As spring progresses, many homeowners contemplate selling their properties, leveraging the favorable market conditions. However, amidst the excitement of selling, understanding the nuances of a Seller Representation Agreement (SRA) is crucial. This standard form agreement, regulated by the Ontario Real Estate Association (OREA), outlines the relationship between a seller and a real estate brokerage. Here are the essential aspects to consider:
Understanding Commission Clauses
When hiring a real estate agent to sell your home, a commission fee is typically involved. This fee is usually around 5%, split equally between the buyer’s and seller’s agents. For example, selling a home for $1 million would result in $56,500 in commission fees after taxes. If the house doesn’t sell, no commission is due. However, if a buyer introduced during the listing period purchases the home shortly after the listing expires, the commission may still be owed, depending on the holdover period specified in the agreement.
It’s important to note that while 5% is the industry standard, the commission rate is negotiable. Sellers should discuss and agree upon this rate with their agent, considering different brokerages that might offer competitive advantages.
Multiple Representation
Multiple representation occurs when a single agent represents both the buyer and the seller in a transaction. This scenario can be complex, as the agent must remain impartial and cannot disclose confidential information from either party. While this arrangement might benefit the agent by doubling their commission, it raises concerns about whose interests are being prioritized.
If conducted ethically, multiple representation can be advantageous due to the agent's extensive network and market insights. However, the potential for conflict of interest exists, particularly if the agent favors their own client’s offer over higher bids from other agents. Sellers should be mindful of this possibility and ensure their agent acts in good faith.
Referral of Enquiries
The referral of enquiries clause mandates that all potential buyer inquiries be directed to the real estate agent. For instance, if a developer expresses interest in purchasing your property, you must inform your agent immediately. Failing to do so and accepting the offer independently would still obligate you to pay the agent’s commission. This clause ensures the agent remains informed and maintains a fair process.
Similarly, if the property is sold to a family member after the agent has listed it, the commission remains due. This clause highlights the exclusivity of the relationship between the seller and the agent, emphasizing the agent's role in facilitating the sale.
Additional Clauses and Final Considerations
The SRA contains several other pre-printed clauses, each designed to protect the interests of both the seller and the agent. Sellers should thoroughly review these clauses, seeking clarification from a real estate lawyer if needed. An informed discussion with the agent about the agreement’s terms, including effective dates, expiration, and expectations regarding property staging or repairs, is essential.
Ultimately, understanding and agreeing to the SRA's terms ensures a smoother selling process. By familiarizing themselves with real estate procedures, sellers can navigate the complexities of selling their homes with greater confidence and ease. Always read and comprehend any agreement before signing, and don’t hesitate to seek professional advice to avoid any misinterpretations.