Selma has decided to sell her house in Northridge and wants to net $900,000 after commissions. She decides on list price of $1,000,000. Selma lists her property with XYZ Realty, ABC Realty, and MNO Realty. In each listing agreement, Selma has agreed to pay a commission of 5% of the sale price when the firm finds a ready, willing and able buyer and a sale is consummated. XYZ Realty company produces an offer $900,000 all cash within 10 days of the listing agreement being signed. ABC Realty produces an offer of $950,000 within 11 days of the listing agreement being signed, with the buyer offering 5% cash down, and applying for 95% financing. MNO Realty produces a full price offer of $1,000,000 , with the buyer's contingency of selling their residence for $900,000 in Chatsworth. What type of listing did Selma sign and which offer will she most likely accept and why ?
Salma signed an open listing. This is because of the following features:
1. It is a non-exclusive listing agreement - Salma is working with multiple firms for sale of her property.
2. It doesn't guarantee ABC Realty, XYZ Realty or MNO Realty any commission.
3. Only the firm who gets a ready, willing and able buyer and the final sale is consummated, will receive commission.
Now, let us consider the three options available:
1. XYZ - $900,000 all cash. This does not meet Salma's requirement of $900,000 and hence, this option cannot be considered.
2. ABC - $950,000 (5% cash down and 95% financing). Here, assuming it is not seller financing. From Salma's point of view, Salma will get 95% of 950,000 (after paying commission) that is $902,500. This meets Salma's requirement of $900,000 and is an option that can be considered.
3. MNO - $100,000. But this is contingent on sale of the buyer's house for $900,000. Right now, the seller doesn't appear to be an 'able' seller and as the deal is contingent on another deal, the sale will likely not be consummated as per Salma's liking. Hence, this option cannot be considered as well.
Hence, Salma will go along with the second option (that is ABC Realty).
Selma has decided to sell her house in Northridge and wants to net $900,000 after commissions....
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