GUIDELINES FOR HOME SELLERS (PT. 1)

A FEW GUIDELINES FOR HOME SELLERS (Part 1)

1)     Preparations:

Before you take the plunge into selling your home, there are several crucial steps to ensure a smooth and successful process.

         i.            Gather Essential Documents:

Real Property Report (RPR): In Alberta, providing an RPR indicating municipal compliance to the buyer is mandatory. It delineates property boundaries and structures' placement concerning these boundaries.

Condominium Documents: These encompass vital information about the condominium corporation's operations, financial stability, and maintenance. Examples include corporation bylaws, reserve fund studies, financial statements, and insurance certificates.

       ii.            Understand Market Conditions:

Buyer’s Market: This scenario occurs when property supply exceeds demand, offering buyers favorable terms. 

Seller’s Market: Here, strong demand outstrips the available properties, potentially leading to competitive bidding. 

Balanced Market: Supply and demand are relatively equal, fostering stable pricing and negotiation. 

     iii.            Consider Tenant Rights:

If your property has tenants, comprehend their rights, especially concerning notice periods if you plan to sell before their lease expires. Refer to the Residential Tenancies Act for specifics. 

     iv.            Evaluate Your Current Mortgage:

Understand your existing mortgage terms. You may have a portable mortgage allowing you to transfer it to a new property, or it might be assumable, enabling the buyer to inherit the mortgage terms. 

       v.            Assess Tax Implications:

Consult a tax professional to understand potential tax consequences, especially if your property isn’t your primary residence. Since 2016, the sale of principal residences must be reported on income taxes. 

     vi.            Review Current Contracts:

Examine existing contracts for home-related services, like alarm systems or rented hot water heaters. Determine if these contracts can be transferred or assumed by the buyer. Full disclosure to potential buyers is essential.

By addressing these key areas, you’ll not only be well-prepared for the sales process but also create a transparent and trustworthy transaction environment for all parties involved.

2)     Identifying a Suitable Licensee for Your Real Estate Needs

When you’ve made the decision to sell your home, the logical next step is finding a trustworthy and competent real estate licensee to assist you through the process. This professional will not only address your queries but also help you determine an appropriate listing price, market your property effectively, navigate the complexities of the transaction, and facilitate successful negotiations. 

         i.         Consider Your Preferences: Think about your specific needs. Determine whether the agent’s approach aligns with your requirements. Consider factors like communication style, availability, and approach to conflict resolution.

Example: Michael preferred an agent who specialized in luxury properties because he was selling a high-end home, so he looked for expertise in that area.

       ii.         Mutual Interview: Be prepared for questions from potential agents. They might ask about your motivation for selling, preferred timeline, and whether you plan to buy another property. 

In your quest for the right real estate licensee, these steps will not only guide you but also empower you to make an informed decision tailored to your unique requirements. Remember, the ideal licensee should not only meet industry standards but also resonate with your personal preferences and objectives.

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3)     Working with your Real Estate representative

When embarking on a real estate transaction, selecting a real estate licensee is a pivotal decision. Once your choice is made, the licensee is obligated to present you with RECA’s Consumer Relationships Guide, a crucial document that outlines the legal framework of your association. This guide delineates the three fundamental types of legal relationships that can be established:

                     i.            Entire Brokerage Acting as Your Agent

                    ii.      Individual Licensee (or Team) as Your Agent

                 iii.            Customer Status 

The Consumer Relationships Guide provides comprehensive insights into these relationships, outlining the respective responsibilities your licensee holds in each category. Your licensee will request you to acknowledge that you have read and understood the guide, and have had a thorough discussion with them, addressing any queries you might have had.

Additionally, at the commencement of your partnership with the real estate licensee, you will be asked to sign a written service agreement, a mandatory step in Alberta for residential real estate clients. These agreements serve several vital purposes:

                     i.            Clarifying Relationships and Obligations 

                   ii.            Consent and Data Usage

          iii.      Compensation Details

                 iv.            Negotiable Terms: Crucially, these agreements are negotiable. You have the opportunity to discuss and agree upon various terms, including the agreement's duration, exclusivity (whether you are bound to a single brokerage or can engage with multiple), fees, services provided, and clauses regarding early termination.

It's important to note that negotiability does not guarantee that all terms will be flexible; certain conditions, such as listing durations, might be influenced by external factors, like real estate board regulations.

By including any promised services in the written service agreement, you can ensure that you receive the specific services you desire and expect from your real estate licensee. These agreements are not just formalities but essential tools that empower you to shape the course of your real estate engagement effectively.

