The pros and cons of private selling
Part 1 – The work of a real estate agent
1. What real estate agents do:
Real estate agents are professionals who help in connecting the buyer to the seller. A lot of real estate agents also do rentals wherein they connect tenants to landlords and even maintain the property on the behalf of the landlords. The real estate agents work by linking together the two interested parties and charging a commission for their services. For sales, they charge commission only to the seller but for rentals (i.e. agent managed rentals) the commission is charged to both parties involved in the transaction.
Real estate agents generally calculate their fee as a percentage of the selling price (in case of sales) and as part of the rent (for rentals). People, who want to sell/let their property, leave the details of their property with the real estate agent (and in fact, even leave the keys of the house so that the real estate agent can arrange for viewings without them getting into any hassle). The other interested party (i.e. the buyer/tenant), gets access to this information by contacting the real estate agent. That’s how the real estate agents become a hub of information.
A lot of home seekers (including real estate investors) use the services of real estate agents not just for getting good deals but also getting them quick. Since real estate agents are probably most familiar with the market situation in their region of operation, it makes sense to approach them to get an idea of the going rate for properties in that region.
Real estate agents would generally know the prices of various properties of different types and at various locations in the region.
A property seller can possibly get a few thousands more for his/her property by using the advice received from a good real estate agent.
A good real estate agent will also analyse the needs of a home buyer/tenant and provide suggestions on what kind of home could be available to them within their budget. So a good real estate agent will not just throw a list of available properties to the buyer/ tenant but will actually discuss their needs and make a suggestion. This, in fact, works in the favour of real estate agent in two ways.
Firstly, if the real estate agent is able to sell the house they get their commission and secondly, if they make the buyer happy too they earn a good reputation (and hence more business). However, it is worth noting that real estate agents work on seller’s behalf.
1.1 Real estate listings – Internet versus newspaper
Whether you are looking to buy a home for living in or whether are looking to just invest in real estate, you will need to get hold of real estate listings as the first thing. Internet and newspapers are the most common ways of getting real estate listings.
With internet gaining popularity, internet real estate listings have become one of the easiest ways of checking out the real estate listings. Though the traditional method of looking for real estate listings (through newspapers) is still one of the most used methods, it is a very time consuming one.
You have to read through various listings and sort out the ones that seem more suitable to you (and possibly write down the phone numbers and contact details on a piece of paper) and then call up the owners/brokers to fix an appointment for viewing the property (which may turn out to be totally disgusting in the end).
Moreover, the newspaper listings generally happen on a weekly basis. So if a deal has materialised in the meanwhile, there is no way you can check it without actually calling up the owner/broker.
On the contrary, the internet real estate listings (on a good real estate listings website) are updated every day or maybe twice a week. Moreover, new real estate listings go up on the internet everyday (i.e. they don’t wait for the newspaper to get published).
So, if you have been using only the newspaper as your source of real estate listing information, you might end up getting stale information. You might lose out on a deal that was out on internet, say 2 days before. As such, making the first offer can make a big difference when it comes to real estate.
Further, you don’t need to go through all the real estate listings in order to determine the listings that look suitable to you. You can specify various search criteria/ filters in order to get only those real estate listings that you really want to look into. This is a big advantage when compared with newspapers where listings are generally classified just on the basis of location of the property.
Thus you can save a lot of time here by browsing only through the real estate listings that are of interest to you. Moreover, there is no need to note phone numbers etc.; you can just take printouts of the listings you want. Some websites also provide tools/ facilities to track those real estate listings.
You could even contact the sellers by sending a message through the website (some websites provide such email type of facility). Another important benefit from real estate listings on internet is that some of them also contain images of the property. So you can have a look at the images and see if you like the property at all.
So, real estate listings on the internet do seem to offer a lot of convenience. However, internet or newspaper is really a matter of personal choice too.
1.2 Is it a good idea to sell your home yourself?
Are you thinking about selling your home? Have you been thinking of selling it by yourself instead of hiring a real estate agent? There are several advantages of selling your home yourself, but there are disadvantages as well. To make it easier for you to make a decision find the most important pros and cons below.
The most important PRO for selling your home yourself is MONEY. Selling your home without the help of an agent means more Money in your pocket!
By selling it yourself you save the commissions and fees. We are not talking about pennies, we are talking about THOUSANDS of dollars which you would have to pay an agent.
