Sale of Your Home, IRS Tax Tip 2007-54

If you have a gain from the sale or exchange of your main home, you may be able to exclude from income all or part of the gain. Click Here for more information.

Why shouldn’t we put it on for a short time at a high price and see if we can get it?
Timing is extremely important in the real estate market. A property attracts the most interest from the real estate community and from "Educated" buyers during the first three weeks it is listed. If you price it high even for a couple of weeks, you will be missing most of this market. Ask for our booklet on Intelligent Pricing.

What is the greatest danger of overpricing
The house sits and doesn’t sell. Then it starts to be considered shopworn, you get only lowball offers and you end up taking a lower price than you might have if you priced it correctly to begin with.

If my house sells in the first month, doesn’t this mean we underpriced it?
No, this shows it was priced perfectly. If it were underpriced, you would have multiple offers in the first several weeks, possibly leading to an above market sale.

If I list my home at or below the market, won’t buyers think there is something wrong with it?
No, quite the contrary. Other Realtors will know it is priced realistically and they will tell their clients. Experienced buyers will also know it is well priced. Their questions will not be what is wrong, but what do I need to offer to be sure to get it before multiple offers come in and it goes to sealed bids.

Why can’t I just compare the houses that have sold to mine and determine its listing price?
When looking at recent sales, the house style, location, move-in-readiness, curb appeal and decoration play a major part. Comparing statistics between two houses only tells part of the story.

Then shouldn’t I just compare my house to ones on the market?
Until you have seen and toured them it is hard to tell which are priced correctly and which are over or under priced. This is the job of the active, full time Realtor. Every Tuesday and Thursday, they tour the new open houses.

How long should it take to sell my house?
The average number of months that a house remains on the market is about the same every year for overpriced homes. The chart below compares, for the year 2003, the average number of months a property was on the market against the percent the original asking price was above the eventual sales price. This chart shows that no matter how hot the market, if you price a property significantly above its market value, it will take a long time to sell, and often at a price substantially below what it would have sold for if priced accurately.

0-5%	5-10%	10-15%	15-20%	20-30%	30-40%
2.6 mos	4.9 mos	7.4 mos	7.9 mos	9.1 mos	19.1 mos

What do the number of showings and offers received tell me about my price?
If, during the first month, you are getting drive-bys but people are not actually showing the house, it means that the Realtors think the price is unrealistically high and are showing Buyers other properties where they can get more for their money. You are approximately 12+% above the market. If, after the first few weeks, you are getting only a few showings, it means Buyers are finding nicer homes for the money. You are approximately 6-12% above the market. If you are getting a reasonable number of showings, but no offers, it means you are close but still not in the running. You are approximately 4-6% above the market. If you are getting second showings but buyers are buying something else or giving you only very low offers, you are still 2-4% above the market. Ask your Realtor how many houses in your price range have sold. If your house is priced correctly, according to the National Association of Realtors, you should be receiving an offer for about every 10 showings. After the initial 4 weeks on the market, a correctly priced house in a normal market should be receiving 1-2 showings a week. During the initial excitement period, you should be receiving 8-12 showings a week.

Does it really matter to the Realtor if my house sells for the right price? After all, their commission is not dramatically affected if my house sells for less than it is worth.
It is true that the commission change is not great, but this misses the point. A Realtor’s business comes from happy customers and their referrals. No one can stay in business if they do not have Clients who feel that they always had their best interests at heart and worked hard to get them the best price possible.

Shouldn’t I leave room for bargaining?
Yes, some buyers always insist on trying to get a house below the listing price. They take great pride in appearing to get a bargain. However, this is not the buyer you really want. After bargaining down the price, they will usually continue to try to get more reductions based on their inspection reports. The buyers you want have seen enough homes in the market to know value when they see it. They will be happy to pay asking price or even above. Their agent, also knows value, and will counsel them to make a good offer.

If I still want to price my house above what the Realtor suggests, will they really try to market it?
If we agree to accept a listing at a price higher than the CMA suggests, we are also agreeing to market it aggressively. We will not compromise our reputation for superior marketing and client service. It is likely that real estate salespeople suggesting an inflated price may also be the ones who cannot be trusted to market it. They may be in the business of "buying listings" by suggesting an unrealistic price. They like the prestige of having a lot of listings and they count on the homeowner eventually reducing the price to a level where it will sell. They do the minimum and wait for the house price to come down.

Can You Show me all the homes in Greenwich that are for sale?
YES. We are members of the Greenwich Multiple Listing Service (MLS) and we can show you all of the homes in all of the Greenwich neighborhoods. For this reason, you will only need one Realtor to help you find your home.

