Mike Montague, a Realtor from Barrie has written a great post outlining and responding to several Myths about Private Home Selling that have been gaining traction in the last few years. I highly recommend reading it =)
Something relatively new to real estate in the past ten years is the private home selling company. The proposition of saving thousands of dollars is enough to catch the attention of anyone. The idea of listing a home for anywhere from $700 for a sign on the lawn and an ad on a website, to a couple thousand dollars if you want some of the additional services that a REALTOR typically provides such as setting your price, getting your house ready to sell, to assisting you in closing the deal is tempting and awakens the entrepreneur inside some of us. The burning question private sale companies use as their hook is why would you give profits from your home sale to a REALTOR if you didn't have to?
The saying "if it looks too good to be true it probably is" was something I first heard my father say to me as a boy, after ordering Sea Monkeys and X-ray specs out of the back of comic books with my paper route earnings. The magic and illusion those sage pitch men weaved into the ads was brilliance and had me checking the mail box for almost a month. When they finally arrived I still remember my disappointment as I am sure millions of American and Canadian kids of the day do as well when they opened a cardboard mailing package containing a plastic cup and a little packet of brine shrimp eggs, or when the magical X-ray specs turned out to be nothing more than bendy plastic eyeglass frames with spiral patterned cardboard for lenses.
Even those hard learned boyhood lessons never kept me from falling for the occasional overly stated marketing promises in later years and no doubt there are more of them to come. Optimistic guys like me are a valuable component of commerce.
If you are trying to decide between giving that well spoken REALTOR thousands of your dollars or selling your home yourself because some do it yourself real estate company says its a snap then take a moment to learn some cold hard facts.
There are salient reasons why more than 90% of home owners in Canada choose to use a REALTOR when they sell. I'll share some facts and some myths with you but please don't just take my word here, do your own research and verify what I am telling you for yourself.
Myth number one: Realtors will charge you a standard 6% commission to sell your house.
Fact: Most for sale by owner companies base their selling pitch on the notion that REALTORs will charge you 6% to list and sell your home. In actual fact Real Estate sales is one of the most competitive industries there is. The choice of services and fee packages offered by REALTORs in your market is likely as varied as the number of REALTORs. The last word on commissions is set by you the seller and in my market if you can't come to an agreement on compensation with one REALTOR there are over 800 more you can approach. There is no such thing as a standard commission.
Myth number two: "Selling your house on your own isn't as difficult as most Joe Schmo agents make it out to be" (a direct quote from the more popular for sale by owner "FSBO" company websites)
Fact: Less than one in five homes listed privately actually sell privately. Whereas over 95% of homes listed with a REALTOR actually sell. Listing a home is as easy as banging a sign into the lawn but it is only a first step. Statistics show more than half of the people who choose to list private eventually end up using the resources of a licensed REALTOR to complete the task. If you have the time to, pick out 10 homes with for sale by owner signs in your area and watch them over the next year, at the end of the year you will see that more will have removed their sign or hired a REALTOR or still be trying to sell private than will have sold with the private company.
Myth number three: Selling privately will always save you money over using a REALTOR.
Fact: If you are listing privately in a sellers market and or have time to wait it out, eventually you should see offers coming your way. Every buyer that comes to you will also be looking at homes listed with Realtors or else they believe their is a financial advantage to be had in buying a private listing. Most buyers who hunt out private listings do so because they believe you are saving money in commissions and can discount their offers accordingly, they assume they are dealing with someone who is not a professional negotiator of real property and chances are they know the area market better than most private sellers do.
Private sellers become quite familiar with and often weakened over time by this breed of buyer. The longer it lists, the better the chance to take advantage. If you have listed privately in the past you know what I am talking about. A good percentage of successful private purchases are from these buyers and often the difference between the original list and eventual sell price is greater than the commission costs the buyer believed they would be saving themselves.
Myth number four: Any money you can save on Real Estate commissions = money in your pocket.
Fact: If the last myth bust wasn't convincing, then consider these facts: Advertising to the degree of most licensed REALTORs does not come cheap. Prepare to spend at least a bare minimum of $100 a week and resolve yourself to the fact that your advertising will be relegated to the classifieds along with the used bicycles and outdated computer equipment where few serious home buyers will ever look, especially when there is a real estate section of coloured ads detailing properties for sale in the same weekend papers.