Another advantage is that you are able to decide the times for open houses and showings. It is also completely up to you where and when you want to advertise.
Unlike a real estate agent who is selling many houses, you can focus on YOUR house, because you are only selling your own house. It is obvious that you will have more interest in the sale than an agent.
But as mentioned above there are also disadvantages selling your house yourself. Real estate agents are paid a lot of money for a reason. Selling a home takes a lot of energy and time. Dealing with potential buyers, open houses, closing sales and of course dealing with legal issues. Real estate agents are familiar with all the above and their experience can impact the sale.
Be realistic when making a decision! Will you drop everything to make a showing? Do you think you are indeed a good negotiator and ask for an offer? Are you 100% sure you are able to close a deal? Selling a home is a big project! It is not everyone who can take on such a big project and can stay calm and professional when dealing with buyers.
Selling your home is not impossible, but it is a challenge. If this challenge excites you and if you are willing to learn then it is not impossible managing selling your home without the help of an agent. With some know-how and a lot of energy you can sell your house without the help of a real estate agent and save thousands.
So how to start? Sit down and start evaluating your house. Finding the right price is the first and most important step when selling your home yourself.
1.3 Selling your home yourself
Nowadays, a lot of people are doing business in the real estate area. One of the businesses is buying and selling house. The Real estate agent who will take charge of his or her services for about 2-6% home often takes this buying and selling home activity. People usually sell the home with the help of real estate agent because they want their home to be sold fast. Maybe you will think that you want to sell your home by yourself in order to save more money into your account because the money will not be cut down to the third party such as real estate agent.
Selling your home by yourself is not a difficult task to do if you know how to sell your house by yourself with a good strategy and know the steps to sell your house immediately. But, selling your home yourself demand lots of your time. Why is that? Because you have to do more survey on price and more work to “clean up” your house before the selling process.
Selling your home yourself is as easy as 1, 2, 3 and you will see that you can also sell your home yourself. Before you start to sell, you have to set your mind that you can sell your home by yourself.
If you already set your mind, the next steps can be lot more easily. First thing that you have to do is “clean up” your house and make your house looks spacious. Every buyer always searches for a clean, neat, tidy, and spacious home. You have to make your home look great and attractive.
You can start by identify your home defects and make some extra work to do to your home such as cut the grass, remove all clutter, scoring your home from top to bottom, makes some little improvement even if that seem unimportant to you such as planting flowers, fixing broken tiles, trimming tree, and make sure that your home smells good, and other repairs and improvements here and there.
After you “prepare” your home, you should also set a reasonable price in selling your home. You do not want to set the price too little or over estimate that will reduce your potential buyers. You can find information about the price of the home, that is similar to your home, in newspapers, advertisements, or you could ask some professionals advice to price your home.
The last step to do is to market your home. Selling your home by yourself can be an interesting work to do but can also make you frustrated if your home is not sold for the time that you have predicted. If your marketing strategy is good, you will have your home sold only by weeks. You can start by making a good advertisement on your house appearance and add your ads into a newspaper or magazine that has a particular field in buying or selling house.
You can also make an open house. Open house is an attractive way to attract buyers. And do not forget to make flyers of your house so that the buyers can bring your home brochure with them.
1.4 Selling a home privately
When you choose to sell your home privately (without the help of a real estate agent), most likely it’s because you wanted to save some money. A research shows that selling a home privately can save as much as $9000 during the home selling process. Don’t let this fact sway you, though. A qualified real estate agent costs a lot because they have experience in the market and is more likely to give you a more secure price of your home. An agent also wins in network; being able to reach people who’s looking for a house, or can help selling one.
Selling a home privately will also affect the marketing process. If you sell your home without the help of an agent, it’s not likely that you’ll have access to Multiple Listing Services – a database full of house listings given out to homebuyers. You might need to get the buyers in some other way, like holding an open house or putting an advertisement on local newspaper.
Furthermore, when a buyer sees that you are selling your home privately, they will offer a lower price, because they know you’re already saving money from not hiring an agent.
On the other hand, it is understandable that some people cannot trust other people to sell their home. Selling your home privately means being in total control of the transaction. You know that you will always be available for questions or home showings. Whenever you made a mistake, it’s yours and only yours to blame (trust me, a mistake that costs you nothing would still feel better than an expensive one).
