As Canadaâ€™s real estate market continues to defy popular predictions of a slowdown, privately-transacted sales are keeping pace as homeowners look for ways to pocket the fees usually collected by real estate agents.
Many owners are now choosing to bypass real estate agents to sell their homes themselves in order to save the average six per cent commission most agents charge. On a $250,000 home, this can amount to $15,000, a hefty sum for most Canadians.
Savvy buyers are also seeking out FSBO homes, realizing they can usually get a better bargain without the brokerâ€™s fee padding the sales price.
The increasing popularity of â€œFor Sale by Ownerâ€ or FSBO, as it is known, is understandably unwelcome by real estate brokers, who see themselves squeezed out by those who take advantage of the internet to market their homes on their own. Many brokers tout dire warnings of slower sales and lower prices than those obtained by â€˜qualified professionalsâ€™.
Indeed, real estate agents stand a lot to lose from FSBO. In fact, they stand to lose exactly what sellers stand to gain: a lot of money. So it is little wonder they wish to discourage those who are considering just how much it might pay to sidestep their services.
But despite the statistics widely quoted on all sides of the divide, the truth is that until recently almost no one was tracking FSBO numbers, except the FSBO websites themselves. So assessing just how many people go the FSBO route, and how many are successful at it, has been tricky.
However, a recent study in Madison, Wisconsin by a group of university professors set out to do just that, comparing FSBO with traditional realtor-brokered sales using the â€˜Multiple Listing Serviceâ€™ or MLS.
On average, they found FSBO sales had a higher net gain for the owner, thanks to the elimination of the brokerage fee, while broker-assisted sales were generally faster than private home sales.
But a recent study by Alliance and Leicester in the UK found FSBO sales were much faster, finding sales by private home-sellers using websites to market their properties took an average two months, while broker-assisted sales took an average three months.
Michael Lawrence, president of PropertySold.ca, a Canadian FSBO website, maintains the time to sale depends on all the same variables, no matter who is doing the selling.
â€œLocation, pricing of the home, and interest rates can all impact time to sell. But the people that do more research, market their property in as many places as possible and price their home properly can sell their home as quickly as an agent can,â€ he says.
He does, however, concede some homeowners who need to sell fast may prefer to go with a real estate broker.
â€œSome may feel the time pressure outweighs the chance to learn and be successful with FSBO,â€ says Mr. Lawrence.
â€œThere are great real estate agents who can sell your property fast, of course — but you have to pay.â€
As for the homeowners who are willing to do the hard work and the buyers who see FSBO as offering better-priced homes, he says, their numbers are growing rapidly.
â€œOur websiteâ€™s traffic has increased exponentially in the last year,â€ says Mr. Lawrence. Their website, now in just its third year of operation, sees more than 5000 unique visitors each day, while property listings have doubled in the last year.
â€œOur clients have sold $118 million dollars in real estate using our tools and services, so we know it works.â€
Mr. Lawrence is quick to point out the success of the system depends a great deal on how much the homeowner is willing to put in, stressing their services do not replace those of a real estate agent.
â€œThe answer lies with the client, not the system. You canâ€™t really equate our website with a real estate agent,â€ he cautions. â€œWhen using our services the person becomes their own real estate agent, while we are an exposure vehicle as well as a tools provider.â€
Canada is not the only place where FSBO is a hot ticket. In the US, the slumping real estate market has many homeowners choosing FSBO to maximize their equity â€“ by taking the brokerâ€™s commission out of the equation; they can price their homes to sell without losing a chunk of their profit in the bargain.
FSBO is catching on in the UK as well, with about 90 websites jostling for the attention of private sellers, who now represent 8% of the sellersâ€™ market, up from 5% last year.