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Welcome again to Real
Estate Economics.
This is talk number nine,
and it is the second talk
dealing with real
estate finance.
I am John McDonald,
an Emeritus Professor
of Economics,
at the University of
Illinois, Chicago,
and an Emeritus
Professor of Real Estate
at Roosevelt University.
Our talk this time is about
How a House is Sold
where we will be
concentrating on
the contracts involved
and the financing.
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The initial conditions
we're going to assume for
this routine transaction
of selling a house:
The owner of an
owner-occupied house
decides to sell in order
to move somewhere else.
The owner has an
outstanding balance on
the mortgage loan
that is less than
the value of the
house, fortunately.
The house is to be sold on
an open market and
"arm's length sale",
so there are no special
conditions attached or
the sale is not to a relative
or anything like that.
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The first thing
that a seller does
is to decide whether
to try to sell it
by himself/herself
or to go ahead and have
professional help for that.
The professional help involves
hiring a real estate broker to
provide services
that will lead to
the sale of the house.
In order to do that, they
sign a listing contract
that specifies several things;
the price that the owner
is willing to accept,
the time period over which
the contract will extend,
and then the conditions
for the commission or fee
that the owner will
pay to the broker.
Now, consideration on
the broker's side agrees
to provide services
that would include
hiring a real estate agent
to market the property
and conduct negotiations
with a potential buyer.
Now the listing itself
can be one of two types.
It can be an exclusive
listing or an open listing.
But remember always that the
broker works for the seller.
The broker is not
working for the buyer.
