documentation of a property’s boundaries before approving their client’s mortgage; some sellers choose to preempt this by hiring their own surveyor, so that they can include land survey certification in their listing and speed the sales process. A list of Canadian surveyors can be found at the Canadian Council of Land Surveyors.
- environmental consultant: an environmental consulting company can help determine whether your property is free and clear of things like toxic mould, radon, asbestos, and other harmful environmental factors
Your home will likely have experienced an average amount of wear and tear over the years. It’s important to choose what to repair, and to present your home in the best light possible. In slow markets, you will rarely find a buyer actually looking for a "fixer upper", so it’s important to get your home inspected for both major and minor problems, fixing the ones you can afford (and disclosing them—and how they factor into your listing price—when you can’t) and always mending superficial or cosmetic problems.
Buyers nowadays are looking for a stress-free, move-in ready property. Glaring blemishes, such as cracks in the walls or missing hardware in a kitchen, will surely jump out at any buyer touring your home. You must be able to offer an objective eye to your home, treating it like it was any other property out there on the market. Examine it from the inside and outside; often potential buyers will not set foot in a house that looks shabby or ill-kempt from the street.
Making certain your home is a safe living environment is a must. A home inspector will be able to point out safety issues with your home. Correcting these before selling is a must, as it not only ensures strong saleability but avoids liability, as well. If you find you’re on a tight budget and can’t address potential hazards with your home, you absolutely must factor the future cost of fixing them into your selling price and notify your buyer with full disclosure.
The following is a short-list of relatively inexpensive safety repairs that must be made in order for your home to sell:
- loose boards: warped wooden boards or other flooring issues can set the scene for a slip and fall claim and absolutely must be repaired or disclosed; if there are cracks in the ceramic floor tiles, those should be fixed or replaced, as well
- railings: slack railings on a stairwell should be firmly secured to avoid accidents
- sidewalks: as a homeowner the onus falls on you to make sure your walkways are even and free of hazard, any loose stepping stones or bricks should be addressed prior to the sale of your home
- electrical: a home inspector will examine your electrical outlets for potential problems; if your home has any built in heaters, these should be cleaned and maintained, as needed
- radon testing: many homeowners have never heard of radon gas poisoning, yet exposure to extremely toxic radon gas is the leading environmental cause of cancer for non-smokers; as a homeowner Health Canada advises that you get your property tested, and, if need be, take the proper measures to protect your home by sealing off all cracks in your walls, open areas around pipes, and renovating your basement floors, especially if they are unfinished with exposed earth
- asbestos removal: this toxic substance must completely be eliminated immediately from your home, failing to do so without disclosure can lead to lawsuits
- mould testing: hiring a mould inspector to do a quick once-over for indoor mould is a smart idea; Health Canada considers mould a health hazard, which can pose devastating consequences for people suffering from respiratory disorders
|Note: As a seller you have the obligation of disclosure, though provincial laws will vary as to the extent of disclosure. Generally, you need to disclose any issues that may affect the health or safety of the home’s inhabitants. Failing to disclose critical issues may leave you open to liability in the future. Consult with your real estate attorney whether it is advisable to sign a disclosure statement.|
Taking the time to look at your home from a buyer’s standpoint will reap big rewards. There are a number of minor cosmetic renovations a homeowner can do before selling. However, some of these get you more bang for your buck than the others, so it’s important to know what’s a good investment in terms of increasing your selling price and what repairs are superfluous. Your real estate agent will be able to give you good advice as to which repairs give you the most return on your investment.
When considering renovations, keep in mind what’s already out there on the market. Homes similar in size and location—referred to as comparables—can offer a good template for where to begin. That’s to say, if every home in the area has a private fence and your home does not, buyers will most likely expect this perk; if it’s not there, a good buyer’s agent will point it out and use it as a negotiating tool. It’s good, then, to keep a running list of renovations in the area, noting homes with strong curb appeal. If you’re selling your home on your own, make sure you get some real estate brochures, attend their home tours, and keep a running list of the more modern renovations that catch your eye.
