Understanding for Sellers

You want to sell a home in Metro Detroit, Michigan. Where does the process begin, exactly? Understanding for sellers begins with several key concepts one needs to grasp before taking any action, or making any decisions, regarding the sale of your home in Ann Arbor, Birmingham, Canton, Farmington Hills, Northville, Novi or Plymouth.

These key concepts are:

  1. Understanding the different types of real estate agency in Michigan
  2. Understanding representation, and why it’s so crucial to be represented by a Seller’s Agent
  3. Understanding the various real estate disclosures required by the State of Michigan
  4. Understanding the financial aspects of a real estate sale in Michigan

On this page, we’ll cover these four points, in order.

1. Understanding Agency

It is imperative that every seller fully grasp the legal concept of “agency.” It is equally crucial that every seller be represented by a “Seller’s Agent” (you’ll find more on “Understanding Representation” below).

Those things said, here are the key things to understand about real estate agency in Michigan:

Every Realtor in the State of Michigan is legally required to have every client sign Michigan’s “Disclosure Regarding Real Estate Agency Relationships,” a document that specifies the nature of the agency relationship between the Realtor and their client. Following are the different types of agency relationships that exist within real estate:

Seller’s Agent

A seller’s agent under a listing agreement with the seller acts solely on behalf of the seller. A seller can authorize a seller’s agent to work with subagents, buyer’s agents and/or transaction coordinators. A subagent of the seller is one who has agreed to work with the listing agent, and who, like the listing agent, acts solely on behalf of the seller. Seller’s agents and their subagents will disclose to the seller known information about the buyer which may be used to the benefit of the seller. The duties that a seller’s agent and subagent owe to the seller include:

  • Promoting the best interest of the seller
  • Fully disclosing to the seller all facts that might affect or influence the seller’s decision to accept an offer to purchase
  • Keeping confidential the seller’s motivations for selling
  • Presenting all offers to the seller
  • Disclosing the identities of all buyers and all information about the willingness of those buyers to complete the sale or to offer a higher price

Buyer’s Agent

A buyer’s agent, under a buyer’s agency agreement with the buyer, acts solely on behalf of the buyer. A subagent of the buyer is one who has agreed to work with the buyer’s agent and who, like the buyer’s agent, acts solely on behalf of the buyer. Buyer’s agents and their subagents will disclose to the buyer known information about the seller which may be used to benefit the buyer. The duties a buyer’s agent and subagent owe to the buyer include:

  • Promoting the best interest of the buyers
  • Fully disclosing to the buyer all facts that might affect or influence the buyer’s decision to tender an offer to purchase
  • Keeping confidential the buyer’s motivations for buying
  • Presenting all offers on behalf of the buyer
  • Disclosing to the buyer all information about the willingness of the seller to complete the sale or to accept a lower price

Disclosed Dual Agent

A real estate licensee can be the agent of both the seller and the buyer in a transaction, but only with the knowledge and informed consent, in writing, of both the seller and the buyer. In such a dual agency situation the licensee will not be able to disclose all known information to either the seller or the buyer. As a dual agent, the licensee will not be able to provide the full range of fiduciary duties to the seller or the buyer. The obligations of a dual agent are subject to any specific provisions set forth in any agreement between the dual agent, the seller and the buyer.

Transaction Coordinator

A transaction coordinator is a licensee who is not acting as an agent of either the seller or the buyer, yet is providing services to complete a real estate transaction. The transaction coordinator is not an agent for either party and therefore owes no fiduciary duty to either party. The transactional coordinator is not the advocate of either party and therefore has no obligation to negotiate for either party. The responsibilities of the transaction coordinator typically include:

  • Providing access to and the showing of the property
  • Providing access to market information
  • Providing assistance in the preparation of a buy and sell agreement which reflects the terms of the parties’ agreement
  • Presenting a buy and sell agreement and any subsequent counter-offers
  • Assisting all parties in undertaking all steps necessary to carry out the agreement, such as the execution of documents, the obtaining of financing, the obtaining of inspections, etc

2. Understanding Seller Representation

Once you learn the basics of agency law, you will more than likely come to the same conclusion that most of our selling clients reach: your preference will be to be represented by a “seller’s agent.” We completely agree with that conclusion, as this is the alternative that is most logical in such circumstances. The goal of a seller’s agent is to sell the listed home for the highest possible price, to a highly qualified buyer, in the shortest time possible.

A seller’s agent acts solely on behalf of the seller. The responsibilities of a seller’s agent include those things spelled out in the prior section under “Seller’s Agent.”

