For Sale By Owner: Why It’s Best to Hire A Real Estate Broker
We've all seen the signs around town: “For Sale By Owner” or “No Commissions Seller” or somehow “Commission Free”. You’ve probably even seen them in your own neighbourhood. If you’re thinking about selling your own Calgary home in the near future, you might be tempted into thinking that that’s a great way to save money on your real estate transaction — but, is it really?
Keeping some, or all, of the real estate broker’s commission in your own pocket is quite tempting, but not all home sellers are up to the challenges of selling their own home. There are numerous items to consider: pricing the home for today’s market, understanding legally required disclosures, providing accurate comparable home measurements, constant marketing and advertising, being available for showing the home, and the myriad of legal paperwork that’s involved. Even if it is a relatively straightforward transaction, and given the size of the huge financial investment that a typical home is, most people find that it makes the most sense to leave it to a professional real estate broker.
Here are some of the things you can get in return for your investment in a real estate broker:
Access to the MLS® System and MLS® System Database
Only REALTORS® have access to place properties into the MLS® System database (REALTORS® that are members of the LOCAL real estate board). This database provides access to all the available inventory of homes for sale by the REALTOR® membership of the local real estate board (all real estate companies and by every single REALTOR® member). The various portals that access the database, like REALTOR.ca and the thousands of local agent websites, are widely used by millions of consumers to find and view properties online with minimal interaction with any REALTOR® member. The agent version of the database has significantly more detailed information and links to various other websites that provide other information that’s required to verify and for completion of the sale transaction. But the MLS® System, itself, is far more than a database. In addition to the database, the MLS® System includes a guarantee of compensation to the real estate agent that brings the buyer. This is not IN ADDITION to what the seller agrees to pay the listing agent but is actually a cut of it — and it is guaranteed to the buyer’s agent by the seller’s agent even if the seller can’t pay it.
Selling your home on your own involves finding your own advertising venues, and directly paying for all advertising — usually up front. There are few real estate firms that now provide a posting service to place your home into the MLS® System database, but they most often do not provide full buyer REALTOR® participation due to a lack of adequate guaranteed compensation to the agent that brings the buyer and therefore the results are lacklustre at best. This is like placing a used car on a car dealer’s lot and saying, “I’ll pay you rent to have my car for sale on your lot, but I won’t pay you to sell it.” Hmmm, the car may sell, but you don’t have the sales staff flaunting your car and actively trying to get it sold. In fact, there’s a high probability they’re using it as an example of how not to sell a car.
In real estate, without the guarantee of the seller paying the real estate broker that brings the buyer, the buyer will be asked to guarantee the seller’s payment. Buyers know that the fee should be included in the selling price, and that it must be in order to get the financing of it, so they’re quite reluctant to make offers on homes that may involve a risk that they have to pay the seller’s service fee directly and, as a result, possibly end up with a significantly smaller downpayment. Some seller’s blatantly refuse to pay enough to garner adequate interest and buyer’s typically steer clear until there’s a “screaming deal” to be had.
An Accurate Market Evaluation
Active and experienced real estate brokers know the current real estate market and the seasonal trends. They know if home values are rising or falling and if activity is rising or falling. By attempting to sell your home yourself, you may not have access to today’s market trends. You may end up overpricing, underpricing, or not making appropriate and timely pricing adjustments based on the correct market trends. Over 90% of homes sold today involve a licensed real estate professional - and that includes new home sales (whose sales personnel are not required to be licensed). Many buyers steer clear of unrepresented sellers, because those sellers have opted to not take professional advise and are try to do everything themselves. If there’s a deal to be had in a private sale, knowledgeable real estate brokers would have a line up of buyers through the home — but that doesn’t typically happen.
Some real estate brokers are well-trained on negotiation and most can provide guidance to the seller through the entire selling process. While almost no real estate broker is also a lawyer, most have a general idea of the legal requirements and legal paperwork involved in selling a home. If you’re selling a home on your own, you’ll probably need a good real estate lawyer to coach you throughout the process and have a good understanding of negotiating with, often, very short timelines. Are lawyers “on call” when most real estate deals are done (evenings and weekends)?
Screening Potential Buyers
One of the biggest challenges and most overlooked pitfall of selling your own home is not knowing if you have a qualified buyer. In other words, you may receive a very enticing offer from a potential buyer, but you may not be able to determine if that buyer is, in fact, able to purchase the home. Do they have bad credit? Can they obtain mortgage financing? Do they have their required downpayment available? When you are working with an experienced real estate broker, you don’t have to worry about wasting your time on someone who wouldn’t be able to buy your home anyway.
Some Other Considerations
As licensed real estate brokers in Calgary, we are required by law to know what we are doing before we place a home on the market. This includes:
- Checking the mortgage balance to see if the seller is even in a position to sell their home based on the current market,
- Verifying the property’s ownership and that it has an effectively clear title,
- Ensuring the seller has the appropriate survey and/or condominium documents available,
- Accurately measure the home to industry standards,
- And if the home is saleable, providing the seller with an estimated market value, a recommended price to allow for a quick sale, and provide them with an estimate of their net proceeds.
These are some of the hundreds of considerations that a consumer has to go through prior to trying to sell their home all by themselves without the use of a professional. If you’re determined to sell your own home, go right ahead, but with this more in-depth understanding of what’s involved in the whole process you might just decide that it’s better to hire a professional, experienced real estate broker and save yourself some headaches, time and money along the home selling journey. Not all real estate brokers are the same: they may provide similar services with similar results, but be aware, experienced, results-based real estate agents need not charge as much as teams or inexperienced agents that are all trying to keep afloat.