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.
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?