Also be prepared for have to advertise your home for a much longer period of time than a REALTOR would need to. Your most effective selling tool is going to be the sign on your lawn and the open houses you do, but keep in mind that of all properties sold through licensed REALTORs, about one in every ten is the result of a sign call. The other 9 out of ten come through buyers introduced to the property by their Realtor and through professional marketing efforts.
All closings require legal documentation, search of title, and transfer of funds, closing of existing mortgages and assignment of new mortgages just for starters. Proper documentation and legally acceptable contracts safeguard both the buyer and seller and without a REALTOR, you are the one who will be personally sued should complications arise, and litigation, lawyers charge by the hour. That documentation a REALTORs typically handles for your sale will be left to you and your lawyer and comes at a price.
REALTORs carry Errors & Omissions Insurance to protect sellers and buyers in the event of a mistake, misrepresentation or unforeseen discrepancies and deficiencies relating to the property. Individual home owners do not. An error in the square footage of the property or some other detail or event often leads to being sued by the buyer. When represented by a REALTOR it is they who would be sued and their insurance generally would cover any loss. A single mistake could end up costing you far more than a Real Estate commission. A REALTOR is a valued insurance policy when one needs it.
You can bet there will be responses to this post by those who will say this is fear mongering and they have never had a problem in all of their private sales. The ones who have had problems likely wont give you the benefit of their experiences here.
Other advice & things you need to consider as you make your decision to list privately are:
- Make yourself available for the next few months - Many showings are booked at the last minute and though often frustrating from my perspective as a REALTOR, we have to accommodate this. It’s kind of like being a fire fighter on call. Many will see you are listed private and just knock at your door expecting to be able to come in and view your house on the spot. With the number of listings available to see you want to be able to accommodate showing request or risk them crossing you off the list and moving on to the next home.
- Good REALTORs screen buyers before taking them through a home. You may have to compromise precautions as your own agent but here is some valuable safety advice for private home sellers:
During open houses, take people’s names and phone numbers at the door before allowing them into your home. Write down their license number and type and color of vehicle.
Put away all pocket-able items of value before showing your home IE: jewellery, watches, and cash.
Check to see that all doors and windows are locked after each showing. Thieves are known to use open houses to scout out valuables in a home and possible points of entry then return when the home is empty.
Never do an open house or showing alone. Have your partner, a friend or neighbour at the house with you when strangers are coming to view the property.
Ask neighbours to keep an eye on your home while it is for sale and report any strangers on the property to you immediately. Otherwise neighbours might assume strangers on the property are there to view the home with your knowledge.
Take names and phone numbers when people call to book a viewing. Don't confirm a showing right away. Tell them you will call back to confirm. If they refuse to share name and number politely tell them they cannot view the home unless they do and end the conversation. Before calling back to confirm screen their name and phone number on the internet to verify legitimacy.
Always go with your gut feelings. If something seems odd don't book the showing and if they are at your door tell them it isn't a good time.
Always stay with potential buyers as they view the home and walk behind, not in front of them as you go through the house. Insist that they stay together as you show them through. If one person wanders off tell them you would like them to stay together.
Restrict all your showings to daylight hours. If someone calls or comes to the door during the evening get their information, check it out and call the back with appropriate times they can view the home.
If you have pets, have some one take them for a walk or at the very least put them in the back yard during showings. The incidence of allergies with buyer clients seems to go up every year and I have had many turn around and walk right back out if they sense there are dogs or cats in the home. The same goes for smoking. If the home is smoked in you are eliminating a large portion of potential buyers before you start.
In the end the convenience, exposure, negotiating skills, legal protections, personal safety and yes ability to market your home to the highest degree to the greatest number of people are the reasons more than 90% of the public choose to hire a professional over experimenting with selling private. Whatever choice you make, do your homework first and don't be taken in by anything offered by anyone you can't first verify for yourself.
Have a look at this story about a private sale I personally witnessed by a neighbour who hoped to save a few bucks and ended up with far more than he bargained for. Click here to read