Selling Your Home

Selling your home is one of the biggest financial transactions of your life. You should know several things before the “For Sale” sign goes up on your lawn.

Before you sell: what is your home worth and what should it sell for in today’s market?

One way to find out is to get a professional appraisal. This will give you a value for your home based on what comparable homes in your area have sold for and on what it would cost to replace your home. The charge will vary with the appraiser between $200 and $750.

Another way to learn the value of your home is to contact several reputable real estate agents who do business in your area. They will look at your house and, for no charge, tell you what price they would list the house for and what they’d expect it to sell for. But realtors are not professional appraisers, so there are limits on how you can use their reports.

Do you need a realtor?

You may decide to try selling your house yourself but, especially in a difficult market, most people prefer to have a professional do the job. If you decide to use a realtor, pick someone you trust and are comfortable with.

Should you have a lawyer?

Selling and buying a house is complicated. The potential for disaster is great – one mistake could cost a lot. As well, there are risks in real estate, and when selling or buying, you should be careful. There are many possible types of real estate fraud. To protect yourself, you should use a lawyer, instead of trying to do it yourself. Consult a lawyer before you sign a listing agreement with a realtor.

What is a listing agreement?

It is the contract between you and your real estate agent with the terms for selling your house. Today, most listing agreements for residential sales are standard forms from the local real estate board and are multiple listing agreements. A multiple listing agreement means your agent can advertise and show your home to realtors in their own agency plus realtors with other agencies. This allows many potential buyers to learn about your home. Many agents prefer that the agreement continue for a 3-month term, but you might want to list your home for a shorter time. If your house doesn’t sell within that time, you can always extend the term of the listing agreement or change agents.

What do you pay the agent?

The listing agreement sets the amount of the agent’s pay, or commission. In BC, commissions can vary widely, so it’s a good idea to shop around. Some agents charge a flat fee. Others charge a percentage. For example, they could charge 7% on the first $100,000 of the sale price, plus 2.5% on the rest. In this case, if your home sells for $400,000, the commission would be $14,500. You pay this commission to your agent, who shares it with the buyer’s agent.

Do you have to pay the commission even if the agent doesn’t sell your house?

Normally, your agent is entitled to a commission when a buyer – who is ready, willing, and able to buy your house – signs an offer to purchase, and you accept it. Sometimes, even if the transaction falls through, depending on the listing agreement, you may still have to pay a commission. You may also have to pay the commission if you sell the house yourself while the listing agreement is active, or even after the listing agreement has expired – if the agent had previously shown the house to the buyer or was the effective cause of the sale.

Do you have a mortgage on your house?

If you have a mortgage on your home, you will have to contact the bank or credit union that holds the mortgage – before you sign a listing agreement with a realtor – to find out certain information, such as:

• How much do you owe on your mortgage?
• Can the buyer assume (or take over) the mortgage? If so, will the buyer need to have a certain income to qualify?
• Can you pay off the mortgage? If so, is there a prepayment penalty? Sometimes a lending institution will waive the penalty if the buyer takes out a new mortgage with them, or if you take out a new mortgage with them.

Get the answers to these questions in writing to avoid any unpleasant surprises later on.

What happens after you sign the listing agreement?

If someone offers to buy your home, your agent will bring you an offer to buy. It is usually written on a standard form provided by the local real estate board. Read all the fine print. Every word is important. You should have your lawyer check the offer before you sign it. Once you and the buyer sign the offer, it is a binding contract of purchase and sale.

Before you sign an offer, discuss with your agent anything in it that you don’t like and write in your own terms instead. It then goes back to the potential buyer as your counteroffer (it’s actually a new offer) and becomes the contract of purchase and sale if the buyer accepts your counteroffer.

What things in the house are included in the sale?

When someone buys your house, all the things that are “fixtures” go along with it, unless you and the buyer agree otherwise. The definition of a fixture can be tricky. But generally, a fixture is anything that’s attached to the house so that its removal would damage the house or require some repair. The bathroom sink is an obvious example. So is the crystal chandelier in the dining room, so if you want to take it with you, make sure the contract with the buyer makes that clear. Better yet, before you put the house up for sale, replace the chandelier with a simple, inexpensive fixture. The washer, dryer, fridge, and stove aren’t fixtures, but you may be able to use them as bargaining tools if the buyer wants them.

What are “subject to” clauses?