Why do I need to sign an agreement before I can see a home?
Connecticut's Agency Law states that a Buyer wanting representation must sign a buyer representation agreement & be given a copy. This is a contract. The terms of the buyer representation agreement are negotiable. An agent of a real estate brokerage firm cannot show a buyer another firm's listing(s) without a written signed buyer representation agreement. To see more on Buyer Agency, including our Buyer Representation Policy and our Buyer Agency Contract, click here.

Will you be able to help me in towns other than Greenwich?
In addition to our membership in the Greenwich Multiple Listing Service, we are members of the Consolidated Multiple Listing Service which covers all of Fairfield County except for Greenwich, New Canaan and Darien. We also belong to the New Canaan Multiple Listing Service. Sometimes it is appropriate for us to help you in other Connecticut towns. We often feel you should be in the hands of a local town expert. If this is the case, we will refer you to a colleague we know and trust.

How is a Buyer Agent compensated?
Our Buyer Agents are always compensated by the Seller. Commissions on properties listed on the MLS (Multiple Listing Service) are paid by the Selling Agency. For properties listed directly by owners, we ask the owner to pay our commission.

Can I get a better deal by calling the firm advertising a listing?
Many people see an advertisement in the paper and call the listing company. This may seem like the best way to see a property, but it is precisely the wrong thing to do. The Realtor you are calling is the agent of the Seller. Their goal is to sell this property at the best price they can get for the Seller. Because many of the large real estate chains give their Realtors an extra commission if they sell the company’s listings, the Realtor you contact may have a special interest in selling you the house. In any event, they do not represent you or your interests.

What training is required to be a Buyer’s Agent?
No training other than a real estate license. In Connecticut, because the state is a buyer-broker state, most Realtors get buyer representation training as part of their continuing education. In addition, they obviously get buyer representation experience every time they work with a buyer. REBAC (Real Estate Buyers Agent Council), a wholly owned subsidiary of the National Association of Realtors, also trains Realtors to be Buyer Agents and awards the ABR (Accredited Buyer’s Representative) designation to those who meet their educational and experience requirements.

Do Buyer Agents collect compensation from both parties?
No. An agent for the Buyer cannot accept compensation from any other party to a transaction without the full knowledge and approval of the buyer.

Don’t Buyer Agents make less money if they negotiate a lower price?
Realtors depend on “repeat business”. They do not get repeat business if the Buyer does not feel the Realtor did a good job. The difference in commission earned is extremely small in comparison to the good will of a client for a job well done.

Would I have a better chance of finding my home if I use several Realtors?
No. In fact the opposite is true. Every Realtor has access to the same base of homes. When you work with more than one Realtor, the amount of time any one Realtor would be willing to devote to meeting your needs would be small.

Why do I need to sign an agreement?
Connecticut Law requires Buyers to sign a Buyer Representation Agreement to see homes not listed by that Realtor’s firm. If the Realtor you are with does not explain this to you or ask you to sign a representation agreement, you should be worried.

If I sign a Buyer Representation Agreement, how long should I sign for?
In all likelihood, the Realtor you contact will be willing to sign a Buyer Representation Agreement for a day or a short time such as a week. This way both of you can decide if you are right for each other. At the end of this short period, you should decide to sign an agreement for several months or move on to someone you feel more comfortable with.

What happens if I sign two Buyer Representation Agreements?
When you first meet a Realtor, they should ask if you have signed a valid Buyer Representation Agreement with someone else and if it is still in force. If you have, it is unethical for them to work with you until you have cancelled that agreement. In the unlikely event that you end up signing two representation agreements, you should tell both Realtors and ask to cancel one of them. If you end up buying a home, both could ask for a commission. It is unlikely you would end up having to pay, but why run up legal bills.

Do I need a Buyer Agent to look at homes for sale by owner?
No, but you should. It is amazing how often Buyers think they are getting a deal, only to discover when they want to sell that they overpaid. Your Buyer Agent will ask the owner to pay their commission and almost universally owners agree to do so.

What is Dual Representation, Dual Agency and Designated Agency?
If one or more Realtors in a firm have signed an agency agreement with a Seller (Listing agreement) and an agency agreement with a Buyer (Buyer Representation Agreement) and if that Buyer wishes to negotiate for the purchase of that Seller’s property, then the firm is in the position of representing both parties. This is called Dual Representation. Dual Representation can take the form of either Dual Agency or Designated Agency.

Under Dual Agency, usually one Realtor represents both the Buyer and the Seller. If that Realtor is trusted by both parties, this can often work out to both parties benefit. Both the Buyer and the Seller must sign a Dual Agency consent agreement.

Under Designated Agency, one Realtor Represents the buyer and another Realtor in that same firm represents the Buyer. For firms which have the required safeguards, this option allows each Realtor to completely represent the interests of their client. Both the Buyer and the Seller must sign a Designated Agency consent agreement.

Why wouldn’t every buyer want a Buyer’s Agent working for them?
We have no idea.