How to Save Money as a Consumer in the Purchase and Sale of Real Estate

Real estate is big business! Canadians pay an estimated $8 billion in commissions every year. There are over 96,000 real estate agents in Canada - real estate agents outnumber family doctors in Canada almost three to one.

Today one in four homeowners sell privately and that number is growing every year. The big real estate firms have a lot to lose if they don't slow the number of people realizing they can sell their homes themselves.

In an attempt to slow the number of homeowners selling their own homes the real estate associations have launched television campaigns and educated their agents to employ a strategy of fear, uncertainty and doubt. The strategy is designed to terrify you and make you so uncomfortable selling your own home that you agree to pay an agent a commission.

Odds are that your province or state's Realtor association is one of the most influential lobbying entities in the local government. Most recently, the Canadian government introduced the "Anti-Competition" legislation enacting that the MLS® now has to let private sellers list on teh MLS® for a flat fee. Also in the USA a number of state legislatures passed a minimum broker services act that cripples a real estate broker's ability to offer discount real estate services. While Realtor associations at both the national and province/state levels fight for higher commissions and greater responsibility in the transfer of real property-there still remains several effective ways for the consumer to save thousands of dollars in the purchase and sale of real estate:

1. Having a Realtor Represent you is not "free" just because the seller pays the commission.
   
   Your Realtor that represents you will typically be paid 3 percent from the seller's broker out of the standard 6 percent fee for listing and selling the property. This is up to 3 percent that you can get off the purchase of your new home, if you use a discount buyer's broker and choose to do some of the work yourself. Usually, this means that you will have to go to a site like Realtor.com or MLS® and contact the listing agents to see homes in which you are interested. After you have one picked out, most buyer's brokers will be glad to take one percent for just doing the contract and negotiation and rebate you 2 percent back. Just for frame of reference, 2% on a $250,000 home is a savings of $5,000!


2. Most Listing Realtors do little to nothing to sell your home.
   
   The basic things that a Realtor does to sell your home is place the property on the local MLS, put a sign out front, and have some open houses. Placing the home on the local MLS allows consumers to search homes on public sites like MLS®, homes.com and Realtor.com as well as allowing buyer's brokers to view the home on MLS. 9 out of 10 times the consumer sites and buyer's broker's produce the prospects that buy the homes. The secret is you don't have to pay Realtors 6 percent to place the home on MLS-there are lots of Realtors out there that will place the home on MLS and all the consumer sites for around $300.00 and let the owner do all the work.


3. Why is the price always 6 percent to sell your home?
   
   Frankly, we do not know, but the price you pay to sell your home is not etched in stone as many Realtors would like you to think. In fact, the price to list a home is always negotiable, and you should negotiate. Many years ago, several Texas Realtors were charged by Federal agencies for collusion and price fixing when a group of Realtors met to agree not to reduce their listing fees to less than 6 percent.


4. An agent will get you more money than if you try and sell by owner?
   
   Homeowners who sell privately net on average 6% more gross profit when they sell their own home. They also avoid the taxes they would have paid on top of an agent's commission - yes you pay tax on that too.


5. You won't sell your home by yourself. You need an agent to sell in this market?
   
   Depending on who you believe, 10% to 25% of all homes are sold without a real estate agent. There's no dispute that the percentage of sellers selling their own homes has been growing every year. The price of property is more important to buyers than who is selling it.


6. Your home will sell faster if you list with a real estate agent?
   
   Houses sold privately sell on average three weeks sooner than houses sold by a real estate agent. It's easier to be price competitive when you don't have to pay an agent commission.


7. Only an agent can determine a realistic asking price?
   
   Real estate appraisers offer the most comprehensive appraisal services, and they have no personal interest in the value of your home. They cost a fraction of an agent's commission.


8. An agent protects you from legal issues?
   
   Real estate agents are not lawyers. Lawyers protect you from legal pitfalls. Lawyers are cheaper than agents and you'll use one to close the deal even if you do use an agent. Why pay for both? Your lawyer's job is to protect you. The documents agents prepare are filled with clauses to protect their commission fees.