The pitfalls of selling a home privately

When you first think about it, it seems like a great idea. Why don't I sell my home myself and save the commission? All I need is a sign on the lawn, maybe a classified ad or two and voila -- a pocketful of money saved! Or is it?

Before you risk what is probably your family's largest financial investment, it's worth investigating what it really means to put a "For Sale By Owner" sign on your lawn.

First, what is your selling experience? If it's limited to setting up the tables at your garage sale, that isn't going to provide you with the specialized knowledge you need to get your family through the maze of negotiations and paperwork that will need to be done, including items such as mortgage financing details, mortgage discharge penalties, taxes, lot survey and easements, if any.

Once you scratch the surface, you soon realize that getting the top price for your home in the time frame you've allowed does take skill and experience. Some homeowners have been lucky, but many have run into the scenario of taking too low an offer because they didn't appeal in the right way to the right potential buyer. Others have run out of both patience and time and again have ended up selling too low. It's certainly worthwhile to consider this point before making the decision to strike out alone

How much is your time worth?

The money you may save on the commission could be eaten up by the time it takes to sell your home. In most cases, it takes longer to sell a house privately than it does if you utilize the services of a real estate company. One of the reasons for this is the general public's lack of access to the communications resources that are normally at a real estate agent's disposal.

For example, real estate agents can reach hundreds or even thousands of potential home buyers through the use of advertising and listing services now in place and accessible to them. This is what you are competing against.

Today, some major firms are computerized and therefore have an instantaneous cross-country referral system at the touch of a key. There could be a buyer for your home transferring from another city, but you would never know it. At the same time, these companies also have or are associated with a relocation service. This gives them direct contact with another one of your target markets that you will again miss out on. As a private individual, you have neither the resources nor the contacts to take advantage of these in the same way.

Remember that classified ad or two you may need to run. In actual fact, you may have to spend hundreds or thousands of dollars in advertising to entice a sufficient number of potential buyers to even look at your property. The downside is if you don't, you may not sell your home for what it's worth in today's market.

The most important part - Selling the buyer

Without a doubt, you will have some potential buyers respond to your ads or sign. Now you must "sell" your home. This may not be as easy as you think. Having lived there, your family has developed some attachment to the home and may not look at it as objectively as an outsider will. One person's idea of cozy Victorian may look like just so much clutter to another. This is the time when many homeowners wished they had a professional looking after the sale.

Through their training and past experience, real estate professionals can show your house to its best advantage. In conversations with the buyer, they've found out what it is they're really looking for and will emphasize those features in your home that match their needs. A professional is equipped to handle objections without getting emotional. They're there to make sure you sell your home to the right buyer at the right price!

If proceeding on your own, be prepared to negotiate the price of your home. Today's consumer is more sophisticated and mobile. They carefully compare relative values before making any important decision, especially one concerning their home. A buyer considering a "For Sale By Owner", usually wants the same thing you do - to save the commission. You could end up doing all the work and possibly receive less money! This is another one of the reasons why utilizing a real estate professional as a third-party negotiator can be beneficial to you.

Once an interested purchaser is ready to make an offer, can you effectively "qualify" that buyer? Is the contract you prepare going to be an enforceable one? As protection for your family, you should consult qualified legal counsel at any crucial stage of the process and always before signing any document. An Agreement of Purchase and Sale is essentially a legal and binding contract. The time factors for acceptance, possession and conditions imposed are all critical.

A situation that you may think is a windfall at first, may turn into a nightmare. Two interested parties are both eager to make an offer on your home. Do you know how not to sell your home twice and yet protect your interests if one offer falls through? It has happened and the results can be as drastic as a lawsuit and a delay in the sale of your home.

Getting back to the time factor of selling a home. It's going to take time to answer the hundreds of inquiries (often fruitless) that may come in. Showing your home will involve your week nights as well as weekends because most buyers work during the day. This also means an investment of your valuable time. And do you have the experience to weed out the "lookers" and concentrate on a genuinely interested buyer?

Your real estate agent is willing to spend the time. It's their job. And each and every house presents a different challenge, with a new family to meet and buyers to find. A professional works out of an office where full-time staff are able to answer calls and not miss any buyers. And by doing so, have access to the marketing power of a national organization.

Selling your own home could be a good idea. But first consider the time, money, resources, and professional selling skills that are required. Are you really equipped to take this on? Your time may be more wisely spent finding a real estate agent with whom you'll be able to work and let that person do the job they were trained to do. This will save you time, stress and the need to spend money before you've even sold your home!


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Pricing Your Property

The single most important decision you will make with your realtor is determining the right asking price for your property.

Once you've achieved a realistic sale price, you can look forward to your property being professionally marketed which will allow you to sell your home for the best possible price in the least amount of time.

The Benefits of Pricing Right

The closer you are to market value in your pricing, the higher the volume of offers will be. Your property doesn't lose its 'marketability' and sells faster when it is exposed to more qualified buyers. A well-priced property can generate competing offers because Real Estate professionals will be enthusiastic about presenting your property to their buyers.

Determining the Value of Your Home

The market ultimately determines the true value of your property.

