If you are thinking of selling your house the most important question is – Sell privately or list with an agent?
There are Pros and Cons for both.
Listing with Agent
- Agent will guide you through the process.
Selling a house is a major transaction and you may not be comfortable dealing with all the necessary paperwork. Agents will handle that.
- Agent may attract more people.
Good agents have a database of prospective buyers and will let them know when your house comes on the market.
- Agent should negotiate for you
Agents are paid by you to negotiate the best price for your house. And the best ones do.
- Agents charge a massive commission
In Auckland the usual standard is around 4% of the final sale price + GST. For a $400,000 house that makes $18,400 down the drain just in the commission – that’s quite a lot for holding a few open homes and filling in a few papers.
- Marketing contributions
As if the commission wasn’t big enough the agent will want you to contribute to marketing your house – pay for professional photography, for an ad in newspaper, for a custom street sign, etc. If you don’t contribute you’ll probably only get a basic listing on TradeMe with horrible photos taken by agent’s iPhone and a basic street sign without a photo of your house and that’s it. Expect between $500 and $3000 in these “marketing contributions”.
- Lock-in contract
Typically the agent makes you sign an exclusive listing for 3 months. During that time you can’t change the agent and you can’t sell privately. That limits your options and even if the agent turns out to be a disappointment or if you get an irresistible private offer you can’t do much.
- Beware of bad agents
The best agents will negotiate with the buyer to get you the best price. The average ones will negotiate with you to accept whatever offer they got from the buyer. That’s not what you pay them for and it may cost you a lot! The agent is only paid when he sells your house and they usually only get half of the commission, the other half is for the agency. And by the way the bad agents won’t even get an offer. Can you tell them apart?
Now check these numbers out – if your house is sold for $400k the agent gets $9200. If he negotiates hard with the buyer and pushes the price up to $420k he gets $9660. That’s only $440 more for perhaps a few weeks of negotiating and for running the risk of losing the buyer. No wonder many agents choose to instead push you hard to accept $400k – for them it’s not a big difference but for you though it’s $20,000 loss!
Don’t take us wrong – there are good agents and some can do miracles. Just be very careful who you choose!
- No commission
That’s probably the biggest reason why you think of a private sale isn’t it?
- You are in control
You decide what you write on TradeMe, you run the Open Homes, you negotiate with the prospective buyers. Who knows the house better than anyone and who can therefore sell its positives the best? You indeed.
- You are motivated
As shown above there is not much motivation for the agent to squeeze a few thousands more from the buyer. Completely different story when you can keep all the extra money though.
- Talking to buyers
Running Open Homes, answering detailed questions, calling back the visitors, convincing them to make an offer, negotiating the price and conditions – unless you are a sales person by nature you may find it daunting and difficult.
- Complex paperwork
Once you find a prospective buyer you will need an “Agreement for Sale and Purchase of Real Estate”, also known as “S&P agreement”. You should order a few blank ones before the first Open Home from ADLS – 2-pack is for $50, 10-pack is for $100. Filling the form for the first time may be confusing – if neither you nor the buyer know how to do that. You may want to leave it to your solicitor for a peace of mind.
- Marketing costs
Essentially the more you can spend the better chances you’ve got. You can spend as little as $400 for just a plain TradeMe listing all the way up to $3000 to $5000 or even more for a comprehensive marketing campaign. We’ve got a whole page about Preparing and Marketing your house for sale.
- Legal fees
Each party in the transaction needs a solicitor – for the seller the cost is usually under $1000. You should know who your solicitor is before the first Open Home.
Selling a house privately may take longer than selling with an agent. Don’t forget to factor in your time required to manage the process and the possibly longer time on the market before deciding whether a private sale is for you. However if the sale succeeds you can save a lot of money on commission.
Sale to a private buyer / property investor
Property investment companies like PatMat Property Solutions regularly buy houses. We generally renovate them and re-sell or keep them as rentals. First of all – though – we buy the houses. We are not agents and we won’t sell your house for you but we can buy it from you.
- We pay the full price
We don’t charge any fees or commissions and we may even contribute to your solicitor’s expenses! If we agree on $500,000 purchase price you will get the full $500,000. No deductions, no hidden fees, no commission.
- No marketing expenses
We don’t need flashy photos or home staging to assess your property. Call us before you start spending your marketing budget.
- Hassle-free transaction
We’ve got all the forms and know how to fill them. We will guide you through the process just like the agent would – but for free!
- Prompt and flexible dealing
We are flexible and can meet you on the weekends or evenings. Once the contract is signed we can generally settle within two weeks if you wish or can wait up to a several months if that suits you better.
- Sell it now, move out later
Very attractive option especially for people who are moving overseas. We can buy your house now, you get the money, repay the mortgage, sort out any debts and still stay living in the house until your departure overseas. That’s the ultimate convenience and peace of mind that you won’t get anywhere else.
- Any condition, do-up houses welcome
We will not require you to fix the broken window and remove the old sofa from the garage. In fact you can leave anything you no longer need in the house and we will get rid of it free of charge. That’s another popular proposition to people moving overseas or downsizing.
- Less marketing
That’s true – we don’t want you to spend your marketing budget and then have the house on the market for weeks. We will promptly offer a competitive price and you can keep your marketing money, save on mortgage repayments, etc.
- We only want houses with potential
We don’t buy every single house we are offered. If you’re selling an immaculate, newly renovated house you will be better off doing a private sale or listing with an agent.
On the other hand – if you’re selling a difficult property, neglected do-up, deceased estate or any other less then immaculate property with a potential we want to hear from you.
- Investors want discounts?
Not necessarily. We have recently made a private offer on a property in West Auckland at $265k that the vendor rejected. Subsequently they listed with an agent and sold it weeks later for $275k. In the meantime they had to pay the mortgage on an empty house and in the end paid legal fees and some $13k in agent’s commission. Had they accepted our offer they would have been at least $5k better off.
The bottom line is – call us first and see what we can offer. There’s no obligation and nothing to lose. You can list with an agent right after you meet with us if you wish. But not the other way around – see the Lock-in contract section above!