When you’re sure that selling your home privately is the way to go, there are some extra preparations you need to do. Take extra measures in preparing your house. Remember that you’ll be competing with professional agents and their clients’ houses – make sure you have a chance to stand out! Find websites that provides a “selling by owner” kit. Get as maximum exposure as possible.
You also need to get educated in legal requirements and contract making. This will take some time, so get help from an attorney and start researching way before your selling date.
Selling a home privately is a tricky business. Some say that you’re able to sell your own house if you have three free hours every day of the week. With a little bit of work, you’ll manage to put that much-needed money to better use.
Part 2 – Private property owner sale versus property broker sale
The reason why some sellers choose to do a private sale of their property rather than use a property broker is to save on property broker commissions, which can be very high.
Unfortunately, property buyers often take the absence of a property broker commission into account when they make an offer, and thus offer less for a private sale property – the reduction in the offer price often being equivalent to the commission that would have been paid to a property broker. This means that the saving on broker fees could be a false economy.
The biggest problem in a private sale is being able to promote the property effectively enough to find a buyer.
2. Overview of a private property owner sale versus a property broker sale
2.1 Private property owner sale:
In a private property sale, the owner sets the selling price, promotes the house, shows buyers around the property, negotiates the sale and project-manages the sale process.
Assuming a serious buyer is identified, a transfer attorney then handles the legal matters. The private seller (property owner) may have to collect and drop off documents as well as arrange compliance certificates (beetle, electrical etc.), and will do much more running around than if an property broker were mandated to sell the property.
2.2 Property broker sale:
If the seller appoints a property broker, the property broker helps to value the property and is responsible for finding a buyer and closing the sale.
The property broker will help to co-ordinate the sales process but a transfer attorney will finalise the property transaction, as is the case with a private sale. The owner’s involvement is usually restricted to preparing and tidying the home before it is visited by potential buyers.
If the seller appoints a property broker, the property broker helps to value the property and is responsible for finding a buyer and closing the sale. The property broker will help to co-ordinate the sales process but a transfer attorney will finalise the property transaction, as is the case with a private sale. The owner’s involvement is usually restricted to preparing and tidying the home before it is visited by potential buyers.
A lot of home seekers (including real property investors) use the services of real property brokers not just for getting good deals but also getting them quick. Since real property brokers are probably most familiar with the promote situation in their region of operation, it makes sense to approach them to get an idea of the going rate for properties in that region. Real property brokers would generally know the prices of various properties of different types and at various locations in the region.
A good real property broker will also analyse the needs of a home buyer/tenant and provide suggestions on what kind of home could be available to them within their budget. So a good real property broker will not just throw a list of available properties to the buyer/tenant but will actually discuss their needs and make a suggestion. This, in fact, works in the favour of real property broker in two ways.
Firstly, if the real property broker is able to sell the house they get their commission and secondly, if they make the buyer happy too they earn a good reputation (and hence more business). However, it is worth noting that real property brokers work on seller’s behalf.
2.3 Can a private property owner sale be promoted effectively?
The ways in which a property can be promoted include:
2.3.1 Promoting the property in the newspapers and magazines: Both a private seller and a property broker can advertise in the newspapers, although some sections of the print media are restricted to registered property agencies so a private seller is at a disadvantage. Print Promoting used to be the key way in which a property was promoted but it is being overtaken in importance by internet promoting.
2.3.2 Promoting the property on the internet portals: Brokers will upload a property’s details to their property agency’s website as well as to other property sale websites (“portals”). Usually a property broker will only upload details to one or two of the main portals. In a private sale, sellers can send the details to as many property portals as they choose (and pay for each listing) but some portals do not allow private sales.
We (Meridian finance and properties) lists property on all the major portals to get maximum exposure. Nowadays buyers go to the internet when they are looking for a property to buy so this is the most important place to advertise. Nowadays buyers go to the internet when they are looking for a property to buy so this is the most important place to advertise.
2.3.3 Putting up a for sale board: As a private seller, if you have a professional-looking For Sale board then you should be able to compete for attention with a property broker’s board. But many South Africans are suspicious of a private sale, believing that there must be something wrong with the property or the seller! A “private sale” For Sale board is therefore usually less effective than a board from a reputable property broker.
