November is national Financial Literacy Month. The goal is to protect and educate consumers about financial services and the theme for this year is Financial Literacy Across Generations. This is the second in a series of Ask Joe columns that will touch on real estate decisions buyers and sellers face at different times in their life.
I can’t decide whether I should sell my home myself or hire a real estate agent. What are the pros and cons of each?
When the time comes to put your home on the market, it can be tempting to handle the transaction yourself, referred to as a FSBO — For Sale By Owner. After all, who knows your home better than you?
Keep in mind the significant time and effort it takes to sell a home. Going the FSBO route means you’ll be responsible for everything — setting the right price, advertising your property, making yourself available to let interested buyers in to take a look, reviewing offers, negotiating terms and managing the paperwork once an agreement is reached. Yes, you’ll save the money that would have been paid to a real estate professional, but think about what your time is worth, and your level of knowledge and expertise in handling such a transaction. Also, be aware that commission rates with real estate agents are negotiable.
Even if you don’t use a real estate professional to help you sell your home, you may still end up paying commission — to the buyer’s representative. That’s because in a traditional sale, the commission for both representatives is typically paid by the seller. As a seller in a FSBO scenario, it’s your choice whether you agree to pay a buyer representative’s commission. If you don’t, the buyer would have to pay and may see it as a disincentive to purchasing your home.
One of the challenges you will face is getting the attention of homebuyers, who largely turn to the Multiple Listing Service to identify available homes that meet their needs. Only registered real estate professionals have the ability to post listings on MLS. Some real estate brokerages now offer a “mere posting” service, where your property is listed on MLS for a fee, but leaves you responsible for all other facets of the transaction.
There are significant benefits to working with a registered real estate agent, including valuable consumer protection. The There are three pillars of that protection are knowledge, professional standards and insurance.
Registered real estate professionals must complete ongoing, mandatory continuing education. That means they’ll be fully prepared to help you navigate the selling process, including determining how best to market and show your home to buyers, deciphering paperwork and negotiating on price and terms.
Your real estate professional is also required to uphold professional standards that emphasize fairness, honesty and integrity, and follow rules and regulations protecting consumers. In the rare instance that something goes wrong and you want to complain, RECO will investigate and take steps to hold the real estate professional accountable for their actions.
The final pillar of protection, insurance, has two facets. First, deposit insurance provides the buyer with peace of mind knowing their payment will be held in trust and insured against fraud, insolvency or misappropriation. Second, real estate professionals must hold errors and omissions insurance to pay for damages and legal costs arising from claims related to a real estate transaction.
If you have the know-how and the time, you can sell your own home. Working with a real estate professional, however, can save you time and effort, and affords you protections that don’t exist in the FSBO scenario.
Check out RECO’s Financial Literacy interactive graphic at
reco.on.ca/buyer/publications.html
Join the discussion on Twitter at #FLM2013.
Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He oversees and enforces all rules governing real estate professionals in Ontario. Email questions to askjoe@reco.on.ca . Find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps .
