Just like my post about Investors Group and mutual fund advisors may enrage financial advisors, I think this post about not necessarily needing realtors may enrage a lot of realtors/ real estate agents.

So please accept my apologies in advance.

Because of the higher home costs (and subsequently higher commission costs) in Canada, more and more Canadians are opting to sell their home themselves.  However, this may prove difficult because the main way more and more Canadians are searching for their homes is through the Multiple Listing Service (this is how we found our current home).  The handy MLS is sponsored by the Canadian Real Estate Association.

Many Canadians are choosing to save $20,000+ (in some cases, even more) because of the high costs of real estate agents.  This is especially so for markets that have pricey homes like Vancouver.  For example, on a $500,000 home, the real estate commission will cost $21,000 for the seller.  As mentioned in an earlier post, the commission that a real estate agent receives is split between the buying and the selling real estate agent.  Of course, the real estate agent has to pay for their overhead and expenses, including payment to the real estate company (e.g. Re/Max or Sutton).

Do It Yourself Real Estate

With an increasing number of people choosing to DIY investing (e.g. through index funds or ETFs), it is no surprise that people are interested in DIY real estate.  However, this can be more difficult for the seller than one would think.  There is a high amount of resistance from the real estate agents, real estate boards to support people who are selling their own homes.  For obvious reasons, a real estate agent would most likely NOT take their client to an open house of a person who is selling their own home.

Why?

Because they won’t get any commission from the selling homeowner.  This is why it can be very difficult for someone to successfully sell their own home, especially when real estate agents are turning a blind eye to these homes.

This is much the same for real estate agents who opt for lower commissions, like that of 1% Realty (where the maximum commission they get is 1%, instead of the typical 7% on the first $100K and 3.5% on the remaining balance… but at the same time, you can get a full MLS listing).

In addition, people who are on their own in terms of selling their home may not have access to the Multiple Listings Service.  However, if they pay a small fee (usually in the range of $250-$500, they can get their home listed in the MLS).

In my own experience, my boyfriend and I looked at MLS regularly ourselves.  We had a real estate agent WANT to show us around and she was quite upset that we found a place without asking her to tag along (because that means she lost out on some potential commission).  Instead of using her, we employed dual agency with the selling realtor to save commission costs.  However this is risky and my be rife with conflict of interest, so definitely proceed with dual agency options at your own risk!

Canadian DIY Real Estate Websites

There are more and more Do It Yourself Real Estate companies out there, and the quality and attention to detail from these companies is pretty remarkable.  For example, certain companies take care of everything for you, including the custom signage (you just need to hammer it into the ground pretty much) and the legal documents you need to finalize your transaction.

These websites are great in that they could potentially save you tens of thousands of dollars.  The downside is because everyone uses real estate agents, there isn’t much selection for independently sold homes.

Here are some of the bigger DIY real estate websites:

• ComFree has an easy to use website interface.  It includes homes for sale in all of the provinces across Canada and lets you choose which geographical area your home is in.  It is indeed very professional looking.  They have been around since 1997 and claim to have helped sell 100,000 homes in Canada.  As part of their commission free package, they include detailed information on sale transactions in your area (so you know roughly how much homes in your neighbourhood sell for) and even a customized “FOR SALE” lawn sign.  They even have marketing support at least 12 hours of the day.  How’s that for attention to detail?

•  Property Guys also has an easy to use interface (especially if you are looking to buy a property, IMO) because you can “save” your searches and it has a cute legend which tells you if the house is an income property, if it is eco friendly, or if the price was recently reduced.  They even have an “Offer Maker Tool” in case you’re shy with negotiations and don’t want to do it face to face.  They also have lawn signage and offers access to Realtor.ca (aka Multiple Listings Service)- though I would assume you would need to pay an additional fee for this.

• For Sale by Owner has many different sites, the main one is for homes for sale in the US.  For the one in BC, it is very simple and just includes homes listed for sale by owners, how big the home is/ was, and how many square footage that is.

One word of caution- if you are planning to “DIY” to sell your own home, make sure you do not DIY when you close the sale.  Lawyers and notary public are so important for this process.

