The hidden risks of selling privately

December 12, 2020
can a buyer pull out of an unconditional contract

Buying and selling property can be quite a complex and daunting process. So it’s surprising when some homeowners decide to undertake this huge task themselves without the help of a real estate agent.

While there are no doubt some benefits to this approach, sellers must be aware of the downsides of coordinating their own sale and weigh up the pros and cons carefully before making their decision.

Here are the advantages and disadvantages of selling privately versus selling with a real estate agent.

Selling privately

The main drawcard for this approach is the potential for cost-savings. When selling through an agent, the sales agent will collect a commission from the sale, often in the thousands of dollars. Say for instance there is a two per cent commission and the property sells for $400,000 this will result in an $8,000 commission paid to the agent, which owners may see as better in their own pocket.

Other benefits include the opportunity to deal with potential buyers face to face – which sellers don’t often get to do through an agent – and the flexibility to arrange appointments and inspections at their own convenience instead of having to fit in with an agent’s schedule.

But there are quite a few disadvantages to this approach, which often override the positives.

Firstly, a private seller with no prior real estate experience will have limited knowledge of the process of selling a property and the complex legislation that goes with it. While they might be able to research what’s involved, they still lack the benefit of past experience and put themselves at risk of non-compliance with real estate legislation.

Furthermore, a private seller may not have the skills to correctly appraise a property. This may see them overprice the property and deter buyers, or under-price it and receive a lower than market value sale price.  The seller may also lack the skills to successfully negotiate the sale, which can be a stressful and intense process.

There are also hidden costs in a private sale, which a seller may not have accounted for.

Private sellers don’t have the same marketing resources as an agent and will need to pay advertising costs out of their own pocket. There’s also complex paperwork and documentation that needs to be completed – such as a contract of sale – which may require them to pay a solicitor to prepare.

Finally, it’s also a huge impact on lifestyle and sellers should not underestimate the time, work and effort involved in selling a property. For agents this is a full time job, so it can be a big task for a private seller to coordinate a sale in their spare time.

Selling with an agent

The main downsides of this approach are the commission fees and the work that goes into finding an agent the seller can trust to get them a good sale.

However, working with an agent brings a number of advantages and usually results in a better outcome and a higher sale price.

Firstly, an agent will have a thorough knowledge of the market and the skills required to correctly appraise a property. They also know how to adjust the pricing strategy if the home is not selling, based on previous experience of what has and has not worked in that market.

It’s an agent’s job to know the ins and outs of the sale process and take this stress and hassle away from the seller. They will also take the responsibility for coordinating the necessary paperwork and documentation.

A major benefit is that an agent can attract a wider range of buyers to the property and increase competition. Most agents will have access to multiple advertising portals and understand how to effectively market a property to get the most interest.

Furthermore, agents typically have a wider network of contacts so can reach more buyers. This is not just through advertising sites but from their own company databases and potential buyers they’ve come in contact with at other properties.

Looking from a buyer’s point of view, it’s generally considered more trustworthy to buy through a reputable real estate agent as opposed to a private seller. Buying a home is a significant and costly decision and buyers don’t want to get caught out with a potentially dodgy seller. Therefore this added element of trust should open the property up to a wider pool of potential buyers.

Finally, it’s always beneficial to have an outside opinion when selling a home. Often, the owner can be too close to the property to see any issues that might turn buyers away. An agent will be able to provide valuable advice on how to get the property ready for sale and what can be improved to raise the sale price.

If you’re looking for a suitable platform to sell your property, you can look no further than Sohoapp.

Soho
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