They are conditions that have to be met before the deal to buy your house proceeds. Common ones include the buyer getting financing and the house passing an engineering inspection. If you get an offer that is subject to the buyer getting financing or any other condition, make sure the buyer has only a short time to remove the condition. Your home may be off the market for the time it takes the buyer to remove the condition, so you want to keep it short.

As well, the “subject to” clause should be very specific. Don’t accept a clause that says just “subject to buyer obtaining satisfactory financing.” If the buyer changes their mind, all they have to do to get out of the deal is to say they couldn’t get satisfactory financing. Instead, put details in the clause about the interest rate, the principal amount, monthly payments and so on, as well as the deadline for when the buyer must remove the clause.

Summary

First, get a realistic idea of your home’s market value. Then choose a realtor you trust. Read the fine print of your listing agreement and the offer to purchase very carefully. If you have any doubt, especially about the offer to purchase, have a lawyer check it over before you sign.

More information

For more information on house mortgages and financing, check script 408, called “Mortgages and Financing a House Purchase”. For more information about the contract of purchase and sale, check script 406, called “Buying a House”.

As well, read the booklet called “Selling a Home in BC Information Booklet” prepared by the Real Estate Council of British Columbia. For a free copy, call 604.683.9664 in Vancouver or toll-free 1.877.683.9664 elsewhere in BC. Or go to their website at www.recbc.ca and click on “Consumer Info” and then “Publications”.

[updated February 2013]

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The testing of the claims in a court proceeding at a formal hearing before a judge with the jurisdiction to hear the proceeding. The parties present their evidence and arguments to the judge, who then makes a decision resolving the parties' claims against one another that is final and binding on the parties unless successfully appealed. See "action," "appeal," "argument," "claim," "evidence" and "jurisdiction."

In law, the re-examination of a term of an order or agreement, usually to determine whether the term remains fair and appropriate in light of the circumstances prevailing at the time of the review. In family law, particularly the review of an order or agreement provided for the payment of spousal support. See "de novo," "family law agreements," "order" and "spousal support."

A professional estimate of the worth of something, such as a company, a property, an investment, a book of business, a loan, or a debt. In family law, this is sometimes required for the court to determine the value of property such as an art collection or a house.

In law, an order of a court cancelling or changing an earlier order of the court. See "order."

Under the Family Law Act, a term that describes the time a person who is not a guardian of a child, including a parent who is not a guardian, has with that child. Under the Divorce Act, a term that describes the time a person who is not a married spouse has with a child. See "guardian" and "parental responsibilities."

In law, all of the personal property and real property that a person owns or in which they have an interest, usually in connection with the prospect or event of the person's death.

In law, a form of possession of property in which a "trustee" keeps and manages property for the benefit of another person, the "beneficiary," without owning that property and usually without acquiring an interest in that property other than as payment for their services. The trustee holds the property in trust for the beneficiary. See "constructive trust," "ownership," "possession" and "resulting trust."

A person licensed to practice law in a particular jurisdiction by that jurisdiction's law society. See "barrister and solicitor."

(1) In law, an unintentional act or failure to act arising from a misunderstanding of the true state of affairs, from ignorance, or from an error not made in bad faith. (2) In contract law, an unintentional misunderstanding as to the nature of a term agreed to in a contract that may justify setting aside all or part of the contract. See "bad faith" and "contract."

In law, someone acting on behalf of someone else, with that person's express permission and normally at their express direction.

An agreement to transfer the ownership of property from one person to another in exchange for the reciprocal transfer of something else, usually money. See "agreement."

(1) In law, a court proceeding; a lawsuit; an action; a cause of action; a claim. (2) A historic decision of the court; case law. See "action," "case law, " "court proceeding," and "precedent."

The conditional transfer of the title to real property by an owner to another person in return for money given by that person as a loan, while retaining possession of the property. The party to whom title is given, the "mortgagee," usually a bank, is allowed to register the title of the property in their name if the person taking the loan, the "mortgagor," fails to make the required payments. See "encumbrance" and "real property."

To give up a right or entitlement, or the opportunity to assert a right or enforce an entitlement. See "release."

In contract law, the expression, either orally or in writing, of a willingness to be bound by a proposed agreement, contract, or settlement. See "offer to settle."

(1) In law, a requirement or obligation to honour and abide by something, such as a contract or order of the court. A judge's order is "binding" in the sense that it must be obeyed or a certain punishment will be imposed. (2) The principle that a higher court's decision on a point of law must be followed by a lower court. See "contempt of court" and "precedent."