The bottom line: a Seller’s Agent represents YOU, the seller. Here are some of the advantages of this relationship when working with a Professional One Real Estate agent:

  • We’ll prepare a “Comparative Market Analysis” (CMA) to show you recent comparable sales and give you the information you need to identify the proper price at which to list your home
  • We’ll price your home honestly and fairly
  • We’ll do everything we can to sell your home as quickly as possible
  • We’ll help you get the best terms
  • We’ll help you negotiate the highest price circumstances will allow
  • We’ll advocate your interests, and only your interests, throughout the entire buying process
  • We’ll obtain and review the closing documents prior to the closing and follow up on any errors or unusual items that we discover
  • We’ll review the closing documents with you
  • We’ll attend the closing with you
  • We’ll follow up with you after the fact to ensure your complete satisfaction
  • We’re completely dedicated to you, the seller

3. Understanding Real Estate Disclosures

The State of Michigan requires every seller of a home to provide the following disclosure statements:

Seller’s Disclosure Statement

As the name implies, the Seller’s Disclosure Statement is intended to disclose information about the condition of the property of which the current owner is aware. Experience shows that the five most common defects in residential properties are as follows:

  • Bad foundation
  • Worn roof
  • Radon
  • Poor water drainage
  • Inadequate systems (electrical, plumbing, heating and cooling, etc.)

Accordingly, particular attention should be paid to these specific topics when reviewing the Seller’s Disclosure Statement.

Other important points relating to this document are as follows:

  • The items disclosed on the Seller’s Disclosure Statement should be carefully analyzed and taken into consideration BEFORE determining what price to offer on a home, not AFTER.
  • An unwritten rule of price negotiation is that if an item is properly disclosed on the Seller’s Disclosure Statement, a seller will almost never allow that item to be used by a purchaser as “leverage” in negotiating a lower sales price AFTER the initial offer has been made.
  • The most common example of this is a purchaser seeking to renegotiate a lower price after the inspection has been performed. As an illustration, assume a buyer has an inspection and the resulting inspection report states something like “roof is significantly worn and will need to be replaced within five years.”
  • Assuming this condition was properly disclosed by the seller on the Seller’s Disclosure Statement, the purchaser will be fighting an uphill battle in attempting to renegotiate a lower price. The seller’s very reasonable position will almost always be: “I properly disclosed that before you made your offer. You should have taken this factor into consideration when you determined the initial price you were willing to offer.”
  • Sellers complete this disclosure with varying degrees of honesty and candor. We always advise our sellers to complete this disclosure as honestly and as completely as possible, as you never want a prospective purchaser to have doubts about the homeowner’s integrity.
  • However, we know from experience that not all people think this way. Which is why we place limited reliance on this disclosure.
  • It is only a guide – we never assume it is all-inclusive. This is precisely why we insist that you have both a complete “contractor’s inspection” AND a radon test. THESE are the actions that you will take to protect yourself.

Lead Based Paint Disclosure Statement

The Lead Based Paint Disclosure Statement is intended to inform a prospective buyer about the potential existence of lead based paint in a home. Specifically, the homeowner is required to disclose whether they are (1) aware of lead based paint in the home, and (2) in possession of any records or reports relating to any lead based paint testing that has been performed. This disclosure is only applicable to homes built prior to 1978. Experience has shown that in our particular market very few homeowners actually test for the presence of lead based paint, and accordingly this disclosure typically yields no information of benefit to a prospective purchaser.

Read the EPA-prepared Protect Your Family from Lead in your Home for more information about the hazards associated with lead based paint.”

4. Understanding Financial Aspects of a Sale

No seller can make a fully informed decision on whether or not to sell, along with the price at which to list their home, without fully understanding the costs associated with a typical real estate sale in Michigan.

This analysis includes most of the items which can factor into the calculation of your “bottom line” – the amount of cash that you will receive following the sale of your home when all is said and done. To calculate your bottom line download a Seller’s Net Sheet and simply fill in the blanks.

Sales Price of Home $
Add:
Prorated taxes and association fees reimbursed by purchaser to seller +
Deduct:
Realtors’ commission(s)
State transfer tax (.75% of sales price)
County revenue stamps (.11% of sales price)
Balance outstanding on your existing mortgage
Title insurance (approx. .44% – or .0044 – of sales price yields rough estimate)
Water escrow, if applicable (typically $200-$300)
Occupancy escrow, if applicable
Other misc. recording and payoff fees (typically, $100 to $150)
Equals: Your Bottom Line =

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