 Personal Finance PowerPoint Presentation Listing Broker Get ready to get financially fit by practicing personal finance. Remember that we can break financial decisions down into the short-term decisions and the long-term decisions. The short-term decisions being those where we train our gut to trust our gut so that we can hone down our habits and depend on them to help make decisions. Long-term decisions such as the purchase of a home being those where we use the adage of measure twice cut once. We want to have a more formal decision making process because we cannot use trial and error as readily to make those long-term decisions with the home purchase process. Some steps we might break the process into could include. Number one, determine the home ownership needs. Number two, find and evaluate property to purchase. Number three, price the property. Number four, obtain financing. Number five, close the purchase transaction. Listing broker, most of this information can be found at Investopedia, which you can find online and take a look at the references and resources continuing your research from there. This is by Rebecca Lake, published January 10th, 2022. What is a listing broker? Obviously, when we go through a home transaction, a purchase or a sale of a home, it's a long type of transaction. We're going to be dealing with multiple financial institutions, multiple individuals, including most likely a broker or brokers. It's a good idea to understand what the objective of the brokers are within the transaction. A listing broker or listing agent is a real estate professional who assists a home owner with listing and marketing their home for sale. So listing broker kind of is what you would expect it to sound like, the broker that's going to be listing the property. Notice when we're talking about a broker in general, then we're thinking on this side of things, the seller side of things, working with a broker, a broker kind of working as like an agent of the seller to help them with the process of listing and marketing the home for sale in the interest or for the benefit of the seller, the person that they're kind of representing, kind of acting in a way as an agent of. So some of the duties of the listing broker include determining an appropriate price for the home, establishing a listing and holding open houses for prospective buyers. So obviously on the buyer side of things, you might have a broker that you're working with that then is going to have to be dealing with the listing broker possibly to look into the item that has been listed, the prices that are involved with it, and then possibly setting up things like of course the open house and viewing the property. They also work with the buyer's agent, also referred to oddly enough as the selling agent to coordinate the sale of the home. Listing broker explained to understand listing brokers, it's helpful to first review the difference between a real estate agent and a real estate broker. An agent is someone who is licensed by their state to help people buy and sell different types of property. A real estate broker is an agent who's received an additional broker's license. So you can think of it basically as a tiered kind of structure or in other words, you can be a real estate agent without being a broker, but you can't be a broker without being a real estate agent because you need to get the agency first before you get the broker's license. So in general, brokers have more in depth knowledge of the real estate market and the various financial and legal processes involved in selling and buying properties. A listing broker is someone who assists property owners with the listing, marketing and selling of their property. This can be a residential property such as a primary residence or vacation home, but listing brokers can also work with commercial property owners. Listing brokers help the seller with a variety of tasks, including staging the property for sale, hiring someone to photograph the home, determining an appropriate sales price for the property, establishing a listing for the home through a multiple listings service, the MLS, schedule and holding open houses, negotiating offers with the buyer's agent. So obviously a lot going on there with regards to the selling process, the broker in essence acting as kind of an agent of the seller in order to negotiate the process for the sales transaction in essence on behalf or for the benefit of the seller. Once a property is listed, the listing broker is responsible for fielding offers from buyers. So they're going to pick up the offers from the buyers, fielding those offers. The broker can work with the seller to vet offers and determine whether to accept, make a counter offer or reject based on the offer price or other factors such as whether they're pre approved for a mortgage. So you can see there they're kind of acting in essence as an agent on the seller. They're helping for the seller's benefit. They're acting on the seller's behalf and making some decisions or having the power to make some decisions on the seller's behalf in the strict area of this real estate transaction. So listing broker versus selling agent. Just as the seller is a real estate transaction may be represented by a broker, so may the buyer. 