April 15, 2016

Selling your own house has rewards and risks

For-sale-by-owner

It’s tempting to avoid those steep sales commissions, but you might not get everything you bargained for

REAL ESTATE
BY MICHAEL BERNARD

In Vancouver’s overheated market, where a real-estate ad can trigger a bidding war and a same-day sale, selling your own home can be a tempting alternative to using a realtor.

It certainly worked for David Kim, who signed up with a for-sale-by-owner website to list his two-bedroom westside Vancouver apartment. It sold a week later to the second person who saw it, who paid $5,000 less than Kim’s $919,000 asking price.

“I figure I put in about 30 hours of work and saved around $20,000 in commissions,” said Kim, a lending officer for a credit union. “I would have to work for three or four months to make that.”

Robert Reay, who in 1997 co-founded FSBO.ca — now one of three major do-it-yourself realty websites in Canada — says more Canadians are turning to selling their own homes. He says his website revenues have tripled each year since 2010, for which he credits the growth of the internet and the pricey commissions realtors charge.

“Back in 1972 when you were asking seven-per-cent commission on the first $100,000 and 2.5 per cent on the balance and the house was worth $150,000, nobody cared if the cost was $8,500,” he said. “Today in Kerrisdale, where a teardown will get $950,000, you would pay $35,000 in commissions.  That’s very expensive.”

Kim didn’t escape without paying some costs: he negotiated a $9,000 fee to his buyer’s realtor, paid $1,000 to list the condo on
FSBO.ca and coughed up legal fees to his lawyer. But he still emerged with several thousand more dollars in his pocket than if he had used an agent.

However, a leading westside Vancouver realtor says there is a lot more to selling real estate than meets the amateur’s eye.

“Statistics show that owners who sell their own home get on average 16 per cent less than if they use a real-estate agent,” said Colette Gerber, adding that sales by realtor average 98 per cent of the list price, according to surveys conducted in the U.S. and Canada.

A do-it-yourselfer is also vulnerable to all kinds of risks, she said, not the least of which is being sued by a disgruntled buyer who find problems with the home that weren’t properly disclosed by the seller.

“Someone comes in and wants to buy your condo,” said Gerber, who has served on the Real Estate Board of Greater Vancouver. “You say ‘great.’ Then the buyer later discovers the plumbing is bad and must be replaced. If the seller hasn’t properly completed a property disclosure form, he or she can be held liable by the buyer for that.” A realtor is legally responsible for disclosure and in fact carries insurance to cover any errors and omissions.

For-sale-by-owner listings also are less likely to get the kind of exposure that a realtor can provide, she said, which probably explains why 92 per cent of homeowners use agents and why FSBO deals have fallen by half in the last two years alone.

“People really vote with their feet,” she said.

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