Readers, what do you think?  Do you think this trend for DIY real estate will catch on?

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This article was written by Les Roberts from moneysupermarket.  He lives in the UK with his dog, Lola.

Many young couples dream of owning a home but the process can, however, be fraught with pitfalls. The internet offers a lot of information that can make the process easier, from tips on what to look for in a home to help on how much you can reasonably afford through tools such as the mortgage calculator at moneysupermarket.

If your parents have purchased a house, you can get first hand advice from them. They have already gone through the process and can suggest who to use, what rates to look for and which terms to consider.

You can consider using the same mortgage lender that they do. Your parents will have a lifetime of experience with their bank or lender and will know whether the lender is trustworthy and can offer sound advice.

One of the most important factors to consider before you buy is whether you and/or your partner earn enough to make ends meet. Apart from the loan repayment you will also pay insurance on the house, so keep that in mind.

Your parents can show you their budget and how easy or difficult it was in the beginning to have the funds to cover all the costs.  Editor’s Note:  I haven’t ask my parents to look at their budget lol.  I don’t think they had one though, but even if they did I think it might look very different given the rate of inflation.

Buying property is a lifetime commitment. You will more than likely have the loan repayments for the next 20 – 30 years. Children may be born into the union and extra costs will be incurred. Make sure you can afford the total package.

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Last month, I shared with you all my house hunting journey. I can’t believe it was the same time last year that we found this home and bought it! I can’t believe I’ve been a homeowner for a year now. Almost surreal when I start to think about it.

I remember that the most exciting part of my house hunting journey was the day when we got the phone call from the real estate agent, saying that the seller had accepted our offer. I remember the moment vividly. BF and I were sitting anxiously, waiting for the call from the realtor. I remember my heart was racing a mile a minute. I don’t know why I had so much emotional investment, but I just did. We got the call and were surprised that the seller accepted our offer and were completely ecstatic. We were happy that no one else contacted the real estate agent, and that a bidding war didn’t happen.

Our Biggest Home Hunt Tip

I know I’m going to get hate comments from real estate agents for this, but I think our biggest tip in our home buying experience, was to use the concept of dual agency with our home buying.

In British Columbia, dual agency means that you are using the seller’s real estate agent to represent you as well. Real Estate Agents can agree or disagree to work with you, because some may see it as a conflict of interest (e.g. how can the real estate agent represent both you and the seller? Where do their loyalties lie?). They cannot be a dual agent for many clients (many whom we talked to only agreed to us and refused others). Some real estate agents decline to be in a dual agency agreement and wish to solely represent the seller. I think it depends on the real estate agents’ comfort levels with the concept of dual agency.

You as the buyer must feel comfortable with the concept of dual agency too – because sometimes you may worry that the real estate agent is lying to you, to try and make you “up the bid.” We certainly felt that way when we entered into the ‘bidding war’ that first time with the duplex. We knew she was trustworthy but we still felt unsure. It’s important to stay firm what you want to pay for the property and not let emotional uncertainty sway your decision.

How does Dual Agency Work?

Okay, standard commissions (for the big real estate firms) for real estate sold is:

7% on the first $100,000 and then 3.5% on the remaining balance. This is split between the buying and selling real estate agent, and paid by the seller of the home.

Therefore, if a house costs $300,000 (yeah, this is obviously an example since there is no way a house costs $300K in Vancouver), then:

$100,000 x 0.07 = $7000

$200,000 x 0.035= $7000

Total realtor commissions: $14,000

If you use a dual agent, the $14,000 is all theirs (and the real estate firm’s). Usually it would be half of this (to account for the other real estate agent involved), so $7000. Basically, with anything more than $7000, the dual agent will (should) be happy with. It would be “all gravy,” as they say. He or she will want to work for this and will aim to please both the buyer and seller. The real estate agent aims to sell the property as soon as possible, because a quick sale can reflect positively on their sales record.

If you’re looking to read more on how real estate commissions work, I have an old post about it here.

