Why Private Sale?
More and more Australians are realising that you don’t need a real estate agent to sell your property. Not only may the sale of the property be less stressful and take less time the vendor may end up getting a better price than they would have achieved using a real estate agent. And we are talking about the gross sale price not the price net of the real estate agent’s commission which is normally around 3% and can reduce a homeowner’s remaining equity by tens of thousands of dollars.
How can a simple homeowner get a better price than a real estate professional who must have undertaken years of training to achieve their professional status?
Firstly to become a real estate agent requires little more than a TAFE course. To suggest that real estate agents are professionals the same as lawyers or doctors is like suggesting that the prop from your son’s under eight’s rugby team could play for the Wallabies next weekend. Some have described the exams that real estate agents are required to sit as impossible to fail while others have said that the only pre requisite is a pulse.
Secondly a home owner has a vested interest in achieving the best price possible. Ah but so has a real estate agent I hear you say, “they work on a commission basis”. It is true that many traditional real estate agents do work on commission (there are some offering a different business model where they receive a flat fee). If we stop to think about the sums involved it becomes clear that the goal for the agent is to make sure that the property is sold not to maximise the price. For example a vendor has listed their property for sale through a real estate agent for $600,000. Lets say that the home owner has an outstanding mortgage of $500,000. So if the sale price is achieved the homeowner will have $82,000 to put as a deposit towards their next property ($100,000 less $18,000 real estate agent commission assuming a standard 3% rate). Let us assume that the $600,000 asking price for the property is reasonable and comparable to similar properties in the area that have sold recently. Now a buyer comes along and offers $575,000, the buyer knows that the property is worth more but cannot get a larger mortgage so the $575,000 really is their best offer. If the agent can persuade the owner to accept the offer of $575,000 the real estate agent will still make $17,250. The difference between the $18,000 and $17,250 is not enough to dissuade the agent from pushing the offer (and the agent has an obligation to pass any offer on to the owner). From the real estate agent’s perspective it is better to make the sale take slightly reduced commission and look to pick up a new listing. The last thing that the agent will want to do is keep the property on her books for another three moths in the home of getting another $750 in commission. But for the homeowner the difference is huge! Instead of a $82,000 deposit the owner will have a $57,750 deposit a massive 30% lower. Unless the homeowner is in the unfortunate position of being a distressed sale (foreclosure, divorce etc) they may well want to wait another three months and realise their property’s true value.
The process where an agent acquires a listing (persuades the owner to list their property for sale with the real estate agent) at a high price and then begins to use their undeniable powers of persuasion to try and get the vendor to accept a lower price is known as conditioning and is one of the reasons that real estate agents have such a bad reputation