No! You don't need a real estate agent to help you sell your home. The truth is, almost anyone can sell a home given the right circumstances. There should be little question however, that an experienced agent, with a host of tools at his or her disposal may not cost as much as you think.
For well over a century real estate firms have been assisting homeowners in selling property. Most people accept as fact that the largest majority of residential real estate sales occur through the Multiple Listing Service in any area. The remaining market consists of Exclusive Listings, new home construction and finally, private sales.
Most homeowners who decide to market their properties themselves do so for one reason. They want to save the commission that they would otherwise pay a Broker for marketing the home, locating a willing buyer, and negotiating a sale. They are hoping that they can net more dollars from the sale of the property. That seems fair enough. Although it cannot be denied that some sellers have success, for most, selling privately becomes an expensive experiment.
For most Canadians, their home represents their largest asset. They have more money invested in their property than in anything else. Homeowners should take great care in weighing the pros and cons, as well as the odds of selling their homes without the assistance of an agent.
Only you can determine whether or not you’re qualified & able to take on the challenge of selling real estate by yourself. While some people have the time, knowledge and skills necessary to market a home successfully, others clearly do not and seriously undermine their best interests by doing so. Even those that have some specialized skills in marketing, sales and human relations forgo the use of some valuable sales tools in marketing their homes privately. Let’s look at some of the challenges that all private sellers face.
A Difficult and Limited Base of Buyers
When a potential home buyer decides to purchase property they have a couple of options to choose from. They can find an agent to assist them in the purchase of a listed home or they can shop the private market. If they choose to work with an agent they have access to most homes which are offered for sale. They have someone working for them that can locate properties, arrange viewings, assist in preparing offers and help arrange mortgage financing, home inspections and appraisals. They can expect guidance in determining a home’s fair market value. They have access to information on other similar homes that have sold and can often obtain historical information about homes. Finally, they have a third party negotiator that will handle all of the stresses associated with the transaction. All of these services are available to them without cost because the listing broker typically offers the buyers broker compensation for negotiating a purchase. A purchaser that buys privately handles all of these duties themselves. So, what could possibly motivate a home buyer to forgo these free services and take on this monumental task? Most buyers that shop the private market want to save the very same commission that you would hope to save by marketing it yourself. There is only one commission to be saved. The big question is, who will save it. Many private sellers spend months marketing their homes, finally giving up their commission savings and more to a ruthless purchaser because they must sell now!
Limited Exposure Means Limited Demand
There’s a universal law of economics that states, “the greater the demand for a product, the more valuable it becomes.” This is a real problem that private sellers have always been faced with. Their means of providing exposure for the home are limited. They can place ads in the classified section of newspapers, post flyers on public bulletin boards, and post signs on the home itself. Most of these methods are very limited in their ability to create demand. On the other hand, details of a listed property are quickly available to many real estate agents through the Multiple Listing Service. These homes receive exposure in higher profile, targeted homes publications. They are often featured on television and large Internet sites. These homes also have the advantage of being able to reach prospects that are relocating from other areas through the relocation services offered by most real estate firms. In a hot real estate market it’s not unusual for listed properties to receive multiple offers, bidding up the price. These occurrences are more difficult to achieve with private sales.
Workload Adds Emotional Stress
The private seller must write and schedule advertisements and absorb those costs themselves. They must prepare and pay for photographs, feature sheets, signs, documents, legal advice, etc. They must be available to take inquiries on the property, book appointments, qualify potential buyers and show the home. At the same time, they try to carry on with their daily routines of a career and family, leaving themselves stressed and emotionally drained. Not the best position to be in when you’re dealing with such valuable property.
Difficult to Qualify Buyers
The private seller faces some challenges in attempting separate the lookers from the buyers. At one time, I read a survey conducted by the National Association of Realtors which indicated that only 4% of those that inquire on a property are ready, willing and able to buy. 70% have frozen equity, meaning that the funds are not immediately available to them for one reason or another (perhaps it's tied up in their present home). 11% simply cannot afford to buy. 15% will ultimately prefer to rent. While a potential buyer would expect their agent to ask questions regarding income and debt expenses, the private seller is considered nosey and offensive when broaching these topics. Private sellers have no way of determining a “potential buyers” true motivation for seeing the home and runs a security risk in opening the door to strangers. Your real estate agent can screen potential buyers to be certain that they are potential buyers.
Legal Issues
The private seller is often unfamiliar with the legalities of offers, counter-offers, amendments, property condition disclosures, etc. and face real dangers of making mistakes that could result in legal actions. A real estate agent has the experience and the expertise to protect your interests and ensure that you are not left open to an expensive and time consuming lawsuit.
