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Wednesday, September 29, 2010

Selling your own Home not for the faint of heart

Looking to save yourself real estate commission fees by selling your home yourself?

Yeah, good luck with that.

David Hilder of Oakville tried to that with his 2,250 square foot townhouse, but after 5 months and very few offers he decided to get a real estate agent instead in September. He listed his home on a “for sale by owner“ website (for speedy typing I will refer to these as FSBO sites), but there web traffic on such websites is pathetically low.

“The problem is, without the Multiple Listing Service you’re dead in the water,” says Hilder. “That’s the first place most people look.”

So #1 in the list of problems that FSBO sites have is very low traffic.

#2. Is actually making the sale. Owners typically have no salesmanship skills, which is why real estate agents are so much better. Retaining them once they get in the door is very difficult for people with no sales experience.

The MLS accounts for 90% of sales in Canada. Limiting yourself to a For Sale sign out front and free websites (or very cheap websites) puts you at the bottom of the barrel for trying to actually sell to a buyer.

In such a scenario your best option is the safety with numbers approach. You can still try to sell your home privately, but why not have the option of a real estate agent at the same time?

For sale by owner networks in Canada have only started to realize this and are now trying to become more competitive. ByTheOwner.com, one of Ontario’s largest for sale by owner sites, is joining forces with 4 other commission-free FSBO sites to create the first national network and a commission free database.

The five companies include
Bytheowner.com in Ontario
PrivateRealEstate.ca in Ontario
Duproprio.com in Quebec
ComFree.ca in Alberta and Manitoba
Skhomes4sale.com in Saskatchewan

HOWEVER THEY ARE NOT FREE! Getting listed on these networks still cost $500 to $700 and there is no guarantee you will sell your home that way.

Also the network is still very small and local. There is no increase in traffic because the websites are simply sharing database resources.

Plus there is a huge disadvantage when it comes to attracting sellers and buyers.

#1. Only a confident (or very cheap) person would try to sell their home privately. What does that say about their personality and the quality of their home? It implies that their home is similarly cheap and likely has structural problems with it that will be glossed over or lied about.

#2. There is no advantage to buyers to buy a home through a private listing. The risks of problems with the house, lawsuits, etc is too high. The real estate commission is a comparatively minor cost when it comes with a better guarantee that the home it will be problem free.

Right now the real estate market in Canada has slowed to a crawl. This act seems more like one of desperation in the hopes of getting free press and surviving the coming real estate bubble burst.

Right now the federal Competition Bureau is taking the Canadian Real Estate Association, which controls the MLS to court, so that people will have greater and cheaper access to the online registry of homes... but do not expect a breakthrough.

The hearing won’t be until next April and difference in price between listing yourself and listing on MLS with an agent will probably be very little.

Plus the existence of FSBO sites that don’t use the MLS shows that there is no monopoly (10% of Canadians still manage to sell privately). And FSBO sites do have the option of listing on MLS, but they have to pay the fees just like regular real estate agents do.

“Nothing tangible in this world is free, least of all real estate.”

In other news...

Real estate in Detroit is so cheap you can buy a derelict house for $100 (due to foreclosures)... for a good house expect to pay $25,000. Mind you, Detroit is quickly becoming a Ghost City so unless you are planning to retire there do not expect to find a job there.

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