Choosing to sell your own home places you in the role of the real estate agent for your property with the benefit of allowing you to keep the commission you would normally have to pay a real estate agent to sell your home. This commission fee can be up to 6% of the total sales price of your home in Canada or the United States.
The For Sale By Owner method is not necessarily for everyone so please read the rest of this webpage for more information about the steps involved in the home sales process in Canada or the United States.
Private Home Sales - Can it Work for Everyone?
In short, no. Making the decision to buy or sell a home is one of the most important financial decisions people make in their lives. There is a large amount of money involved in a real estate transaction and making sure that as much of this equity ends up in your pocket as possible when you sell should be an important part of the decision making process.
In order to make the private sale method successful the home seller must do the work of a seller's agent on their own behalf. As the old saying goes, "there are no free rides". As a private seller, you stand to gain a lot when you sell but only if you do your homework and diligently market your property.
Traditionally, home sales in Canada or the US are brokered by a certified real estate agent. A seller's agent & is responsible for;
- assisting with home staging
- pricing your property
- marketing your property
- qualifying potential buyers
- scheduling visitations and open houses
- installing yard signs
- placing a listing for your property online with the MLS.ca website.
There are two types of real estate agents. Buyer's agents who broker deals on behalf of home buyers and seller's agents (also known as listing agents) who list and market properties on behalf of home seller's. The 5% sales commission is split between these two parties when a successful deal is brokered. Both types of agents are not necessarily involved in every real estate deal such as in a private sale where the home seller performs the role of the listing agent and may or may not work with a buyer's agent to broker a deal.
All of these services are essential to selling your home and most real estate agents are fully capable of providing these services in a highly professional manner. Typically, these services are provided for a set percentage of the total sales price of your home with the rate agreed to prior to listing a property with the agent. The fee is known as a commission and can be up to 6% of the total sales price of your property in Canada or the United States.
For home sellers to save this commission fee they assume the role of the seller agent for their property and either perform all of the tasks outlined above themselves or arrange a third party to perform these tasks on their behalf.
Let's breakdown each of the roles a real estate agent plays in the home sales process and compare this with what is required using the For Sale By Owner method:
Property Marketing
- Assisting with Home Staging - A real estate agent will visit your home and offer suggestions on how to make your home buyer friendly. They will suggest repairs, upgrades and maintenance that you should perform in order to create a good impression in a potential buyer's mind. Many of these suggestions are of the common sense variety. Home owners are normally quite familiar with any shortcomings their home or property may have and can arrange to perform the required staging tasks on their own.
- Pricing Your Home - Real estate agents will find out how much comparable homes in the area have sold for in the recent past and estimate a sales price for your home based on their research also factoring in their sales commission into the sales price. Agents will typically utilize an account on the Mls.ca website in Canada that has access to home sales data that an ordinary visitor to their site cannot acess. While this information is not available to For Sale By Owner candidates it is still valuable to review the Mls.ca site to see what houses are currently selling for in your neighborhood. Ask other sellers in your neighborhood directly and also review newspaper classifieds, online classifieds sites (such as Craigslist ) and real estate print publications in your area to help with pricing estimation. FSBO sellers can also enlist the services of a home appraiser to value their home if they are not comfortable performing this task for themselves.
- Scheduling Appointments and Open Houses - A real estate agent will schedule showings of your home and open houses for potential home buyers. For Sale By Owner candidates must perform this scheduling for themselves. For people who do not have a lot of free time having someone dedicated to this scheduling can be a necessary service and well worth the sales commission to the seller.
- Create and Distribute Property Feature Sheets - A real estate agent will meet with you and fill out a property feature sheet which they will use to help market your home to potential buyers. This feature sheet will also be used to create an online listing for your property. For Sale By Owner candidates must replace this service with a comparable alternative. For Sale By Owner websites can provide you with an online property listing which is printable often for a fee under $100 with the same quality that an agent will provide you on the mls.ca site.
- Market Your Property Online to Buyer Agents and Home Buyers - Real estate agents will create an online listing for your property (generally, using the mls.ca system in Canada). This listing is open for anyone to view and generally is a place for sellers agents to market your property to other real estate agents, known as buyer agents. For Sale By Owner websites can provide you with a comparable online listing for your property for a flat fee often listing your property until you sell it. Selling your home privately also allows you the flexibility of allowing buyer agents to contact you directly to broker a deal, or you can try to find qualified buyers for yourself. If a deal is brokered between you and a candidate from a buyer's agent, only the buyer's agent would be paid a negotiated commission fee by you (you negotiate the fee with the buyer's agent yourself). If you find a buyer yourself you keep both the buyer's and seller's agent commissions!
- Classified Advertising - Real estate agents may or may not add your listing to local newspaper classifieds, usually with a link to view your property profile online and a contact phone number. FSBO candidates can call local newspapers and add a classified listing themselves often for a relatively modest fee. The FSBO candidate can include a link to their online listing with the FSBO website they have chosen to market their property with. Another relatively inexpensive way to market your property is through the use of online classifieds. Provider's such as Craigslist will allow you to post a listing for your property for free. Sites like Craigslist generate a LOT of traffic.
- Yard Sign Delivery and Installation - Real estate agents will hand deliver a yard sign or make arrangements to have a sign delivered with the goal of attracting local passer-by traffic. These signs will include contact information and optionally the link to their online property profile. For Sale By Owner websites will often bundle a yard sign with their packages, including a link to your online listing and contact information right on the sign. FSBO candidates can also find low cost yard signs at their local hardware store.
Qualifying Potential Buyers
A real estate agent will qualify potential buyers for you to ensure that only people who are serious about viewing your home and have the means to complete the sale if they are interested. This is a valuable service and can save you a lot of time over the for sale by owner method.
Using the FSBO method home sellers will have to qualify potential buyers themselves. The most important consideration is to ensure that a buyer is pre-qualified for a mortgage. This information can be asked for by the home seller and verified with the company issuing the mortgage.
Any sales offer received by the home seller should be given immediately to your real estate lawyer for review to ensure there are not clauses in the offer that especially favor the buyer.
Real Estate Lawyers
Real estate agents will refer you to a real estate lawyer for you if you do not have one of your own. A real estate lawyer will charge additional fees in addition to the agent commission when completing the sale but a real estate lawyer is required whether you choose to use a real estate agent or sell your home privately.
A real estate lawyer will arrange all of the funds transfers and hold money in escrow for clients, draw up the sales contract and any disclosures associated with your property and review any sales offers you receive to ensure your best interests are represented. If you can find your own lawyer to help you with your real estate sale the services of a real estate agent may not be required in this regard.
Real Estate Agent or For Sale By Owner?
All of the tasks listed above are important and must be completed in any real estate transaction. Real estate agents are professionals and in most cases offer their services in a professional manner.
If you are interested in the For Sale By Owner method you have to ask yourself if you have what it takes to diligently perform these tasks. Most home sellers who try the for sale by owner method and fail do not fully understand the amount of work involved in marketing a home. The benefits are obvious but diligent marketing work is required in order to succeed.
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