Before you compare your home to similar properties and establish a competitive list price, the following points should be considered:

Location Size Options Financing Supply
Condition Style Community Amenities Buyer

Getting to Know Your Market

A comparative market analysis is an indicator of what today's buyers are willing to pay for a home. It compares the market activity of homes similar to yours in the neighbourhood. Selling prices for homes recently sold represent what buyers are prepared to pay. Asking prices for homes currently listed for sale represent the price sellers hope to obtain and your current competition. Expired listings are generally an indication of overpriced, stigmatized or poorly marketed homes.

Your realtor will prepare a comparative market analysis for your home based on the most current market information. Together you and your Real Estate Professional will establish the proper list price for your home.

Understanding the Factors that Influence Overpricing

Extensive renovations/hidden costs.
A desire to purchase in a higher-priced area
Original cost of the home was too high
Lack of real market information
Building in "bargaining room"
Perceived emotional value

The Result of Overpricing

Many sellers believe that if they price their home high initially, they can lower it later.

Often, when a home is priced too high, it experiences little activity. Gradually the price will come down to market value, but by that time it's been on the market too long and many buyers will be wary and reject the property.

On occasion, the price is dropped below market value because the seller runs out of time. The property sells for less than it's worth.

Missing the Right Buyer

You may think that interested buyers "can always make an offer", but if the home is overpriced, potential buyers looking in a lower price range will never see it.

Those who can afford a home at your asking price will soon recognize that they can receive better value elsewhere.

The Importance of Early Activity

As soon as a home comes on the market, there is a flurry of activity surrounding it. This is the crucial time when Real Estate Professionals and potential buyers sit up and take notice.

If the home is overpriced, it dosn't take long for interested parties to lose interest. By the time the price drops, a majority of buyers are lost.

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Agree on a Marketing Plan

For many people their property is their largest asset. A house is very complex to market and the process needs to be well organized. To do the job properly a plan is needed.

Your realtor can prepare a personalized plan for you containing all activities required to effectively market your home. Your property will be aggressively promoted through the realtor's own advertising publications, other branch offices, the MLS information library ( unless it's an exclusive listing), and the Internet.


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Signing a Listing Agreement

The first formal step in marketing you property is to enter into a Listing Agreement, a contract that commits the realty firm to actively market your home for a specified period of time. It also commits a pre-established marketing fee that is paid upon the successful closing of the sale. The following documents may be required:

Plan of Survey or Location Certificate

A survey of your property which outlines the lot size and location of buildings as well as details of encroachments from neighbouring properties. This may be required in certain areas to complete the sale of your home. Your legal professional may recommend that you obtain a survey, especially if significant changes have been made to your property.

Property Tax Receipts

- Most Listing Agreements require that the current annual property tax assessments be shown.

Mortgage Verification

- Few homeowners know the exact balance on their mortgage as it is paid down. You will be asked to authorize your mortgage lender to provide the figures required.

Other Documentation

- In some instances, it may help the sale of your property if you can provide prospective buyers with information on such items as annual heating, electrical, and water expenses, as well as any recent home improvements costs.

NOTE: In many provinces you will be required to sign a seller disclosure statement.


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Preparing to Show Your Home

First impressions are important. You will want to make sure that buyers looking at your home are left with the best possible impression. The following checklist will help you achieve that goal:

Exterior

House exterior in good repair
House number easy to read
Eavestroughs, downspouts and soffits in good repair
Garage/carport clean and tidy
Litter picked up
Cracked or broken window panes replaced
Lawns and hedges cut and trimmed, garden weeded and edged
Walks shoveled and salted
Boot tray inside front door
Doorbell and door hardware in good repair
Porch and foyer clean and tidy

Interior

Chipped plaster and paint touched-up
Doors and cupboards properly closed
Leaky taps and toilets repaired
Burned out light bulbs replaced
Squeaky doors oiled
Mirrors, fixtures, and taps cleaned and polished
Seals around tubs and basins in good repair
Floors cleaned, garbage containers emptied
Insides of closets and cupboards neat and tidy
Appliances cleaned
Countertops neat and polished
All lights turned on
Air conditioner turned on in warm weather
Halls and stairs cleaned
Drapes opened during daylight
Carpets freshly vacuumed
Fresh flowers in various rooms
Jewelry and valuables locked safely away or taken with you
Valuable property, such as art objects, vases and figurines out of reach, out of sight, or locked away
Pets absent, where possible, or contained during the showing, and litter boxes clean


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The Major Elements of an Offer:

PRICE

Depending on the market and the buyer, the price offered is generally different from the asking price.

DEPOSIT

The deposit shows the buyer's good faith and will be applied against the purchase price of the home when the sale closes. It is held in trust by the Seller's Realtor.

TERMS

Terms include the total price offered as well as many other details such as closing date, inclusions and conditions. The buyer may be arranging their own financing or may ask to assume your existing mortgage if you have an attractive rate.

CONDITIONS

Conditions may include "subject to home inspection", "subject to arranging financing", "subject to the sale of the purchaser's property" or all of these.

INCLUSIONS / EXCLUSIONS

These might include appliances and certain fixtures or decorative items, such as window coverings or mirrors.

CLOSING / POSSESSION DATE

Generally, the day the title of the property is transferred to the buyer and funds are received by the seller, unless otherwise specified (except in Manitoba and Quebec).

NOTE: In B.C. the possession date is usually 1-3 days after the closing.

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