Ultimately, you want your updating to help your home fit into its surroundings; all while making good financial sense. However, there is such a thing as overimproving: for example, installing a hot tub when no one else in the neighbourhood has one can actually detract from your home’s value. Buyers generally want to fit into their neighbourhood. If you have an agent, listen to his or her suggestions, undertaking only the ones that make the most sense to you financially.
Note: For your home to stand out amongst professionally represented competitors, consider hiring a professional photographer for photos and a virtual tour. These days, it’s all about first impressions and you want your home to come across with as much curb appeal as possible. If you plan on taking your own photos, make sure you:
Your real estate agent will advise you the correct listing price for your home, starting with the fair market value by performing a comparative marketing analysis of your property, examining the home’s features, as well as the selling and listing prices of comparable homes in the neighbourhood. Ask your agent to speak candidly about the market. They should be able to let you know what methods they used and how they came to their final figure. A listing price should always be up for debate, and it should always be set as a starting point only, taking into account negotiations with buyers.
Pricing and showing your home are phases of the home selling process where your agent should excel. After all, their market savvy and showing experience is just what you’re paying for. Properly showing a home in its best light is one of the most important aspects of selling. At this point, your agent will have accurately priced your home, and marketed it so that it stands out amongst others in the area. As a seller, be wary you don’t get in the way of your agent during the showing process. By now, you should have made the mental concession that your home is a product, and one to be sold. Now is a good time to put away family photos, children’s artwork, and other personal touches of a home.
It’s also important to know your agent may think it best for you to be absent during home tours. Don’t be upset—he or she may simply work better without their clients around, for sake of interruption. Potential buyers may also be more comfortable viewing and discussing your property when you are not there. However, send in a neighbor or a friend if the showing is public. If your agent is blithely sitting in the next room, clearly not actively showing your home, then you may want ask to attend showings; if they still object, don’t hesitate to contact their broker. On the other hand, there are some agents who prefer not to be at home showings, considering that some buyer’s agents prefer not to discuss the home with their buyer when confronted with the listing agent.
Some things your agent should have down before beginning showings:
- ensured completion of all repairs
- have a sign-in sheet at the ready for prospective buyers’ names, agents, and forms of contact
- drawn up and printed out information fact-sheets about your home, bearing property logistics like square-footage, recent renovations, etc
If your agent wants to be at every showing, it’s best to know ahead of time whether or not he or she is amenable to last minute showings. Some agents maintain a 24-hour-notice to show policy; but if that’s the case, as a seller you run the risk of missing out on any impromptu showings. Discuss this with your agent ahead of time, and if the market is cold, you may want to let them know you are willing to have the home shown at a moment’s notice.
|Note: If you live in a condominium or townhouse community, make sure your home is among the lowest priced. It’s virtually the only way for your property to stand out from others with the same exact square-footage, amenities, and features.|
Home staging is an important part of any home tour, and there are professionals who make it their job to properly dress a home. Homes with furniture often sell quicker than empty ones, but home staging’s more than just keeping your furniture around until the home sells; it’s about paying attention to what buyers consistently look for in a space. Real estate agents will often encourage their sellers to hire professional home stagers.
Before inviting the public for a home tour, all repairs need to be completed, your furniture needs to be minimized and you’ll need to tend to any glaring problems that diminish your curb appeal. A buyer’s first impression is a fragile thing. As a seller you want it to be of a clean, well-lit, aesthetically-pleasing home. You want their first impression to warrant your asking price.
Here are some crucial points for staging your home:
- garage sales: get rid of the clutter; no one wants to see knick-knacks, half-filled moving boxes, overgrown plants, or any other object that distracts from your home itself; get some friends to help you hold a garage sale and use the money to go toward closing costs
- no children: if you have children, arrange for an off-site babysitter during showings; this creates a more comfortable environment for potential buyers.
- no animals: homebuyers do not want to see, smell, or be scared of your animals—even if it’s your most well-behaved, elderly dog. Keep the animals off-site during showings. Make sure all evidence of your animals is also non-existent, including odours or hair.
- lighting: strategically place high-wattage lamps so that your home to be well-lit and inviting—dark corners diminish a room’s sense of space. If the showing is in the evening, turn on all outside lights to create a warm and welcoming first impression.
