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Does it pay to sell your own home? Sonya and Sergei's story Add to ...

When Sonya and Sergei decided to sell their own home, they were hoping to save money. But they weren't expecting all of the decisions they had to make along the way. Here are just a few questions they had to resolve:

  1. What price should they ask? In Canada, it is difficult to get data that helps you compare your property with others like it. You can look at homes currently for sale, but you won’t know what their final price will be. Many people who sell their own homes list their homes at prices that simply aren't realistic.
    Instead, you can get an expert appraisal to find out what your home is worth in today's market. That's what Sonya and Sergei did. They paid $300 for the appraisal. Then they used it to convince buyers that their home was worth the price they were asking.
  2. How much should they discount the price for a buyer? Many buyers came to Sonya and Sergei looking for big savings. They knew the couple was not paying a real estate agent commission. The buyers expected them to pass on some of those savings – no matter what the appraised value of the home was.
  3. Should they pay a commission to the buyer's agent? In most home sales, sellers pay the commission for the buyer's agent. But when selling privately, Sonya and Sergei can ask their buyer to pay their own agent. It's another point to negotiate. Of course, they risk losing the sale if the buyer doesn't agree.

In the end, Sonya and Sergei's appraisal told them their home was worth about $400,000. They sold for $388,000, giving the buyer a $12,000 discount. The couple also agreed to pay the commission to their buyer's agent. The commission equaled 2.5 per cent of the purchase price, or $9,700.

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Would they have done any better if they had used an agent? While there's no way to predict this with 100 per cent accuracy, Sonya and Sergei believe they came out more than $8,000 ahead by selling their own home. Here's their math.

Agent sale or FSBO? A comparison

The chart below sums up the costs of each option for Sonya and Sergei to sell their home. The example assumes that:

  • The home is well-priced at $400,000.
  • The couple got the same price an agent would. According to the National Association of Realtors in the United States, on average, agents sell homes for 97 per cent of the list price. Some studies show that private sellers do just as well. Other studies put the agents ahead.
  • Each agent involved would receive a commission of 2.5 per cent of the sale price.
  • The couple would pay some sales costs if they sell their own home. They should also consider the value of the time they spend marketing and showing their home. They don’t have to pay for it, but their time does have a value at least equal to minimum wage.

Note: These numbers are for example only. Results in an actual sales situation will be different. An agent that negotiates a better price could more than offset the cost of their commission. A private seller that can equal or outperform an agent on price will come out further ahead. Private sellers may have higher legal costs as they do not have an agent to help with contracts.

Selling with an agent1Y return at June 30, 2010
Sale price: $388,000Sale price: $388,000
Less: Real estate commissions: $19,400 (equals 2.5 per cent of sales price x 2)Upfront sales costs: $1,000 [includes listing with a private marketing company, ads]
Commission for the buyer’s agent: $9,700 (equals 2.5 per cent of sales price)
Seller's time: $1,000 [100 hours at $10 an hour]
What they made (before taxes and legal costs): $368,600What they made (before taxes and legal costs): $376,300


Clearly, there are reasons both for and against each approach to selling a property. Not every private sale would end like as Sonya and Sergei's did. To sum it up, owners who sell their own homes have to be able to negotiate – and do a lot of other things right – to outperform an agent. But some can and do.

Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca


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