Selling your home - a personal perspective: 1. Method of sale
Recently we have completed a complex, emotionally charged, time consuming and potentially life-changing process - we have moved house!
Much like 80,000 other people this year, we have sold our existing house and bought a new house to call our home. However unlike the vast majority of these other buyers and sellers I have an insight and knowledge of the industry, and the property market that gives me somewhat of a unique perspective of the process. A process I am keen to share, providing some observations and insight, now that we have successfully completed the move.
I decided to wait until we had finally completed the process before writing what I intend to be 4 separate articles which break the process down into what I see as critical components (i) the decision around the method of sale - agent or private sale, then (ii) choosing an agent (iii) the marketing and finally (iv) the completed sale.
I will be completely up-front at the start and declare that the process was highly satisfactory. Not only that, but the experience has, I am pleased to report (and to the pleasure I am sure of 10,000+ real estate agents) significantly changed my views, presumptions and appreciation of real estate agents.
In selling our house we followed a path trodden by over 90% of people selling their home. We appointed a licensed real estate agent, who marketed the home and undertook to facilitate the process with consummate professionalism and delivered for us a result which met our expectation.
We paid a market rate commission which in the cold light of day is a large amount of money, however whichever way I look at it, the outcome is the most important thing - we sold our house without undue stress. We were therefore able to move on to our new home in a timely manner and naturally get on with our lives.
The starting point to this whole process was the decision around the Method of Sale - the 1st chapter:
Method of sale
Deciding to move house is not something that comes to you in the middle of the night as a bolt from the blue and drives you to call up a local agent the very next morning. Like most people we began thinking about moving around 8 months before we actually put the house on the market. I suspect that this time period, whilst a long time in absolute terms is neither uncommon, nor unrealistic. We wanted to ensure our house was in top condition before we started marketing it and we knew there was some work to be done, added to which we wanted time to check out the options for a new location and a new house.
With the house completed to our satisfaction earlier this year, we looked at the various options to the process of selling the house. In my mind, and with my experience, there were three valid options which I wanted to sit down and seriously consider with my partner.
1. We could undertake the whole process ourselves as a private sale or as the American’s love to call it a FSBO (For Sale By Owner). The attraction of FSBO is saving money. In NZ that saving of the fees of a licensed real estate agents run into the tens of thousands of dollars. This is a sum worthy of serious consideration.
2. We could experiment with a new model of real estate - using a licensed real estate for a fixed fee and a undertaking some of the work ourselves. This model lead by the innovative service of 200Square certainly appealed to me.
3. We could appoint a local licensed real estate agent. Make them accountable for the outcome of a successful sale and pay them a commission fee at a market rate.
Irrespective of which of these 3 options we chose, I knew for certain that there were two elements of the process that were not negotiable - we would use a professional photographer and we would market exclusively online.
A professional photographer would be engaged to undertake a complete photo portfolio of the property together with a set of floor plans - an absolute must in my opinion. When it comes to online marketing the listing on Trade Me Property was a must, together with premium featuring to ensure we stood out from amongst the other properties on the market. If we went with a licensed agent then coverage online would include Realestate.co.nz as a complementary platform.
So the first issue in preparing to put our house on the market was which of these three options we would choose.
Selling privately naturally has a significant attraction in financial terms, this coupled with its ability, through the use of Trade Me Property and a professional photographer to achieve exactly the same level of market impact, viewing and potential open home traffic as any licensed real estate agent, makes it a serious consideration for many. However the fact is that marketing your home and selling your home are as separate as buying the ingredients and serving a gourmet meal. There is so much more to the process required to bring people to the point of being able to make a decisions which eventuates in a sale and purchase contract being signed is subtle, hidden and challenging for the average person. I have gained an insight into this extensive process over the years I have worked with real estate and I can see just how complex and under-appreciated is the process of hand-holding that is required to get people to make a serious move to buying a property. It takes a certain type of personality to be at the same time persistent, forceful, cajoling, pleasant, empathetic and ultimately results-driven to get a successful sale. We can all identify a real estate agent. They stand out from the crowd. It is that personality type that makes them effective at what they do and the rest of us, pretty poor at trying to do their job!
So having decided not to go for a private sale, the simple question then was, the traditional model of real estate agent or the new innovative model? Stacking up the similarities and differences only makes the decision that much harder.
Traditional agents and innovative real estate companies such as 200Square both operate under the laws of the Real Estate Agents Act. Both services would be handled end-to-end by professional agents with many years of experience and success behind them. Both would be able to market the property as well as each other. Both would work to succeed and earn a fee / commission on successful sale.
The only difference is really that 200Square does not physically meet you at your house, they do not have a high street office in your suburb (not that makes any difference), they do not manage the open homes; they judge that is something you can do just as well or better, and if you want someone to do it for you then can arrange it. What they do better than any traditional agency is an online dashboard putting you in the driving seat as to the progress with the sale of your house, not only the data of online viewings but an insight into the lead management and the negotiation process.
Most striking of all though is the fact that they do not charge a commission based on a percentage of the selling price which for most agents amounts to around 3% plus GST. 200Square charges $4,500 - a flat fee irrespective of the value of your property.
That comparison creates a tough challenge. 200Square has a good track record, they have been operating for over 3 years and have sold many more houses in that time than the local real estate agent, right across the country - can’t be bad.
However at the end of the day when we as a couple sat down and weighed up the decision it came down to one factor.
When my wife asked me - putting aside the costs, could I in all good consciousness tell her that there wasn't any risk in using 200Square? - I could not. Not that there is any risk at all, they are a licensed real estate agent. The issue comes down to trust and like it or not - local agents sell local houses and in our area; nobody has used 200Square in our area and therefore that presents a risk. A risk which when it comes to selling your home becomes far more amplified than for many other decision.
The one thing which in my mind is bigger than anything else in the process of selling a property is reducing risk. That is it; and to be honest the cost of reducing that risk can be pretty high, but it is easy to justify it at the end of the day.
4. The sale!