The Selling Process
The Listing Contract
There are two basic types or real estate listing agreements: the Exclusive Listing and the Multiple Listing
The Exclusive Listing gives the seller’s agent the sole or exclusive right to sell your property.
The Multiple Listing: This is the most common type of listing. In the Multiple Listing Agreement, the seller’s agent agrees to register the property on the Multiple Listing Service (MLSTM) . This makes the listing available to all licensees who are members of the local real estate board. In this situation, the listing agent agrees to share a specified amount of commission with any other licensee who is able to find a buyer.
Responsibility of the Seller
As a seller you are to supply your agent with accurate information about your home, including its age, condition of the roof, appliances, property taxes, etc. A Property Disclosure Statement is to be filled out by all sellers who wish to have a Multiple Listing Agreement. When selling your home honesty is the best policy. If in doubt, disclose.
Your home has been marketed, and now you are being presented with an offer to purchase. Do not be surprised if you are presented with some offers that differ dramatically from list price. Your agent has an obligation to present all offers to you for consideration. If several offers are presented to you at once, you are under no obligation to accept any one offer over another.
You have three options
1) Accept the offer as it is presented
You are happy with the offer and its terms. Once you sign the Contract to Purchase and Sale agreeing to its terms, and it has been conveyed to the buyer, it becomes a legally binding contract.
2) Make a counter-offer
If you make any changes to the original offer you are in fact presenting a new offer to the buyer. If the buyer declines your offer, you cannot enforce their original offer. The buyer may decide to counter your counter-offer, and this process may go back and forth a few times before an agreement is reached.
3) Reject the offer
You are not obligated to accept any offer or to make a counter-offer. However, if you reject an offer that meets the exact terms of your listing contract you may be obligated to pay a commission. You may want to discuss this with your agent.
*** It is important to realize that an offer that is presented to you by a buyer can be revoked at any time prior to the communication of your acceptance.***
A subject clause is a specific condition that calls for the happening of some event or the performance of some act before the contract shall be binding upon the parties. While many subjects may be encountered the most common are:
1) Subject to Financing
The buyers make the sale conditional upon their finding the financing under their desired terms. It is important that this is met in a specified time, as you are essentially taking your home off the market while you wait for the buyer to remove subjects.
2) Subject to Building Inspection & Approval
This can be subjective in nature and is best to be presented in an objective and specific manner (ex. subject to buyers arranging building inspection and no defects are found that amount to over $5000). It is important that this is met in a specified amount of time in accordance with the contract.
3) Subject to buyers selling their home
This is often a subject that cannot be removed within a week therefore it is very important to insert a time clause. This way you can still consider other offers and enforce the time clause if another offer should come in that you would like to accept. This time clause leaves you, the buyer, in control of the transaction.
Financing Options To Offer The Buyer
You may be in a situation where you will be faced with a large interest penalty to pay out your mortgage early. If your mortgage has an attractive term with lower than market interest rates this can be a selling feature.
It is important to ensure that your mortgage lender will release you from future obligations if the buyer defaults on the mortgage.
This will change the market value of your offer. If the going market rate is higher than the market value of the assumable portion of your mortgage the market value of the offer will be lower. Your agent is able to calculate the difference and you should insist that her or she do so. This is the only way you can make an informed decision.
Vendor Financing or Vendor Take Back Mortgage
In this situation you, the seller, become the mortgagee and the buyer becomes the mortgagor. You need to think about whether you want to be responsible for collecting payments for an extended period of time. You also want to ensure that your buyer has a good credit rating, and verify the buyer’s source of income. This route is definitely not for everyone but some people see this as a good, solid investment.
Like the Assumable Mortgage, a Vendor Take Back Mortgage requires some calculations to come up with the actual market value of the offer. You should insist this is done so you can make an accurate informed decision.