Last year 465,251 homes were sold through MLS at an average price of $320,333. Owned by CREA, MLS aggregates listings from Canada’s 101 local real estate boards. Only registered real estate brokers can get key information such as past selling prices, and only these professionals can use the the site to connect buyers and sellers. Housing information is freely available in other countries, such as the UK, where the property market is massive, and anyone can find out how much their neighbours sold their house for, or how much a prospective purchase was sold for in the past, with a simple search on the internet. It provides transparency and empowers consumers to do alot of their own research, to help them make informed decisions, without relying on a real estate agent, who has access to “secret” information, and you have pay 5% of your property value, to have them share this with you.

The federal Competition Bureau, is now interested in this, and is questioning whether consumers be forced to use a real estate agent to represent them throughout the entire buying/selling process.

One of the largest for sale by owner websites in Canada, is Propertyguys.com, which enables buyers and sellers to connect through their website, with the onlly costs being a small charge for the house owner to list their property on the website. This is usually for around $500 and is an amazing deal if you compare this to $15,000 in commissions that would be due based on a sale of a $300K house at 5% commission.

The Globe and Mail had a live blog session with Walter Melanson, the VP of Propertyguys.com today, and here were some of the key comments:

Question: People have no limitations on selling their own homes – if they want to sell their homes – they can – if they want to use a real estate sales rep. they can – why all the big fuss?

PG: That’s exactly our sentiment. You are right – It’s all about options. I think the fuss is all about what the market perceives their options are. Given the state of the industry it doesn’t seem like many options exist.

G&M:
Some people think private sellers are at a disadvantage because the homes can’t be posted on the MLS, which is owned by the Canadian Real Estate Association. If you want your home on there (that’s where it’ll get the most eyeballs), you need to employ and agent through the whole process. Some feel that isn’t fair, that you should be able to post your listing there and still handle most of the details yourself.

Question: Aside from the obvious $ saved are there more benefits to both parties that are not so obvious?

PG: We don’t feel that Private Sellers are at a disadvantage at all. Our feel is that the internet levels the playing field. Selling a house is all about letting people know its for sale. We’ve been successfully doing that!

Question: Are there any legal risks or pitfalls that a real estate agent will help to prevent a seller or buyer from encountering? Can a lawyer fill this gap at a much cheaper cost?

PG: Our system weighs heavily on interaction between lawyer and seller. Most people are totally comfortable with that. We feel that a lawyer is best equipped to handle situations surrounding mitigation of fraud or any other legal concerns.

Question: I have heard of people having deals not go through because CMHC has denied the deal because it was being handled as a private sale. Can you explain what that situation is?

PG:No. We don’t see that mortgage insurers are predjudice on types of deals. They are simply mitigating risk on a property by property basis. In our case – we help parties supply all relevant information for CMHC to input into their system.

Question: What is the average difference in time on the market for a private sale vs. one with an agent? ?

PG:When we examine data, we see that private sellers (given proper mix of Price/Product/Exposure) sell on average sooner.

‘For Sale by Owner’.

Drive around many neighbourhoods and you’ll see these signs mixed in with the more traditional smiling faces of the local real estate agents.

The private sale of homes is becoming more common these days, as technological advances allow buyers different avenues into your home instead of having to visit a real estate agent’s office to find out what’s available in the community.

As the Internet and its capabilities expand, so do the opportunities for online browsing of real estate. This has resulted in a different avenue for people to sell their home privately, thus avoiding real estate fees/commission of about 5% of the purchase price of their home ($200,000 house x 5% commission = $10,000 fee).

Many private online real estate websites have sprung up in recent years, with one figure showing that about 25% of homes in Canada (and 50% in Quebec!) are to be sold privately. One such website, ByTheOwner.com, boasts no agents and no commissions, and offers three tiers of advertising for your home on the site, which range from $325 to $675 (in Toronto – prices vary depending on location), with more options available to sellers as the costs rise. The site, along with the majority of its competitors, offers centralized searches for a buyer’s city of interest, and photo galleries for showcasing homes. It also features a customer service team and a consultant to be at your disposal to assist you in selling your home privately.

ByTheOwner.com boasts 600,000 visitors each month, and 6,500 sold homes in 2008, up from about 5,000 in 2007. The average turnaround time is about 85 days, according to the website.

Selling privately seems like a great way to put more money in your pocket when the sold sign goes up. In our current economic crisis, people selling their homes can’t expect the same profits that were common-place a couple of years ago, so selling privately is one way to maximize the dollars created from the sale of your home.

Aside from websites like ByTheOwner.com, other ways to advertise your home are classified sections in local newspapers, free classified websites that are becoming increasingly popular like Kijiji, or even online auction houses like eBay. Although there are costs involved with most of these, with proper planning and budgeting, you can make these options work for you.

But visibility will always be an issue with the private sale. Unless someone happens to drive by your home and see the ‘For Sale by Owner’ sign in your front window, or is web savvy enough to seek out these private sale websites, your home could be overlooked by many potential buyers. For many, a living, breathing real estate agent is the most comfortable option for them when making such a significant purchase. Agents know everything that’s available in the community, the ins and outs of each house they show, the art of negotiation, and the process of closing the deal. That’s why three-quarters of homes in Canada are currently sold by real estate agents.

They also feature on the most used website – MLS.ca – which is where the majority of homes in any city or town are listed. It is the first destination for many home buyers when looking online because it offers the widest variety of properties, and the contact numbers of the agents in charge of moving the home.

Old habits die hard, and even as people of all ages become more web savvy and use the Internet as a tool for shopping for a new home, MLS.ca and the agents listed on it, continue to lead the way.

The pros to selling privately

* Those amounts are estimates
* Chart courtesy ByTheOwner.com

Cons to private sales