Going Head to Head With Limited Negotiation Experience
The private seller has limited expertise in contract negotiations and is often taken advantage of by savvy buyers that might be better prepared. It’s not uncommon for sellers to second guess their position and make large concessions in the buyers favor. It has been commonly accepted for years that a third party negotiator will have greater success in negotiating an offer that is satisfactory to both buyer and seller. Many private sellers and buyers have difficulty remaining objective when dealing directly. No matter how you view it, both parties have a lot at stake in a real estate transaction. A real estate agent will not have the same types of emotional ties to the transaction that the seller and buyer have. They are less likely to be offended by the buyer’s actions and therefore have a greater chance of bringing negotiations to a close, successfully. Typically, a private buyer views the seller as an adversary. They believe that there must be a winner and a loser in the transaction. Private negotiations commonly break down when tempers flare. Your real estate agent makes a living conducting successful negotiations between buyers and sellers. Does it make sense that someone who’s been through these negotiations many, many times, should be able to get you a little more money?
Price Integrity
The private seller has limited ammunition in defending the price of their property. A real estate agent can provide buyers with proof of your home’s value by accessing information on other homes that have sold through the Multiple Listing Service.
History Has Not Been Kind To Private Sellers
Most private sellers are unsuccessful in negotiating an offer. In the publication, Make the Most of the Market, the Royal Bank states, “Although not impossible, the major difficulty in selling your home yourself is credibility. Often For Sale By Owner properties are not taken as seriously by prospective buyers. While many people consider For Sale By Owner, only 1% of Canadian home sellers actually attempt to sell their homes themselves. Of those who do, some 93% later hire a real estate agent. For Sale By Owner may be a solid option if you already have an interested buyer.” As an agent, I seriously question the accuracy of these quoted percentages and I expect that the likelihood of succeeding in a private sale is greater than what's represented here. However, my experience does tell me that "most" homes which are marketed privately do eventually become listed. The actual percentage would be more difficult to pin down and I expect that it varies depending on market conditions, particularly the availability of options for buyers. Private sellers should carefully weigh the potential costs associated with a much longer selling time and paying for advertising when the odds of success are slight. If you are later faced with the reality of listing the property your total costs of selling will be even greater in the end.
Longer Market Time
Many studies have shown that the longer a house is for sale the less money it brings. A National Association of Realtors study revealed the following statistics with respect to listed property. Homes that sold in less than four weeks sold at an average of 2.9% below their list price. Homes that sold between four and twelve weeks sold at 4.8% below list. Those that sold between thirteen and twenty four weeks dropped 6.4% from their listed price. Those that sold after twenty four weeks on the market sold at 9.1% below list. A lengthy marketing period can also cost the seller money in other ways. Perhaps you’re in a position where you’ll need to start another household in a new location and suddenly be faced with two mortgage payments, doubled tax and utility bills, etc.
With these points in mind, a private seller should ask themselves the following questions:
- How much of the commission will I have to give the buyer to convince them to buy?
- How much more money could I get with the added exposure and resulting increase in demand by listing my home?
- How much money will I have to invest in advertising?
- What potential cost could I face if I make a mistake that results in legal action?
- How much more money could an experienced agent that has negotiated many real estate transactions get for my property?
- How much more money could I realize by having a third party negotiator?
- How much money will it cost me to spend my time focusing on home selling activities?
- Are there any potential security risks involved in opening my home to strangers?
- If as few as 7% of private sellers are successful, do I want to take the time to try?
If You Just Have To Try
If you just have to try, there are a number of things that you can do to prepare yourself for the experience.
- Become familiar with the challenges listed in this report and develop a battle plan to deal with each one as best you can.
- Consult a good real estate lawyer prior to offering the home for sale. Discuss how you’ll deal with offers. Secure some offer to purchase forms that your lawyer recommends. Find out how to protect yourself with regards to terms and conditions a buyer might propose. Find out what types of disclosure obligations you have in your area.
- Have your property appraised by a certified Appraiser. Buyers will almost certainly attack your asking price. That’s their job in the private real estate process. You’ll need a credible tool to defend your asking price. An appraisal will be viewed as more reliable than an evaluation from your friend in the real estate business.
- Decide in advance what your bottom line will be. Promise yourself that you will not accept less before consulting an agent.
- Set a deadline for yourself. Know in advance exactly how long you will try on your own. Remember, the faster your home sells the more money it’s likely to bring. If you spend too much time marketing the property it may be more difficult for your agent to sell. Many good buyers will have eliminated it as a possibility.
- In spite of the many additional resources available to agents, the successful ones work long hours to get the job done. Be prepared to earn the commission savings. You are now in the real estate business!
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