- mirrors: hanging mirrors can effectively add depth and light to a room
- ease of movement: arrange your furniture so that there are wide access channels throughout the home, to creating a feeling of space and flow; you don’t want buyers bottle-necking and bumping into each other during an open house, as this will create the impression of cramped quarters.
- spa baskets: a bathroom can be turned into an inviting space by creatively folding hand towels and placing nice soaps and lotions in them
- candles: lightly scented candles add a warm touch, and they are a great way to light up a fireplace that doesn’t work
Your agent will schedule showings and open houses of your home; be prepared to be flexible on advance notice, as prospective buyers may crop up rather quicly and a diligent agent will be responsive to requests to see your property. It’s usually best if you are not home during showings and open houses, as it may make buyers less comfortable about discussing the home’s virtues and flaws. Worse, you will remind them this is your home – whereas you want them to think of it as their future home.
|Note: Have a fresh pot of coffee brewing for your agent to offer potential buyers, a small courtesy whose smell creates an inviting atmosphere|
Your agent is under ethical obligation to review all written offers with you as the seller. He or she will also negotiate price on your behalf, handling all signbacks and offering of incentives.
Your agent will screen each buyer and discuss each offer with you as it comes in. Usually they will be quick to recognize an offer that expects further haggling; a potential buyer may present a ‘low-ball’ offer in hopes of settling somewhere in the middle.
The buyer may make the purchase contingent on a home inspection, which the buyer will coordinate. You may also wish to insert your own conditions, such as finding a suitable home to purchase before closing the sale. Once the paperwork is signed, it’s completely binding. At this time the buyer’s lawyer will also carry out a title search on your property, ensuring you are the legitimate homeowner and that the property is free and clear of encroachments, liens, or other legal encumbrances.
An offer to purchase, also called an Agreement of Purchase and Sale, is a legal document provided by the buyer, or buyer’s agent, outlining the terms of the sale. Once this document is signed by both parties it is binding. To you as a seller, this means as long as all conditions of the agreement are met, this is the party buying your home. Conditions of the agreement can include anything from stipulated repairs, to the inclusion of chattels (personal property that can be moved and are not attached or considered "fixtures" of the property, including stoves, fridges, washers and dryers) in the sale. When a seller signs this agreement, he or she is assuring the buyer all conditions will be met before the closing day; if for whatever reason these terms are not met, then the buyer is under no obligation to purchase. The offer to purchase document will contain:
- both the seller and buyer’s names
- address of the property
- price on offer and how much is being used as the buyer’s deposit
- closing date and expiry date of the offer
- items in the home to be included in the purchase price, including all chattels remaining
- any contingencies which must be met, making the offer conditional and only final when requirements such as home inspections, land surveys, or lender approval have been met—these conditions are usually added by the buyer’s lawyer (or notary if in Quebec)
You and your agent can also counter-offer, negotiating for a higher price or stipulating different terms of the sale. As a seller you might have a different closing day in mind, perhaps you’re worried about renting, or storing your things after selling; you want to make the sale contingent upon buying a home. Writing a contingency into a counter-offer is more common for sellers during seller’s markets, when fewer homes are on the market. The buyer may also be in a similar situation: they may want to make their offer contingent upon selling their home first (see Contingency Contracts and Who They Benefit). As a seller you can also ask your agent to counter-offer with the allowance of retaining back-up offers—meaning if you’ve signed an offer to purchase from one seller, you’re definitely selling to that seller, but if another offer comes up, you can accept it in case the first offer to purchase falls through. It’s important to discuss all conditions of an offer to purchase with both your agent and real estate lawyer, making sure your best interests are represented in cases of contingency, this includes the right to cancel a contingent agreement if you get another offer (known as the right of first refusalclause); retain back-up offers; or extend the closing date.
Your real estate agent’s commission will be by far your greatest closing cost as a seller. Whether you pay this to a listing agent, buying agent or none of the above should be decided in advance of your sale’s closing. On top of an agent’s commission, you will pay your real estate lawyer their fee, and any residual mortgage interest and your share of the year’s property taxes, if not pre-paid.
