The Saskatoon Region Association of Realtors has reported that house prices in the Saskatoon Region fell by an average of 2.2 percent during the last quarter of 2017, and all indications right now are that prices could slide even further in the coming months.
For sellers, that means that they should seriously consider selling privately, especially if they are selling a home that they purchased when prices were higher in the past 8 or 9 years. The reason is that the Real Estate Commission on the sale of a home purchased during the housing prices boom could leave sellers with little or no equity in the sale of that same home.
Example: A buyer buys a home in 2010 for $400,000, with a 10 percent, or $40,000 downpayment. As shown below, by 2018, with a mortgage rate of 3 percent, the home owner will have a remaining balance on their mortgage of $260,000. If that same home sells now for $350,000, that would leave the seller with $90,000 of equity to put into their next home.
But if the seller sells for the same price with a Real Estate Agent, the typical Real Estate Commission would be $14,430. (Based on 6 % on the 1st $100,000 of the sale, 4 % on the 2nd $100,000, and 2 % on everything above that, plus GST & PST)
That would leave the home seller with $75,570 worth of equity, and it would mean that the agents involved in the sale would have taken about 17 percent of the home seller’s equity.
If the home seller bought the same home with the same conditions in 2015 for $400,000, and is selling now for $350,000 because of falling prices, they would only have about $31,000 in equity in the home. The Real Estate Fees in that situation would amount to almost 46 percent of the home seller’s equity.
A lot of people are in situations where they can afford to use a Real Estate Agent to help sell their home, and a lot of people are in a situation where they need to use a Real Estate Agent to sell their homes, but there are no laws requiring people to use a Real Estate Agent, and there are benefits to buying and selling privately.
If you are selling on your own, you are in control of the process. You get to set the asking price, you get to show your home to potential buyers, present it’s best features and answer questions directly, you decide if and when you hold open houses, or where you advertise your sale, you get to negotiate directly with the buyer, and you get to keep all of your hard-earned equity once the sale is complete.
If you are buying on your own, again, you are in control of the process. You decide which properties you want to see, you get to meet the seller and ask them directly about the features of their home. You negotiate directly with the seller, and you know that the full purchase price you agree on is going to the seller, and that you can do the same when it is time for you to sell.
With prices dropping, it might be something more people will want to consider, and maybe 2018 will be the year of buying and selling privately!