4)     Completing the Seller Representation Agreement

Completing the Seller Representation Agreement, often referred to as the Listing Agreement, is a critical step in the real estate transaction process. This document delineates the specifics of your property listing, covering essential elements such as the listing price, inclusions/exclusions, possession date, and the responsibilities of both you and your real estate licensee.

Setting the Right Price: Determining the appropriate listing price is paramount. Your real estate licensee employs tools like Comparative Market Analysis (CMA), analyzing data from recently sold comparable properties to suggest a suitable listing price. While the ultimate decision rests with you, your licensee's expertise aids in setting a price conducive to a timely and profitable sale.

Residential Measurement Standard (RMS): Your licensee must discuss property size and adhere to the Residential Measurement Standard (RMS) in Alberta. The RMS ensures consistency in representing a property's above-grade size. Any areas not covered by RMS can be communicated to potential buyers separately. However, it's crucial to avoid misleading information, ensuring transparency in all disclosures.

Factors Influencing Property Value: Property size is just one factor influencing a buyer's decision. Location, features, decor, and overall maintenance significantly impact a property's value. Homes with identical measurements can vary in price based on these factors.

Additional Considerations in the Agreement:

                     I.        Dower Rights: If married, spousal consent might be necessary if your spouse isn't a registered owner. Your real estate licensee can provide detailed information regarding this.

                   II.       Possession Date: You can specify a preferred possession date or leave it negotiable, allowing flexibility in the transaction process.

                 III.        Attached/Unattached Goods: Differentiating between attached (unalterable without damage) and unattached (movable) goods is vital. Specific items like garburators or built-in appliances are generally considered attached and stay with the property. Clear communication is crucial, and any exceptions must be explicitly stated in the agreement.

                IV.       Inclusions/Exclusions: Clearly outline what items are included or excluded in the sale, both in the listing agreement and any subsequent offers or counter-offers. Clarity avoids misunderstandings during negotiations. 

                  V.        Material Latent Defects: Sellers are legally obligated to disclose known material latent defects—issues affecting safety, habitability, or the buyer’s intended use. These could range from structural problems to undisclosed renovations without permits.

                VI.         Stigmatized Properties: Stigmas, such as a property's association with a death or crime, don't need to be disclosed as they aren't material latent defects. However, if asked directly, honesty is crucial. Buyers have the right to inquire, and sellers must respond truthfully or let the buyers decide whether to proceed without the information. 

Understanding these nuances ensures a smooth and transparent real estate transaction, protecting both your interests and the buyer's expectations. It's advisable to consult your real estate licensee for any clarifications or concerns related to these aspects of the Seller Representation Agreement.

5)     Conflicts of interest

Conflicts of interest can occasionally emerge in real estate transactions, posing challenges for both buyers and sellers. Such conflicts occur when there's a genuine or apparent clash between the interests of a real estate licensee and those of their client. For instance:

                     I.       Your home is on the market, and the buyer is related to your real estate agent: This situation creates a conflict because the agent should prioritize your needs above all else. If they're related to the buyer, balancing these interests becomes complex.

                   II.        Your home is for sale, and your agent wants to buy it: This scenario constitutes a conflict as the agent is supposed to represent your best interests. Buying your property compromises their ability to fulfill their fiduciary duty to you.

                 III.        Your agent represents the buyer of your property: This situation raises conflict concerns because the agent owes undivided loyalty to both you and the buyer, which can be challenging to maintain in negotiations. 

Real estate licensees have a responsibility to identify and disclose conflicts of interest promptly. They must:

·         Provide you with comprehensive information about the conflict.

·         Explain the reasons behind the conflict or potential conflict of interest.

·         Describe how the conflict may impact you.

·         Recommend seeking independent advice.

To manage conflicts, transaction brokerage serves as a solution, especially when your agent represents a buyer interested in your property. In this setup, the agent becomes a transaction facilitator, treating both parties impartially. Undivided loyalty to either party is no longer applicable.

If both you and the buyer agree to transaction brokerage, you must sign an "Agreement to Represent Both Buyer and Seller" form. This document ends the sole agency representation and outlines the terms of the new relationship between you, the agent, and the buyer. If either party disagrees with transaction brokerage, alternative options will be presented. 

Upon becoming aware of a conflict of interest, you have the liberty to decide the course of action. Seeking legal advice or choosing a different real estate licensee are viable options. Moreover, a real estate agent cannot provide services in the presence of a conflict of interest unless you provide written informed consent, allowing them to proceed.

Click here to see 5 more very important Guidelines for Home Sellers.