For most people their house is their most valuable asset and it is also a home that they know intimately. So why pay a real estate agent so much money to sell something that you know more about than anyone and that you can now directly advertise online as effectively as they can? I am glad that you asked.
With the advent of Trade Me, private sales companies and other means of advertising your property this has broken the shackles of people largely being constrained to using real estate agents to sell their property. While there are still a number of very valid reasons why people should use real estate agents, most people seem to continue to use agents because that is what they have done before or that they lack confidence to do it themselves. Presently about 10% of house sales are done privately down from 16% in 2003.
Have sold houses twice via a real estate agent and then sold our last property privately, I would not look to use an agent again. The key reasons I would use private sale are:
This is not because I thought the agents did not do a good job, it was more because I don’t think that they job they did was worth what was paid in commission as based on the median national house price of $450,000 equates to about $18,000 in commission. The counter argument is that they know the market and have the sales training to negotiate the best deal for you but as long as you have got a valuation done and looked as similar homes for sale you should have a good idea of what you should set your price at. Buyers are not tied to an agent and are continuously search the market to see what new listings appear.
In either case you end up paying for any advertising and promotion costs
When you have an agent provide a valuation of your property it could be that they are doing so to enable them to get the listing as it is higher than what another agent has estimated. Getting an independent non-bias appraisal from a registered valuer would give likely you a better indication. As part of the due diligence process when considering using an agent you can also ask them to do an appraisal.
You are the one that lives in the house and therefore can speak most knowledgeable about it. Also, your house if not just one of many that you are trying to sell as is the case of the agent.
Rather than be reliant on the communication and feedback from the agents you control this yourself. For instance, if the market is telling you that the house is priced too high then you get to hear that directly and can adjust accordingly. If it was the agent telling you that you might think that they just want to make a quick sale and move on. Similarly, you get to gauge the interest level of the potential buyers that come through the property rather than getting it third hand from the agent who might have a more convenient interpretation of what the level of interest is.
The agent only earns based on what they sell, but for that extra $50,000 on your house sale only gets them about another $1,000. This is hardly a great motivation to push for those extra dollars from your investment yet is a huge deal for the vendor. The main goal of agents seems to be to attain further listings rather than help the vendors achieve the best terms for their house sale.
Whether you use an agent or do private sale you should still involve your solicitor for the final agreement and the cost of this is about the same either way. For a private sale the sale and purchase agreement usually passes between both parties solicitors so you don’t have to negotiate face to face with the buyer.
If I was buying a house privately I would know that the price has not been inflated to recover the cost of the agents commission. The house is only worth what you are willing to pay for it, but you are not purchasing a commission for an agent are you?
These can be a great source of advice on how to best get your house ready for the market and also what is happening in the local real estate market. Knowledge is power.
Do you have the time to arrange the “for sale” sign, do the listing on Trademe and host the open homes?
You will get people that come to view you home and may not be too diplomatic with any criticism they might have. Would you be able to handle that without taking offence and showing it?
For further reading I found this article quite interesting.
The information contained in this article is of a general nature and should not be taken as advice. It reflects the opinions of the writer only and does not necessarily reflect the opinions of New Zealand Home Loans.