Last week a neighbour asked me how much I thought her house was worth. I did a comparative market analysis and said I would list it at $550,000. Her jaw dropped as she had been offered $475,000 by an acquaintance. They settled on a price in the middle, but she does know that she left money on the table.
There are two main reasons that people try to sell property on their own.
1. To save the Real Estate commission fees and
2. Because there is something wrong with the house and they don’t want to disclose it. In a private sale, the owner does not have to say what is wrong with the property. On the other hand, by law, realtors must ask and must disclose defects. The Real Estate Board of British Columbia ensures that realtors have a high standard of disclosure.
Recently I looked at five sales of "For Sale By Owner" (FSBO) properties.
House 1 Starting price of $979,000 and 502 days on the market, eventually selling for $875,000. A real estate agent represented the buyer, therefore the owners paid a standard commission of 3.5% on the 1st 100K, and 1.5% on the remainder. They saved $15,125. in real estate commissions. Or did they? What if the house had been originally listed at $899,000 and sold in 60 days? Less hassle than showing a house for 1.5 years. The listing agent also would have paid for the photos, floor plan and marketing.
House 2 A homeowner listed their house For Sale By Owner with a starting price $769,900. The house sold for $749,888 in 6 days. A real estate agent was representing the buyer, so the standard commission was paid to the buyer's agent. I would have likely listed this house a bit higher and the sellers would have netted more money.
House 3 Starting price $949,000. Sold for $920,000 in 20 days. Buyers used a real estate agent, so commission was paid out to the real estate agent on the buyer's side.
House 4 Starting price $449,000. Sold for $455,000 in 11 days. This house could have easily been listed for $499,000 in my opinion. No one represented the buyer, so the seller did get to keep all the profits. House was from the ’50s so possible asbestos, perimeter drain issues, oil tank. As I am not privy to the details of the purchase it is unknown what due diligence was done by the buyer to find any defects before the purchase was done.
Condominium 5 Starting price $225,000. Sold in 1 day for $226,000 with the buyers using a real estate agent. Someone had a great buyer’s agent who was right on the ball and got that deal done. Could the property have sold for more? Quite likely.
As a buyer, your Realtor can work with FSBO properties. As you can see from above, most sellers pay the agent's commission. If the seller is not willing to pay a buyer's agent commission, you may pay a fee. The fee is worth it as you have a professional writing the contract of purchase and sale, ensuring due diligence is done and that you are purchasing an appropriate property. Personally, I love working with buyers purchasing a FSBO house as I get to bypass they gatekeeper (the seller's agent) and go directly to the source of the sale.
As a seller, why would you sell a house on your own? You are likely going to have to pay the buyer’s Realtor a commission, you are paying for the marketing and if there is a non-disclosed material latent defect, you could be held liable into perpetuity. If you are selling a home in BC the website for the Real Estate Council of British Columbia is a good place to start to understand your legal obligations as a seller.
Real estate agents know the local market. They know what is selling today, what type of marketing works, and what marketing doesn’t work. I understand that it appears shocking when you see that you are paying out between 4% – 5% in commission for the sale of your house, but that money gets split between the buying agent and the selling agent. As you see from above, 80% of the time there is going to be a buyers agent you will need to pay regardless. That 2 – 2.5% the Selling agent is paid goes to so much more than a post on the MLS.
As a selling agent, in a recent marketing campaign, I had over 30,000 people view my advertising of a house with over 2500 clicks to receive further information. More eyes on a property are equal to more competition. You may have the best house in the world but if only your neighbours know you are selling it there is no way you will get top dollar. Bottom line: Unless you are an online marketing professional, if you sell your own home you are leaving money on the table.