87% of people who bought a home in 2021 did so with the help of a real estate agent according to the National Association of Realtors. The buyer's agent is also referred to as the selling agent once the offer has been accepted and a property is under contract. So now you could have, of course, two agents that are going to be involved when you're talking about the listing agent. Clearly, if you're selling the home, you're typically going to want a listing agent to help you out with all the processes of listing the property that we just basically looked at. When you're buying the home, then you also still might want an agent on your side of things as well to help you out with the purchasing process as well. So now you've got the two agents that are going to be involved, one representing the interests of the person that is listing the property, putting it up for sale, one representing the interest working on behalf of the buyer in that case. And it's not required, you don't have to, but that would be oftentimes the case. So in terms of what buyer's agent or seller agent does, the list includes helping buyers to identify properties that may fit their needs and budget. So obviously, if you're on the buying side of things, the agent's going to help you to identify those properties because they're going to be working more in the field of real estate. So you'd want to get a pretty good connection if you're working with an agent to give them a good idea or representation of the stuff that you want, what you're looking for, so they can make the best decisions. Contacting the listing agent to schedule a showing. So obviously if you hire an agent, you're not hiring the listing agent typically. You're hiring your agent who is then going to have to work with and contact the other side of the transaction represented by their person, right? Who's your agent? This agent versus my agent. And then you look at the transaction and you can schedule things like showing the home, drafting an offer and forwarding it to the seller's agent. So when the offer is going to be put into place, if you've got the agent and you're buying the home, they can help you to draft the offer. Of course, possibly giving you hopefully advice in terms of what you think the best offers would be in that particular environment. Clearly, one of the things that you would expect the agent possibly to be more aware of is the workings of that particular environment that you are in, meaning home sales in general. What's just the logistics of going through the process, but possibly more in terms of the marketplace that you're currently in would be something to be nice if they had some advice on walking the buyer through the remaining steps of the home buying process once an offer is accepted. So the selling agent can also communicate with the listing broker if issues arise during the home buying process. If the home inspection reveals one or more structural issues, for example, the buyer's agent can reach out to the seller's agent to discuss whether the seller will make any necessary repairs themselves or offer a concession for them. So when we go through the process of saying, is there any issue that happened with the inspection, so the deal's kind of going through, if there's an issue, then you've got to make the decision, okay, what are we going to do about that? Because now you have another negotiating point that's going to be put into place, who's going to be taking care of this particular issue or the costs with it? And obviously there's multiple kind of avenues that you can think about, you can think about adjusting the home price, you can think about the seller picking it up, the buyer picking it up depends on the buyer and the seller in the marketplace and so on. So listing broker, the listing brokers work on behalf of the seller in a real estate transaction. The listing broker is responsible for listing and marketing the home scheduling, showing and negotiating with the selling agent. The seller pays the listing brokers commission, selling agent, the selling agent works on behalf of the buyer in a real estate transaction. So the selling agent is responsible for helping the buyer identify properties that fit their needs and budget as well as making an offer and navigating the purchase. The seller pays the selling agent's commission. Listing broker compensation, listing brokers and listing agents are paid a fee for their services in assisting a seller, though they're typically only paid if the sale is completed. So obviously you got the listing broker is working kind of on behalf of the seller, they're listing the property and so on and so forth. So however they're going to get paid, typically they're going to get paid, you know, when the home is sale, they're going to get a piece of it typically would be the general thought process there. So traditionally, a typical commission associated with the sale of a home is around 6% of the home's sales price. So 6% depend, which could be substantial, you know, if you're talking about a large home price or a home sale depending on the price of the home, this commission is split equally between the listing broker and agent and the buyers or selling agent. So then you might split it between the agents. So real estate commissions are usually paid by the seller of the home out of the proceeds of the sale. So the seller is making the sale, they're getting, you know, the sales money traditionally commission paid for it. So for example, say you owe $200,000 on your home, your listing agent is able to sell it for $400,000. So you got a home, you got a loan on it for $200,000, you're selling it for $400,000, your listing agent helped you to do that resulting in a $200,000 profit to you, meaning you sold it for $400,000, you had to pay off the loan of the $200,000, which left you with the $200,000 in profit. So if you assume a 6% commission rate, then you'd need to pay $24,000 in commissions, that's going to be the $4,000, which is the amount that you actually sold it for, not after the loan times the 6%. If that amount of that amount, $12,000 would go to the listing broker or listing agent and $12,000 would go to the buyers agent. So you got the full $24,000 splitting between the two agents involved, the listing agent and the other agent, selling agent. Your net profit would be then $176,000, which was, we sold it for $400,000, we then subtracted the $200,000 because we had a loan for the $200,000, and then we had to pay the two agents $24,000 total, $12,000 to each, and that brings it down to the $176,000 profit. There are some situations, however, in which a listing broker might be able to collect both commissions, specifically, they can do so if they're acting as a dual agent. So they're dual agents, they're acting on both sides of the transaction, which seems kind of suspicious, but they