Everyone wants to sell real estate these days. That is what happens when you have one of the hottest markets in North America.
It means new choices for consumers when buying or selling, but it appears more than 90 per cent of Canadian home sales still involve a professional real-estate agent. The statistic is the same in the United States, where discount brokerages have been operating for the past 10 years. The question is, why?
It is easy to attack real-estate agents and the commissions of up to 5 per cent for buying and selling. But what do you get with the alternatives?
Last October, organized real estate and the federal Competition Bureau reached a deal that allows sellers to use discount brokers and have their listings posted on the MLS system at a discounted fee of a few hundred dollars. Home at Ease and Realtysellers in Toronto are among those offering this service to consumers.
There are also for-sale-by-owner companies, such as the PropertyGuys and ComFree, which will sell you a package so you can sell by yourself, including having your property listed on the for-sale-by-owner website. For an extra charge, you can list on a national MLS website with a registered broker. Their packages cost between $500 and $1,000.
Lawyers are trying to sell real estate through a similar website called propertyshop.ca, where they will also help you negotiate and close your deal, for a fee of around 1 per cent to the buyer and 1 per cent to the seller.
You can also use a public auctioneer to sell your home, for a fee of around 2 per cent to 2.5 per cent total commission.
For-sale-by-owner companies claim to have a unique system for selling real estate. Yet they are not licensed to sell real estate or give advice to consumers. They are not regulated, yet they help people sell their largest investment, without providing any guidance about the pitfalls, especially when hidden defects are not disclosed to buyers.
They are not there to help during the difficult contract negotiations, where mistakes of judgment and in the contract itself can easily be made. Still, more and more sellers are using these services to try and save the commission. Buyers must therefore be very careful before signing anything with a private seller. This includes verifying the lot measurements by asking to see the seller’s deed and survey, conducting a home inspection and asking the seller to represent that they have never had issues with water penetration into the home, or to provide details of any corrective action taken.
Discount real-estate brokerages that merely post listings on an MLS system are not, in my opinion, providing the due diligence required of their provincial codes of ethics. Buyers must therefore conduct the same due diligence noted above before committing to any purchase.
Lawyers can assist with negotiations and can certainly close a deal. However, lawyers are not salesmen or marketers. Will they be there at 11 p.m. to help reach a deal? Do they have the network of buyers and sellers that agents build up over the years, not just from this country, but from all over the world?
With auctioneers, you may pay less in commissions, but are you sure they will attract the most buyers, to get the price you want?
Real-estate agents are far from perfect. For every consumer who tells me about a great experience, I hear many more about incompetent agents who do not properly protect their clients, whether it is overpaying in a bidding war, not listening to requests or receiving unwelcome surprises after closing. I believe the real-estate industry needs to do more to properly mentor new agents, and to reduce the number of part-time agents who don’t do a proper service to themselves or their clients.
In all cases, buyers and sellers need to do a lot of research and ask questions before selecting anyone to assist with buying or selling their next home. Remember, if it was easy, everyone would be doing it.