My neighbor got wind that I'm selling my house, and now they have expressed interest. They told me that we can avoid paying real estate fees if we work a deal privately. What should I do?
If I had a nickel for every time I personally encountered this situation when listing a home – well, I'd have pretty heavy pockets. People are always eager for an opportunity to save money, but you've got to ask yourself what benefit the potential buyer gets, and what's in it for you.
In my experience, it's usually one of two situations.
In the first, and most likely, the neighbour is likely trying to get a deal by paying less than market value. Note that it couldn't be that they expect to save paying real estate fees themselves as the buyer doesn't typically pay the fees, the seller does (though of course most sellers do factor in fees when determining their bottom line).
In the second situation; they simply aren't serious. They're testing the waters, and that's a lot easier to do without a motivated real estate agent working to complicate things for them. if you put your plans to list on the market on hold and they then change their minds, you're left holding the bag. If you have a potential buyer like this, tell them to make an offer when your property is listed on the market. It'll make life easier for both of you.
Now, we do need to get something out of the way.
I'm a Realtor and I obviously have a bias against selling privately. I know the value that a real estate agent brings to a client. Realtors have chosen the career, they're trained and certified, they have specialized tools, a community of support and a code of conduct. They're professionals, and they work in a hypercompetitive marketplace that I'm convinced rewards the proficient and weeds out the poor performers.
And practically speaking, a Realtor gets better rewards.
Late last year I was preparing to list a home in a red hot neighbourhood in the east side of Toronto. Just before we went to market, a neighbour approached my clients to try and work out a deal. My clients were seriously entertaining the idea. We talked about the options, and they ultimately brought the home to market with me.
We worked the property quite hard and received 9 offers – and sold for $90,000 over asking. The neighbor came in with an offer $20,000 over asking. It's not an uncommon experience.
Neighbours or friends asking for a private sale also tend not to be the most disciplined in terms of paperwork. One thing I've learned in the real estate business is that you simply cannot rely on verbal discussions or agreements. If something isn't in writing, I don't give it much weight in my decision-making process.
Here are two quick questions to determine if you are equipped to deal with a private real estate transaction:
· Do you think you will be able to read and understand all of the details, implications and requirements of an offer?
· How will you handle the deposit, how much should it be, and who is going to hold on to it?
In real estate, paperwork equals protection. And how the money works? Always fundamental.
It comes down to this: Work equals value, and skilled work equals higher value. A real estate agent is working for you, bringing their skill, experience and reputation to the transaction. You can assume that work for yourself, and keep the resulting savings if all goes well. But be warned that the risk and complications are all yours too.
On top of the work, there's a lot of emotion involved in selling a property, and that can impact a seller's judgment when things get down to business. Especially if family, friends or neighbours take a liking to the idea of buying your place.
And that's exactly why I wouldn't sell my own house. I'd hire a colleague to do it.
Ricky Chadha is a broker with Royal LePage Estate Realty, and specializes in applying social media and other digital tools to the business of real estate. You can find Ricky on Twitter @your416 or at his website RickyChadha.com.
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