can do that sometimes because usually if they're a dual agent, that means they're a double cross in government terms, like if they're a government agent. But here, possibly not, you're a dual agent. A dual agent is a real estate represents both buyer and seller of the property. So again, you would think like just on a market kind of condition that if the agent is representing both the buyer and the seller, they got kind of conflicting interest to some degree with regards to the negotiation. But possibly not depends on the situation. Obviously if the buyer and seller both trust the agent and so on within the process to just facilitate the third-party transaction, then you would say, well, they can have the possibly access to both the commissions in that case because now you only got one agent in place. So dual agent is not allowed in all states and when it is permitted, the agent must adhere to a fiduciary duty when acting on behalf of the buyer and the seller. So again, just in and of its nature, you would think, well, how can you be an agent? That would be like going to court and you got one lawyer that's representing the plaintiff and the, you know, how can that work? That doesn't make much sense. But so that's why you would think, you know, it's a little bit, a little bit odd and you might need some more safeguards in place to make sure that that's okay. So how is a listing broker different than a selling agent? The listing broker works on behalf of the seller and a real estate transaction while the selling agent works on behalf of the buyer. What's a typical listing broker fee? You might ask listing brokers and listing agents are typically only paid if the sale is completed. So they're getting a commission sales got to go through. They might be a little pushy over there. Note that that the agents of course are as you have the typical agency problem when you when you hire an agent, meaning if you're hiring and like it's like hiring executives of a company. When people when the shareholders exactly hire the executive, the executive is working on as agents in essence of the shareholder, at least as the classical view of of it. But obviously they have different personal desires that don't quite line up exactly to the shareholders needs. Same thing is kind of true here. Obviously you're hiring an agent to work on your behalf. They're supposed to be working on your best interest and working as your agent. But clearly their interests are to sell the homes and get get some commission from it. So the interests that are real to them don't exactly line up to your interest. So obviously you got to keep that in mind when you're when you're negotiating or working with basically any agent agency problem is that's an agency problem. So traditionally a typical commission associated with the real sale of a home is around 6% of the home sales price. This commission is split equally between the listing broker or agent and the buyers or sellers agent are listing brokers required for a home sale. Home sellers owners don't necessarily need to have a listing broker or agent to sell their home, but it may make the process easier. So in the sales home, we listed all the things that the listing agent does, which is a fairly significant amount of things, right? They're going to have acts they're going to have a hopefully a better pulse know the pulse of the current local housing market that you're in. They have more capacity to process the home as a as a listing agent agent and put it up for sale and everything. So obviously if you were an agent, then you might be have more of a capacity to do that yourself. And if not, you still could possibly do it, but they generally have a substantial amount of items that that would be possibly helpful for the for the selling side of things. So the bottom line, a listing broker can make selling a home easier, though hiring one isn't a nest isn't a necessity for property owners or comfortable selling on their own. So if you're comfortable, if you're experienced doing it yourself, then you may be able to do it yourself. But you want to consider, you know, whether or not you got the skills and whether or not you'd want to pay for the skills to do that. So when working with a listing broker or agent, consider their track record reputation and overall experience. So clearly they're handling a fairly substantial transaction here. Experience is going to matter in that transaction. You want to make sure they got the experience to process the transaction list the transaction. And also, are they familiar? You would think with your you would want them to be familiar with your local sales area where you are selling the home. So they have a pulse on the economy in that particular area. So it can also be helpful to ask questions about the how often they'll communicate with you during the process selling your home and how they prefer to communicate. So clearly you would like to be able to be in contact with them to some degree and get some updates with the home purchasing process, because clearly there can be some turns and shifts and whatnot with that process. So this can give an idea of what to expect during the time that you'll be working with them to sell your home. Finally, you can review the best real estate website to see how much homes like yours are selling for in your area when deciding how much to list your property for. So clearly in the past, it might have been a little bit more even more required to have a listing agent because you would have to depend on them to do more of the in-depth research. It'd be a little bit more difficult to get an idea of what homes around you are selling for. It might be a little bit easier these days to get a feel for what the home price would be just by looking at the kind of applications that are out there to give you that information. So it might be a little bit easier, but still, again, you'd think the listing agent would have a better feel for the whole process and the price and so on going forward. So you want to measure the pros and cons related to it.