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When
the time comes to sell your home, you may be tempted to sell it
yourself. There is primarily only one reason for doing so,
and that is saving on a real estate commission. The only
other motivation could be a personal challenge or learning
experience, but basically the desire to save money is the main
motivator. You may indeed save money. On the other
hand, the saving could be an expensive illusion.
Based on my personal and professional experience and
observation, there are some general disadvantages of selling a
home yourself, as opposed to using a carefully selected and
experienced
REALTOR®. The
following remarks are not intended to dissuade you from
attempting to sell your own home, but to place the process in
realistic perspective. The comments apply whether you are
selling your own home or an investment property. In the
end, you will have to balance the benefits and disadvantages of
course, and decide what is best for you.
INEXPERIENCE
If
you don't know all the steps involved, from the pre-sale
procedures and strategies to completing the deal and receiving
the money, you could and probably would make mistakes that could
be costly to you.
EMOTIONAL ROLLER COASTER
Many people, especially with their
own home, tend to get emotionally involved in the sale process because
of the direct interaction with the prospective purchasers. For
example, frustration can be experienced due to rejection of the house,
negative comments or fault-finding, people whose personality you don't
like, or people who negotiate toughly on the price. These
one-on-one direct dynamics or comments can sometimes be taken
personally, and therefore be a cause of stress.
TIME COMMITMENT
You have to have
open houses as well as show your property at times that may not
necessarily be convenient to you. In addition, you are going to be
spending time preparing the ad copy and staying at home to respond to
telephone calls or people knocking on the door.
ADVERTISING
Costs include all
the daily or weekly newspaper classified and/or box ads, as well as a
lawn sign. You would pay for these yourself. In addition,
you may not know what specific types of advertising would be appropriate
for your type of property; how to write ad copy that would grab the
attention of a reader and prospective purchaser; nor how to identify and
emphasize the key selling features of your property.
LIMITED
EXPOSURE
There
are considerable differences in market exposure in terms of
advertising by yourself and they types of advertising and promotion
a
REALTOR®
could do for you. There is obviously a direct correlation between
the nature and degree of market exposure and the end price.
Clearly, limited market exposure means limited prospective buyers.
LEGAL PROBLEMS
The prospective
purchaser may supply you with his own agreement of purchase and
sale. This contract may have clauses and other terms in it that
could be legally risky, unenforceable, unfair, or otherwise not
beneficial to you. You may not recognize these potential problems
or risks. In addition, you could end up agreeing to take back a
mortgage (vendor-back mortgage) when it would not be necessary or wise,
or to accept a long-term option or other legal arrangement that could be
risky.
LACK OF FAMILIARITY
You may
not have a clear or objective idea of exactly what a similar
property in your market is selling for, or the state of the real
estate market at that point in time. This can place you at
a distinct disadvantage. For example, if you are being
unrealistic in your pricing, along with limited advertising
exposure, you could literally price yourself out of the
market. Prospective purchasers may not even look, let
alone make an offer. You may eventually sell your
property, but only after several price reductions and after a
long period of time. Naturally, of course, this depends on
the market and the nature of your property. Conversely,
you could have a property with unique features or potential that
could justify a higher sale price than you might realize.
NO PRE-SCREENING
You would not
generally know the art of pre-screening prospects in terms of questions
to ask them over the phone. Then end result is that you could
waste your time talking to people over the phone or showing them through
the house, who are not and never will be serious prospects. You
could also end up accepting an offer from someone who does not
realistically have a chance of financing the house, or who asks for
unrealistic time periods for removing purchaser conditions, which
effectively would tie up your property during that time.
OFFER PRICE
You may think the
offer is the best offer from that prospective purchaser, or any
purchaser, and therefore may accept it. That price may not be the
best price at all. You may have started too low or too high for
your initial asking price, based on emotional needs, not reality; you
may have received a "low-ball" offer from a prospective
purchaser that was never intended to be accepted but was designed to
reduce you expectations; you may be inexperienced in applying real
estate negotiating skills; or you may be subjected to effective closing
skills on the part of the prospective purchaser.
LACK OF SKILLS
This problem was
referred to in the previous point. You may lack any negotiating or
sales skills and feel very uncomfortable or anxious in a negotiating
context. As a consequence, the price and terms you eventually
settle for may not be as attractive as they otherwise could be.
DISCOUNT
It is not
uncommon for the prospective purchaser to determine what the fair market
value is and then ask to have an additional discount equal to the real
estate commission you are saving. The primary reason why
prospective purchasers are attracted to a "For Sale By Owner" is the
prospect of getting a better deal than a property listed with a
REALTOR®,
due to the commission otherwise built into the sale price. The
primary reason why you are selling the property yourself is to save the
full amount of any commission otherwise payable. Hence the
problem. A compromise may be possible whereby the price is further
reduced by a percentage of the commission saved. Again, in
practical terms, it is normally an illusion to think that you will save
the full or even a substantial amount of the commission. Would you
not have a lingering doubt that you could have netted more if it was
listed with a TOP NOTCH
REALTOR®?
BUYER'S
MARKET
Buyers in this
type of market are very price sensitive, negotiate toughly because they
want the best deal, and have the time to be selective after comparing
what is available in the market. You are at a disadvantage if you
don't receive all the exposure possible and use all the negotiating and
selling skills available. You could go down further by that time
in a declining sale market, due to oversupply of homes, limited demand
and reduced exposure.
As you
see, there are distinct advantages to utilizing the services and skills
of a professionally trained and experienced
REALTOR®.
Of course, there are exceptions in certain situations where you may
choose to sell yourself, but you have to be very aware of the potential
disadvantages. The vast majority of homeowners and real estate
investors realize the benefits of using a
REALTOR®
and do so, whether for
buying or selling real estate.
Douglas Gray, LL.B,
is a Vancouver-based recently retired real estate lawyer and one of
Canada's foremost authorities on real estate education. Douglas Gray is a speaker,
nationally syndicated real estate columnist, and author of 12 best
selling books, including Home Buying Made Easy; Mortgages Made Easy;
Condo Buying Made Easy; and Making Money in Real Estate; published by
McGraw-Hill Ryerson. Mr. Gray's syndicated column appears in the
Vancouver Sun
Calgary Herald
Edmonton Journal
Windsor Star
Hamilton Spectator
Kitchener/Waterloo Record and
Kingston Whig-Standard.
This particular
column was also carried in Canadian Realtor News. |
