The pitfalls of selling your home without a real estate agent
Going it alone? The pitfalls of selling your home without a real estate agent
Legal fees, disbursements, discharging the current mortgage, capital gains taxes… selling a home often comes with an abundance of seemingly never-ending costs that can send your stress levels soaring, lighten up your wallet and often make you wonder why you thought selling was even a good idea in the first place. It’s no wonder more and more people are looking to save a few bucks when it comes to one of the most expensive costs—realtor fees.
With the advent of so many DIY property-selling sites in Canada, listing your own home has never been easier or cheaper. Sites like PropertyGuys, ComFree and ForSaleByOwner offer all-inclusive, flat-fee packages priced anywhere from $400-$800, and can include exposure on popular property-searching sites like Realtor.ca. These companies promise to help inexperienced owners price, promote and negotiate the sale of their homes, all while potentially saving tens of thousands of dollars in realtor fees.
Given the skyrocketing housing market (the MLS Home Price Index rose 14.7 per cent year-to-year last August) paying four-to-six percent in commission can seem like a hefty chunk of cash—money that could easily go into paying down the mortgage on your next property or to renovations. Sure, there have been success-stories from those using these self-service sites (look no further than the sites themselves for glowing reviews), but the high risks are a caveat worth considering.
“There are so many times we see a bad offer that doesn’t protect the seller’s interest,” says Sam McDadi, owner of Mississauga, Ont.-based Sam McDadi Real Estate Inc. “Obviously, the dollars are the tangible aspects of the offer but there are many other intangible aspects. A poorly written offer could leave a seller exposed to legal consequences.”
Just some of those legal consequences could include a buyer unexpectedly backing out at the last minute, financial repercussions from failing to provide a complete disclosure statement, or fallout from poorly worded clauses involving home inspection, financing or other such contingencies. Plus as a seller you’re also still on the hook for some realtor fees – 2.5 per cent – if your buyer is using a realtor.
Then there’s the issue of market knowledge and the question of how much to list your home for in the first place. Sellers often attach too much sentiment into the pricing and negotiation of the sale price, which can lead to overpricing and a house that sits on the market for far too long—something that can also impact top dollars. Or, perhaps a seller believes the key to a quick sale is to under-price the home, resulting in a loss that negates the savings they’ve achieved by foregoing a realtor in the first place.
“A seller might save a few thousand bucks, but realistically it could cost them much more. A realtor with a good track record can negotiate more favourable terms, price and conditions for you than you’ll likely be able to do on your own,” says Ariel Kormendy of The Kormendy Trott Team at Century 21. “This comes from experience of doing this on a regular basis but also having a pulse on the market, which changes daily. If you’re not up-to-speed and doing the right things to prepare your home, market it to the widest possible audience and skillfully negotiating with confidence, any potential savings are easily mitigated by this.”
Savings aside, security is another huge issue when it comes to listing your own property. Realtors have detailed systems that register and keep track of every single person who comes to your home, and their teams often exercise extreme caution when it comes to booking appointments—they’re rarely done directly through the potential buyer and his or her agent, but through an established booking system involving the brokerages.
“Security is a major factor nowadays. Burglaries, violent intentions and fraud artists are just some of the scary scenarios I’ve not only heard of but actually know of situations were private sellers have had it happen,” says realtor/broker Leo Latini of discount brokerage firm Min Com Solutions Realty Inc., which only takes a one per cent fee instead of the traditional 2.5 per cent. “Do you really know this stranger who calls you and walks through your door?”
If these concerns still aren’t enough to outweigh the perceived savings benefit, another interesting trend McDadi has seen over the years as more sellers attempt to navigate the market on their own is the idea that buyers are beginning to expect some of the DIY-savings to be passed along to them.
“Many buyers will offer the seller the price less commissions because they feel they would have otherwise paid it to a realtor,” he explains. “From a seller’s perspective it doesn’t make sense to give this up as the seller wants the savings accrued to themselves. They are investing their time and energy to the process of selling a home and they miss out on all of the value added services a realtor provides.”
Although on the surface it can appear as though a realtor simply shakes hands with one of their buddies, puts together some paperwork and the cash comes rolling in, there’s a lot more to it than that, as McDadi notes. Staging, professional photography and video, social media and exposure to a wide network of other realtors through multiple listings services are all included with a typical 2.5 per cent selling commission, which is usually negotiable.
“Sellers are often disillusioned by the process when they realize they need to show the property to buyers, deal with prospective buyers who don’t show up for appointments or are unqualified, hold open houses and negotiate an offer (which can be difficult when there is emotional attachment or unfamiliarity with the market),” McDadi notes. “Many times after two or three weeks, if not successful they turn to a realtor as they now realize the importance of having one in the process. In our practice we receive many calls from sellers who have tried to sell on their own to save fees but realized quickly it wasn’t the right step to take.”
By that point, a seller is actually paying more when you consider the fact that they’ve already paid all these DIY fees upfront. Add in other emerging market factors such as an increased number of international buyers here in Canada, ongoing bidding wars and the greater need for a pre-approval process in order to keep up with lightening demand all contribute to a marketplace that’s full of twists and turns.
“Bidding wars have changed everything and strategy is extremely important. Most people can’t or don’t want to try and navigate through all of that themselves,” Kormendy adds. “The DIY route can certainly be a good option for some people. Every home sells, the question is how long will it take to sell and how much will it sell for. Before making any decision, look at all avenues available, fully understand the work required and take a hard look at the potential net proceeds that you will walk away with in each scenario. It can be difficult to navigate in such a fast-paced and ever-changing market, so do your due diligence.”