2.3.4 Property broker buyer lists: A property broker who has worked in an area for many years may have a list of potential buyers. If the seller doesn’t appoint a property broker then they will have to do without this potential source of buyers.
2.3.5 Networking amongst property brokers: Property brokers normally have either informal or formal networks that help them to source buyers. These networks are clearly not accessible in a private sale transaction.
When promoting a property, a seller who does a private sale cannot compete with a property broker for the reasons given, but there is always an element of luck involved!
2.4. Is a buyer more likely to buy a property from a property broker or from a private owner seller?
There is some debate about whether a property broker or a private seller is better at getting a buyer to put pen to paper. Top property brokers are trained sales professionals and are thus probably more skilled at handling buyer objections and at closing a sale. However, owners know their house and area best and so buyers sometimes prefer being able to deal directly with them in a private sale transaction.
Some believe that buyers have to “fall in love with the house” in order to buy and that no amount of sales talk by a property broker will get a buyer that doesn’t like a property to change their mind. However, as selling and buying a house is an emotional experience, it can help to have an experienced property broker as the intermediary between the two parties. A good broker can also help the buyer to obtain a bond, which is often a pre-condition in the sale agreement.
Ultimately the success of a private sale depends on the seller’s promoting skills and budget as well as their confidence and emotional maturity, because buyers can be very critical.
Selling a home privately will also affect the promoting process. If you sell your home without the help of a broker, it’s not likely that you’ll have access to Multiple Listing Services – a database full of house listings given out to homebuyers. You might need to get the buyers in some other way, like holding an open house or putting an advertisement on local newspaper.
Furthermore, when a buyer sees that you are selling your home privately, they will offer a lower price, because they knew you’re already saving money from not hiring a broker.
2.5 How to decide: property broker or private sale?
2.5.1 Advantages of a private property owner sale: You save on property broker commissions, which can be substantial.
You have control over the process and can show your house when it is convenient to you. You may feel it is safer since you don’t have to entrust your keys and alarm code to a property broker (but you have to be present when people you don’t know enter your house).
2.5.2 Disadvantages of private property owner sale: You need to do much more work yourself such as determining a realistic selling price and showing potential buyers around your home.
What you save in commission you may lose in a lower offer price for a “private sale” property transaction.
Realistically, you are far less likely to find a buyer, particularly in a tough property promotion campaign. You have to pay your own promoting and advertising costs, upfront.
You don’t have the training or experience of a professional property broker and this can cause stress because you are taking decisions about (probably) your major financial asset.
You have less experience in screening out time-wasters and other undesirable “buyers” than a property broker does.
You need to do much more work yourself such as determining a realistic selling price and showing potential buyers around your home.
We (Meridian finance and properties) can provide a summary of recent comparative sales in your surrounding area and advise you on realistic pricing as we have access to all property sales handled by the central deeds office.
3. Specific benefits we provide to property sellers:
• We have access to Multiple Listing Services – a database full of house listings given out to home buyers in magazine format at various kiosks. When you go it alone on your own, you will not have access to this resource.
• We list property on all the major web portals to get maximum exposure. We advertise your property on several of the highest buyer traffic web sites, nationally and internationally, with the push of a web button, where buyers find it quickly. Going it alone on your own will give you at the most 2-4 online advertising resources.
• We have expert knowledge on establishing realistic selling prices, as we have online access to deed transfers in your area and get summaries of recent comparable prices, trends and building costs. You remain in the dark about prices when you go it alone on your own.
• We arrange bond loans for buyers at all the banks. We pre-qualify buyers through credit bureau and affordability checks, to which we also have online access. When you go it alone on your own you may be subjected to several buy offers where eager buyer bond applications at banks may fail, which can waste lots of valuable time.
• When we are not able to sell your property within a short period of time, we invite other agents to help us with selling your property, as we have online resources to arrange open hours with many agents. Going it alone on your own will exclude you from these resources.
• We can assist sellers to prepare a property to a condition of readiness for a sale to take place, as we have our own property maintenance resources.
4. I hope this unbiased information can be of help to sellers.
I have sold four of my own residential properties, two of them privately on my own and two of them through real estate agents, so I know both sides of the coin.
Please feel free to contact me if you want to buy, sell, rent or rent out property. Also feel free to contact me if you want to find out more about the process of becoming an estate agent.
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