Given Vancouver’s sky-high home prices, it’s no wonder some people may consider the for-sale-by-owner route as a way to save money on real estate commissions.
According to statistics from the U.S. National Association of Realtors and the Canadian Real Estate Association, somewhere between 10 and 13 per cent of all sales appear to be by the homeowner.
But before you run out and stick a sign on your front lawn, you might want to consider cautions from people like Colette Gerber, a westside Vancouver realtor and director on the Real Estate Board of Greater Vancouver. Gerber cites one statistic from the U.S. National Association of Realtors that might make some owners think twice about FSBO.
“People who sell their home by owner tend to underprice by as much as 28 per cent of what they actually could get using a realtor,” she said. That means that even though they save on the real estate commission — usually seven per cent on the first $100,000 and 2.5 per cent on the balance — they may have effectively lost thousands of dollars because they priced their home too low.
Part of the reason for that difference in sale prices is that realtors have access to an enormous amount of data not available to the average homeowner, allowing for a more accurate appraisal of the value of the home.
“How much research does the homeowner do?” Gerber asks. “Perhaps they do a bit of research or maybe they don’t do any research, but just look at the house next door (and decide) it sold for x so maybe mine should sell for x. But they don’t do the amount of research that is required to maximize the sale.”
There can also be a less common danger with a homeowner setting too high a price, she said. “People who are looking to purchase a home want value, and when they look at a for sale by owner, they figure they are going to get a deal. So if the FSBO has overpriced his house, there is no deal to be had and the property will sit and sit and sit. It’s unlikely (a potential buyer) will even try to enter into negotiations.”
Another explanation for the difference in sale price may be the exposure a home receives in the marketplace. Statistics show that yard signs are the most common way owners advertise their home for sale (48 per cent of all FSBO sales, according to 2012 numbers cited by the U.S. National Association of Realtors). Realtors typically use a variety of means, including the Internet, newspapers, word of mouth and the Multiple Listing Service (MLS), which exposes the property to more than 4,000 agents in Metro Vancouver alone, Gerber said.
Finally, many owners who try to sell their own homes make the mistake of dramatically under-estimating the time it takes and the many things that a realtor does to complete the sale. That includes holding open houses, overseeing home inspections, filling out disclosure statements and even transferring title to the house.