Private home sales can save thousands – but there’s risk involved

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There is one simple reason why Sue Amon opted to privately sell her three-bedroom, three-bathroom residence in Yarmouth, N.S.: “The high commissions that real-estate agents charge,” says Ms. Amon, 65, who has lived in the area for 35 years.

Nova Scotia’s agent commissions are generally fixed at around 5 per cent or 6 per cent of the sale price – a fairly standard fee across the country – but for a house her size in a smaller market, Ms. Amon didn’t see the point of those extra costs.

She inquired about negotiating the commission a local real-estate agent would charge and even looked at agents in Ontario with lower fees, but she was told they couldn’t help her with an out-of-province sale.

“I have no interest in having a second property at my age,” explains Ms. Amon, who originally bought it as a home for her mother who has since passed away.

Private sales or for-sale-by-owner (FSBO) in today’s real-estate market are definitely options as technology has made it easier to access potential buyers. But even in a hot market, it’s not the go-to choice for most people. These types of sales tend to happen in smaller, rural areas.

In larger urban centres such as Vancouver or Toronto, which have more active and global real-estate markets, agents are still preferred, especially in multiple-offer situations, which can prove to be complicated if self-managed, experts say.

Ms. Amon is doing the marketing on her own, with pictures and a video she put together herself. She’s definitely getting “more interest from away” – as far away as Alberta and British Columbia.

If a private sale can potentially save sellers tens of thousands of dollars in real-estate fees (depending on the cost of the home) why are FSBO listings not a popular choice?

It comes down to exposure and risk for both sides of the deal, explains Michael Ferreira, founder of Urban Analytics, a company that provides advisory services and data products for the real-estate industry.

“From a buyer’s perspective, they tend to shy away from the FSBO … because if anything goes wrong it’s basically them against the seller,” he says. “They really don’t have much recourse.”

Realtors are also less inclined to take clients to FSBO properties, which limits market exposure. And double-ending a deal – acting as an agent for both the seller and the buyer – is prohibited in some regions.

According to the Real Estate Council of B.C., representing two clients, what’s called dual agency, has been banned since 2018, and it remains the only Canadian province or territory with a total ban. However, each province has its own regulations on the practice.

For sellers, the risk of selling without an agent comes from the complex nature of real-estate deals, particularly in multiple-offer situations, which are occurring in hot markets all over the country, Mr. Ferreira explains. “The [number] of people who have the capacity to manage all of this without angering a whole bunch of people is a fairly small group.”

For these reasons, despite Canadian home sales being way up in 2021, FSBOs haven’t risen in the last eight to 10 months and “if anything it’s been happening less in the recent hot market,” according to Mr. Ferreira. He adds, however, that it’s difficult to track data on private real-estate deals as there’s no major repository for it in Canada. The U.S. National Association of Realtors states that FSBO sales accounted for 8 per cent of home sales in 2020.

For those curious about alternatives to selling through a traditional real-estate agent, there are companies such as PropertyGuys.com, based out of Moncton, N.B., that offer hybrid solutions to the for-sale-by-owner option. They combine some of the tools realtors employ to gain exposure to a bigger market, without the same commissions.

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“A lot of Canada’s real-estate market is hyperlocal – aside from the Vancouvers and Torontos, which are more global –– and that’s where we really shine,” says Walter Melanson, founder of PropertyGuys.com.

The company has 112 franchise units across Canada and it offers services including online listings, social-media marketing, photography, a sign on the lawn if desired, even connections to lawyers that can help draw up a deal. It offers flat-fee packages that can be as low as $499 (self-service, DIY offerings) up to $5,999 in some areas. The price is dependent on services rendered, not on the listing price of the property.

It has also opened 18 offices across Canada this year, 72 per cent of which are in Ontario, and it has recently broken into markets in Texas, Florida and as far away as South Africa.

“Everyone who comes to us comes from a different perspective and angle,” Mr. Melanson says, “but a lot of them have had a previous experience and something about that experience of the traditional brokerage model made them want to try a platform like [ours].”

Mr. Melanson likens his business to disruptors such as Uber that faced traditional options such as taxis (agents would be the equivalent in the case of real estate), but are able to offer more customized and sometimes cheaper services (whether it be Uber or in this case PropertyGuys.com). “At the end of the day, it’s still a private sale,” Mr. Melanson says. “We just give the tools and strategy to get ahead.”

As for Ms. Amon, she’s happy with the decision to do her deal herself as it “gives her a sense of control.” Since putting her property up for sale about a month ago, she says she’s had eight to nine serious queries and she is confident something will happen soon.

“But the sooner the better,” she adds.