Buying and Selling a Home
Copyright © 2004
Zegarelli
Law Group.
All rights reserved.
Written by
Gregg
R. Zegarelli, Esq.
Although not at all necessary, sellers and buyers
of real estate often use real estate agents. Real estate agents work for
real estate brokers who coral agents into the brokage.
In a real estate transaction, there is a buyer
and a seller. Usually the seller has a broker and agent. The
advantage for the seller is that the property will be "multi-listed" meaning
that the opportunity will be centrally identified in listings that are jointly
managed by most or all real estate brokerages. Commissions are
negotiable, and so is the term of the listing agreement.
So, let's play it out. Joe Seller lives in
Town Greenacre wants to sells his home. He knows John Sagent, his buddy,
who happens to be a real estate agent with a local brokerage, RealSell.
Seller calls Sagent, who is more than happy to take the listing for his
employer, the broker, RealSell. Seller's property is now multi-listed.
Jane Buyer lives in Town Whiteacre. She
received a job transfer and will be moving to Town Greenacre. She needs to
find a home in Town Greenacre. She could do two things: a) She could drive
to Town Greenacre and look for "for sale" signs. Then she can call the
listing agent. For example, she might drive by Joe Seller's property, see
the for-sale sign with John Sagent's name and call him directly. b) She
could call her friend, Mary Bagent, who happens to be a real estate agent with a
local brokerage, RealBuy. Bagent is ecstatic to receive a call for
business and might respond in either of two ways: i) if Bagent is familiar with
Town Greenacre property, she would take begin working with Buyer; or ii) if
Bagent is not familiar with Town Greenacre, she might refer the business to an
affiliated agent in Town Greenacre. (Being familiar with the community is
an important quality for the agent working with the buyer.)
A couple of terms. Sagent, the agent
contacted by Seller and entering into the "lising agreement," is called the
"Listing Agent." Bagent, the agent contacted by Buyer, is called the
"Selling Agent."
Without delving into the complexities of dual
agencies, both Sagent and Bagent
work for Seller. Even though Buyer called her friend, Bagent works for
Seller. This is important because when Buyer tells Bagent, "I don't
want to pay $250,000, but I will..." it's like telling Seller.
| Seller |
Buyer |
Result |
| No Agent |
No Agent |
Buyer and Seller
work together to consummate the deal. Usually one or both have
attorneys draft the Agreement of Sale. |
| Agent |
Agent |
The two agents
work together and split the commission 50/50. |
| Agent |
No Agent |
Buyer works with
the Seller's Agent. The advantage is that the commission does not
get split, thereby leaving the agent a bit more flexible to adjust their
own commission to achieve a deal. Since, usually, there is a
commission split, if there is only one agent, anything better than 50%
is still a win for the agent. |
The agents then split the commission with their
brokerage. Therefore, for example, if there is a Listing Agent and a
Selling Agent, then, for every $100 in commission, the two agents and the two
brokerages each make $25. This split is a general rule, but different
brokerages have different deals for agents determined by annual production, etc.
Some states permit dual agencies. This is a
situation where the Listing Agent or the Selling Agent works directly with the
buyer and is charged to not advocate either side. That is, anyone who
consents to dual agency is saying that they permit the agent to represent both
sides. Be very careful before permitting dual agency; sometimes it is a
smart thing to do and sometimes not so smart.
Remember that a real estate agent cannot practice
law. That is, a real estate agent cannot tell you the legal consequences
of the terms contained or to be contained in the agreement of sale.
Whenever a buyer is obtaining financing to buy
property, the lending institution will ensure many aspects of the closing and
the property are handled. The buyer can benefit from this significantly,
but it is incidental. The lending institution is protecting their security
for the loan; they want the property to be free and clear of liens for their own
protection. However, the lending institution is concerned for itself and
this does not mean that the buyer should not have an attorney.
In the event of an all-cash deal or a private
loan, it is important for the buyer to obtain title insurance. Lending
institutions require title insurance. Title insurance protects the buyers
title, but only in the sense that the title insurer insures that the record is
as good as they say it is; that is, they guarantee their statement of the title.
If something exists that the insurer did not identify or disclaim, then coverage
proceeds will be granted.
Our firm regularly handles many real estate
transactions for our clients.
Contact us for more information:
Z e g a r e l l i
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Zegarelli Law Group
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Upper St. Clair Administrative and Postal Office:
2585 Washington Road, Suite 134
• Summerfield Commons Office Park
Pittsburgh, PA
15241-2565 USA
Pittsburgh Office:
301 Grant Street, Suite 4300 • One Oxford Centre
Pittsburgh, PA 15219-1407 USA
Voice: 412.833.0600
Fax: 412.833.0601
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