Traditionally, the majority of closing costs are taken care of by the buyer, who can end up paying out of pocket somewhere between 1% to 2.5% of your listing price. These can include property purchase taxes, land transfer taxes, property taxes, appraisal fee, survey fee, and legal fees, including disbursements. In slow markets some sellers try and sweeten the deal by agreeing to pay for some or even all of the closing costs; typically they will be added to the purchase price, thus allowing the buyer to roll the closing costs into their mortgage, rather than having to pay out of pocket.
Before closing day, buyers are usually given a final walk-through of the property. This is usually to check for the completion of any repairs or other contingencies previously discussed with you the seller. You are required to bring all your keys—including any keys associated with your homeowner’s association amenities, such as gym, pool, etc—and any paperwork associated with your property. You (and your spouse or common-law partner if applicable) should also have photo identification on hand.
Your real estate lawyer (or notary in Quebec) will have set up a trust account for the buyer’s payment of the sale; and, depending upon how you’ve chosen to settle your mortgage, usually will pay off your mortgage from these funds. Your agent will bring all necessary documents for the closing of the sale, including the property deed and any other paperwork associated with the Agreement of Purchase and Sale. If you have any questions for your agent, never hesitate to ask them on closing day, no matter how last-minute you feel they may be. This is an extremely fine-tuned transaction for any real estate agent, all of which is governed by your province’s real estate and business brokers act.
Once the exchange of closing funds has taken place (once a check has been made out to you), the registration of the transfer/deed will be taken care of according to the Law Society of Upper Canada, and thus releasing the buyer from escrow. If the title registration goes through without a hitch, congratulations! You successfully just sold your home.
appraisal: used by lenders to decide a buyer’s mortgage, a real estate appraiser establishes the fair market value of a home
bridge loan: also known as a swing loan, caveat loan or interim loan, this is a high-interest, short term loan used by home buyers to purchase a new home before they sell their old.
broker: a real estate broker is licensed to act as an intermediary between the buyer and seller in a property transaction; brokers can split their commission with a real estate agent
closing day: the pre-determined calendar date on which the seller hands over the keys to the buyer and money for the purchase is transferred from buyer to seller
cluster: a group of homes in a neighborhood, most often used when comparing comparables
contingency contract: some offers to purchase are laden with contingencies, as well as well as how long you have as a seller to complete them; however, as a seller you can also make the sale of your home contingent on the purchase of another
disbursements: costs a lawyer pays which you reimburce, including registration fees and photocopies
encroachment: this happens when a property is built or extends into part of a neighbor’s property; they can arise from improper land surveys or mistakes made by building contractors
equity: as a seller, your equity is the value you have in your property beyond what you still owe on your mortgage
fair market value: this is the highest value, which a seller’s property would be able to bring if it were being sold in a competitive market
listing: this is a binding document signed by you the seller and a listing agent, which states the agent or broker is authorized sell your property to a buyer; it also includes the property’s listing price, listing length, and agent compensation
Multiple Listing Service: an online, searchable database set up by realtors to list homes and homeowners they represent
open listing: when a seller does not pay to be represented but pays the buyer’s broker; this is a non-exclusive listing in which the seller only pays the broker who brings a buyer whose offer the seller accepts
overimprovement: excessive improvements that neither increase your home’s saleability nor make good monetary sense from a seller’s point of view
prospect: someone who is looked at as a potential client in the eyes of agents and brokers; prospects are not considered clients until they sign an agreement employing an agent or broker
real property report (RPR): a report conducted by a licensed surveyor, the report guards home sellers from future legal liability as it relates to property location, improvements and boundaries. Buyers, sellers, municipal officials, lenders rely upon this document as an accurate account of improvements made to the home
sign-back: an industry term used to describe a counter offer
survey: how property boundaries and precise locations are determined. It factors in lot lines and any easements, if any; buyers usually pay for a surveyor’s real property report to be carried out on the land as it protects their future investment
title search: this is standard procedure carried out by a buyer’s lawyer to ensure there are no restrictions on your property; if any are to be found you’ll most likely need to fix them in order to sell your home
vendor: another word for seller
weighted interest rate: this is a rate determined by a lender who calculates your existing balance with the rates of the two separate loans