SELLING AND BUYING PROPERTY

CBB525 ( Feb 2015) Lecture 3

1. AGENT AND CLIENT RELATIONSHIPS Terms used in Real Estate Business

i) Property owner is sometime referred asthe principal. The principal can be the seller or prospective buyer.ii) The representative of the real estate firm is known as the agent.iii) Listing: Is the term used to describe the contractual relationship between the real estate agent and the client.

1. AGENT AND CLIENT RELATIONSHIPS (2)

Listing (cont) :The client instructs the agent to find a buyer who is willing and able to purchase the property, while the agent expects to be compensated for the services offered. Usually a commission is paid as % of selling price Payment of commission is effected when the buyer have paid the seller (closing).

1. AGENT AND CLIENT RELATIONSHIPS (3)Breach of listing Breach by the buyer- the buyer changes her/his mind and does not come to closing or signing off the sale, or

Breach by the seller, by asking the agent to withdraw from listing or by not accepting the offer for the asking price by the buyer who is read and willing to pay.

1. AGENT AND CLIENT RELATIONSHIPS(4) Importance of listing:To the agent and the firm they need to as many properties listed with them in order to have inventory of properties of various types and price range to show to prospective buyers.

For the seller, the property may widely advertised/exposure to potential buyer, benefit from professional expertise in property market

TYPES OF AGENTS:

i) Listing agent: She/he is concerned with the needs and desire of seller by presenting the propertyto potential buyers

ii) Selling agent: He/she is concerned with the buyers. She/he shows the available inventory of properties available for sale, assisting in arranging finance and preparation of the offer

2. DETERMINING THE MARKET (1)

Both the agent and the client (property owner/seller or prospective buyer) may benefit from examining the local real estate market. The agent wants to list the type of property that have the highest volume of sale and needs to establish the price range and location.

2. DETERMINING THE MARKET (2)The buyer or seller needs answers for several questions such as;What is the best time to list the property,The average waiting period for sale,What is the amount of average sale,How many homes re selling in general etc

3. INTERVIEWING THE SELLER (1)

The agent needs to know about the followingSellers reason for listing, i.e. being transferred to a different area, or looking for a larger accommodation/more spaceSellers knowledge of selling or purchasing of real propertyAppropriate or expected sale price

3. INTERVIEWING THE SELLER (2)

Property condition ( if well kept or Listing agreement and property descriptionThe agent should present the seller with the plan for sale, for the seller to know anticipated period and other matters relating to disposal of asset

4. SALE BY OWNER VERSUS SALE BY REAL ESTATE AGENTPotential sellers frequently ask this question, why cant I sell the property myself and avoid paying the commission?

The answer: property owner has the option of selling her/his property. The decision to sell oneself or through the agent depends on the sellers knowledge and time

5. FINDING A BUYER

Once the property is listed with the real estate firm, the agent must attempt to find a suitable buyer. The seller benefits from the agents ability to find a buyer. The agents knowledge on buyers demand is important to identify possible sale.

6. COUNSELING THE BUYER (1)

The purpose is i) to determine the buyers desire and financial capabilityii) to obtain the buyers confidence and loyalty.The agent can then select the most suitable property to show the buyer

6. COUNSELING THE BUYER (2)

The process of determining buyers needs, motivation to buy and establishing financial capability is called qualify the buyer

1.Buyers needs in terms of space required(m2), number of bedrooms, no. of bathroom, garage, social services available, trees and garden etc

6. COUNSELING THE BUYER (3)2. Buyers motivation; immediate need to purchase needing accommodation as may have moved into the area, or just looking for suitable property at the right price3. Determining the buyers financial capability: Ability to raise the down payment necessary for mortgage, meeting the lenders requirement on size of income The knowledge of the above positions enables the agent to identify which properties to show the prospective buyer (the agent will then select a maximum of 3 to show the buyer)

7. SHOWING THE PROPERTY (1)The purpose of showing property to prospective buyers is an attempt to obtain an offer from them. Once the buyer decides that s/he wants the property s/he must make an offer to the seller.

The agent must show the property at its best and create a mood conducive for the buyer to make an offer.

7. SHOWING THE PROPERTY(2)The agent should therefore follow the following steps 1. Inspect the property in advance to see if the property is at its best and ready to be shown2. Learn all about the propertys features know the inventory, area (m2), sewer connected or septic tank provision etc.

7. SHOWING THE PROPERTY(3)

As a general rule the agent should disclose any pertinent facts about the property which may influence the value.

If such information is not disclosed the agent or the seller may be accused of misrepresentation which is unethical and/or unprofessional.

7. SHOWING THE PROPERTY(4)Showing a maximum of three (3) properties separate the professional agent, who spend time to establish buyers need from a tour guide who shows the potential buyers every property that is on sale. The agent should show special features of the neighborhood by selecting the best route to the property, shopping area, school etc .

7. SHOWING THE PROPERTY(5)

At the property the agent should allow the buyer to discover the premise, initially the agent should not point out major features, she/he should let the buyer to discover features that s/he consider important

8. THE REAL ESTATE SALE CONTRACT (1)

The sale contract is a valid, bilateral or expressed contract. As a valid contract it contains all essential features required by the body of law known as contract Law.

8. THE REAL ESTATE SALE CONTRACT (2)Essential features of a valid and enforceable contract;i) an agreement (offer and acceptance)ii) A consideration: an exchange of valuable assets (price)iii) Competent parties, two individuals who enter into a contract they must have the legal capacity.iv) Reality of consent: for contract to be accepted it must be free of mistakes and misrepresentation

8. THE REAL ESTATE SALE CONTRACT (3)Essential features of a valid and enforceable contract;(cont)

v) Legality of purpose : legal promises, actions and objectsvi) Necessity of it being in writing in certain instances