With the dual agent, we were able to knock off $25,000 from the purchase price at a time when homes were being overbid from the selling price. The real estate agent gave up some of his commission, and that way, we were able to save some money. The seller was happy (well, I’m not sure she was that happy, but she still agreed), the real estate agent was happy, and we were happy.

However, not everyone likes to use this type of strategy. Some home buyers like to have a real estate agent choose properties for them, and they like to have that personal touch. For some reason or another, we didn’t like the idea of using a real estate agent, perhaps we didn’t want to feel pressured to buy, and we liked looking at places on our own time.

Readers, do you have tips from your house hunting experience? What was your most vivid experience during your house hunt journey? What do you think about the concept of Dual Agency?

So, if you haven’t entered already, go enter “The Great House Hunter Contest for BMO Smartsteps® for Homeowners”! You can win 10,000 AIR MILES reward miles and all you have to do is do what I did (share your house hunting story).

the fine print:

There is no purchase requirement to enter into The Great House Hunter Contest for BMO SmartSteps® for Homeowners (the “Contest”). The Contest is open to all legal residents of Canada (excluding Quebec) who (at the time of entry): (i) have reached the age of majority in their province/territory of residence; and (ii) have an AIR MILES®* Collector Card. To enter, send an email to House.Hunter@bmo.com that contains (among other things) a story that discusses your “house hunting” experience and one (1) optional photograph to accompany your story. Prizes: Eight (8) Finalist Prizes (1,500 AIR MILES reward miles each); one (1) Grand Prize (10,000 AIR MILES reward miles); and two hundred and fifty (250) Entry Prizes (100 AIR MILES reward miles). Approximate retail value of the Prizes varies by travel service and date selected – example: from Montreal to New York return air travel for one passenger for October departure is 1,250 reward miles, which is approximately $342.00 CDN. Odds depend on the number, caliber and timing of eligible entries received. Skill-testing question required to be correctly answered to win. Full rules at: www.bmo.com/greathousehuntercontestrulesandregs

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I realized that with all the hustle and bustle of buying a home, I hadn’t really shared my experience and our thought processes on how we decided on the home we live in now.

Our Experience

The house hunting experience (or the first one anyway, not that I’ve experienced a second one yet) is an arduous yet fun experience. Our house hunting experience spanned over a few years but became really serious over six months. We started looking in 2008 but “looking” at the time just meant going into presales/ preassignment condos and “ooh-ing” and “ah-ing” over
the features of the condos we were looking at. We actually got serious six months before we bought our home and got a pre-approved mortgage. We ended up extending our pre-approved mortgage because we were looking and nothing really piqued our fancy.

At first we were all over the place. We didn’t know if we wanted a condo, or a townhouse, a duplex, or even a house. We ended up narrowing it down to a townhouse or duplex or house.  We didn’t know if we wanted a newer home or a fixer upper that we could renovate. A few months into house hunting, we saw this adorable duplex in the area where we live in now.  It was about $100,000 less than our current house (which we hadn’t seen yet). The duplex seemed perfect, it was new, it was nice, it had three bedrooms (albeit three small bedrooms).  We wanted it.

Disappointment

However another family wanted it too. It went into a bidding war and we lost.

We were pretty devastated. I hated bidding wars and we got so attached to it. However, we were not willing to go up as much as that family was wanting to go up. We knew we would find something else.

There’s Hope

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Way back when, I had talked about how one can use the RRSP for the Home Buyers Plan.  Having bought my first home recently, I found the home buyers plan information on the Canada Revenue Agency website a bit difficult to understand (must be all that government lingo), so I thought I would simplify it in easy to understand terms and spell it out step by step on how take advantage of the HBP.

First off, in case you haven’t heard of the Home Buyers Plan, I’ll try to explain it.

It’s where a first time home buyer (you and whoever you buy the home with) can each withdraw up to $25,000 from your RRSP tax-free.  The caveat is that you have to repay it within 15 years, following the second year after the home is bought.

e.g. if you buy the home in 2010, you will have to start repaying the Home Buyers Plan withdrawal in 2012.

Conditions in order to be eligible for the HBP plan:

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