How To Avoid A Costly Mistake When Selling A House Privately

“Can I be successful in selling a house privately?”

We get this question all the time.

As a family business committed to ethical standards, we pride ourselves on being honest and transparent with our clients. This means that our clients feel so comfortable with us, they can literally ask us anything.

And this question is often one of the most frequent.

A study from the National Association of Realtors found that one quarter of all private sellers will list their house with an agent within 6 to 8 weeks of their house going on the market.

Why? In short, because they typically don’t work. In fact, the same study found that only 2/3 of all FSBO (For Sale By Owner) sales are successful.

With that in mind, can selling a house privately work?

The short answer is “yes, but…“. For the Millennials, TL;DR is here. The long answer is found in this blog.

We’re certain you’ll want to read the long answer.

If you want to give FSBO a try, we’re certainly not here to stop you – but we do encourage you to ask yourself some key questions before embarking on this adventure.

Below are 5 questions you need to ask yourself before selling a house privately.

1. Do I have the knowledge to sell a house privately?

From the removal of terms to conditional offers (and everything in between), it takes a great deal of time, experience and knowledge to sell a home. When you’re determining if you have the knowledge to sell yourself privately, break this down into two parts:

• Do I have the knowledge and education to read and understand all of the details, implications and requirements of an offer?
• Do I know how I will handle the deposit, including how much it should be and who will hold onto it?

Put it this way. If you’re an electrician by trade, but you want to fix your leaky toilet, would you give it a try yourself? Perhaps. Would you be better off simply hiring a plumber for a couple hours and getting the job done quickly, efficiently and with less mess? Absolutely.

Apply this learning to selling your home.

2. Am I comfortable showing my home to strangers?

Selling your home comes with a great deal of emotion, and selling a house privately can be even more difficult. After all, this is a home you’ve likely built your life in; one where your children have grown up, or perhaps the first home yourself and your partner purchased together.

Are you comfortable staging your home and allowing strangers to walk through?

Better yet, are you comfortable having strangers in your home while you’re alone?

As you’re preparing your home for a sale, ask yourself – am I comfortable showing my home to buyers? 

3. Do I have the skills needed to negotiate a profitable private sale?

Negotiation is a skill – truly, it is – and the results of negotiation almost always pay off. In fact, on average FSBO homes sell for 13 per cent less than comparable agent-assisted sales.

That’s pretty significant. Although there is no rhyme or reason for these results, we’re fairly certain they are because of two factors: experience and removal of emotional baggage.

Experience is explanatory. Realtors work with home transactions each and every day. They live and breathe showings and offers.

Emotional baggage, on the other hand, requires an explanation.

The rule of thumb in negotiation tactics is to never get emotionally involved in the transaction. The moment you become involved, you are trading or negotiating based on a financial and emotional currency, no longer financial currency alone. This impacts your ability to successfully negotiate. The vast majority of us are emotionally connected to our homes, so how could we possibly negotiate on a level playing field?

As you’re determining whether or not you can sell your home privately, ask yourself – do I have the skill of negotiation with expertise behind me?

4. Can I be sure that I follow the Realtor’s Ethics Code?

Did you know that the Canadian Real Estate Association has a Realtor’s Ethics Code? The first code was approved in 1913 and has since been amended over the years to keep up with the changing marketplace.

The code and the law can be found here. It includes some key obligations that are mandated by law. All parties are required to follow this code when selling a property.

If you haven’t read the Realtor’s Ethics Code, make sure you’re well versed before selling a house privately.

5. Am I certain I’ll know when the sale is complete?

In real estate, paperwork equals protection; so how do you know when the sale is complete?

Within a typical real estate transaction, the buyer makes an offer to the seller and then leaves the offer “open for acceptance” for a short period of time (about 24 hours), during which time the seller (you) must decide whether or not to accept the offer.

Offers can be simple and straightforward, or complex and confusing.  Either way, once an agreement is reached the contract is binding, meaning no do-overs if you missed something or have second thoughts.

In a perfect world every real estate transaction would be quick and painless – accept the offer, sign the contract and get paid!

However, that’s not often the case.

It’s not uncommon for sellers to receive multiple or conditional offers, both of which require careful consideration to navigate ethically and correctly, and can quickly become overwhelming for an inexperienced seller.

At the very least private sellers should expect some back and forth before reaching a deal that both parties agree on, but the fun doesn’t end there. Once an offer is accepted and agreed on there are still a number of requirements that must be met before a sale is deemed “complete”, meaning a private sellers work is really just beginning.

The good news?

Even at this late stage in the process it’s not too late to enlist the help of a professional Realtor to help ensure your bases are covered. Working with a real estate agent also means that you’ll know exactly when the sale is complete. Actually complete.

Remember – if you’re interested in selling a house privately, it’s totally possible, but it’s not always the best idea for your property. In fact, a study found that Realtors even use their own colleagues (not themselves) when selling their home. Why? It’s more difficult to sell your home when you have emotional ties to the property, and it can impact the result of your listing.

Before embarking on the journey of selling a house privately, ask yourself the questions we’ve presented and determine if FSBO is best for you.