Do You Need A Real Estate Agent to Sell Your Home?

Any real estate agent will tell you the service he or she provides is worth every penny.  But in a hot real estate market like Toronto, do you really need one?

According to the latest figures from the Toronto Real Estate Board, the average home sells in just 20 days, so you can see why some home owners might question the value of paying a full service agent.

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The cost of a full service real estate agent

The average home price in the Greater Toronto Area was $577,898 in April – up 10 percent from the same time last year.  A standard commission of 5 percent – 2.5 percent each to the listing agent and the selling agent – would set you back close to $29,000 in fees.

That’s why many would-be home sellers are drawn to the growing number of discount realtor options and do-it-yourself kits to help sell their home and save on fees.  The trouble is that many real estate agents disregard properties when they know they’ll get paid nothing, or much less than usual.

According to Robert McLister, founder of RateSpy.com, there’s no question that a bias exists against the discounters.  He’s had first-hand experience, having sold his home in nine days after listing with a full service agent.  Prior to that, his property stagnated on the market for several months when he tried listing on his own.

“We had a dozen showings in the first few days after re-listing with a commission, but just one showing in five months when we used a $1,000 flat-fee MLS listing service,” said Mr. McLister.

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Some points to keep in mind:  This bias may not apply to agents who build a minimum fee into their buyer representation agreements (since they know they’ll earn something, even if the vendor isn’t offering a commission).

Mr. McLister says that not all discount brokerages pay less than the going rate to cooperating agents. Some charge only 1 percent or a flat fee to list, but still pay 2.5 percent to the buyer’s agent.

Commission-free services

You can list your home for as little as $800 using a service like ComFree, which includes an MLS listing, a lawn sign, high quality photos, coaching and support from a licensed realtor.  Since 1997, over 130,000 Canadians have sold their homes through ComFree.

Another alternative to a traditional real estate agent is a service like PropertyGuys.com.  In 15 years they’ve helped nearly 60,000 Canadian home sellers save on real estate commissions.

For $2,600 you’ll get your property listed on MLS, a professional appraiser will help you with your pricing strategy, and a lawyer can assist you through the process.

Let’s say you are an active buyer and have enlisted the help of a real estate agent to help you find a home.  Most home buyers today will scan the MLS listings on Realtor.ca and let their agent know which homes they’d like to visit.

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If one happened to be listed with a discount brokerage, what are the odds your realtor will steer you away from it?  Not likely if they want to keep their customer happy – most agents will grin and bear it.

But if a buyer happened to be looking in a city that he or she is not familiar with and had asked an agent to come up with a list of houses to show, there’s a good chance any homes listed with a discounter won’t make the cut.

Consider a discount broker

The sweet spot might lie in a service like One Percent Realty.  Founded in British Columbia in 1999, One Percent Realty is a full service brokerage that charges the same $6,900 commission whether your home sells for $200,000 or $600,000.

For homes prices over $600,000, they charge a commission rate of 1 percent, plus $900 for the same full services.

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Darren Chamish, a broker at One Percent Realty, says that while there’s a perception other realtors won’t show your home if it’s listed with a discount realtor, the fact is that over 80 percent of One Percent Realty’s listing sales were sold by cooperating realtors representing the buyer.

Of the $6,900 commission, $3,000 is paid to the buyer’s agent.  That’s much less than they’re used to, but worth it if it means a happy client gets the home they wanted.

Mr. Chamish says that bias hasn’t hurt business.  In its third year of operation in Ontario, One Percent has over 50 agents and handles more than 100 offers per month.  On average, its listings sit on the market for 25 days – five days longer than the Toronto average – but the savings on real estate commissions can more than make up for the wait.


2 Responses to Do You Need A Real Estate Agent to Sell Your Home?

  1. I’ve heard houses that list without a full service agent tend to get offers lower than they normally would. Apparently people know that the seller isn’t paying a full commission so they assume it’s acceptable to make a lower offer. I don’t have any experience with this so I can’t confirm if it’s true but it does make sense. On the other hand, real estate fees can add up fast and can slowly eat away at any equity built up in the home.

  2. I think a lot of these decisions also depend on the market that you operate in. I am far removed from town on a day-to-day basis and our market has a lot of out of town buyers, which makes real estate agents attractive to buyers.
    The only biases that I hear of are related to in-fighting and very occasionally due to the commission amount. When it is a commission thing, it is a combination of a certain developer breeding illwill and also not offering much commission.

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