globeinvestor.com

News from The Globe and Mail

DAVID AKIN

Saturday, September 25, 2004

When Shaun and Kathy Shivers moved from Mississauga to Oakville, Ont., four years ago, it took just two days to sell their home.

They were happy about the speed of their sale but wondered why they had to pay $9,000 in commissions to the real estate broker that handled the transaction.

"The real estate agent wasn't even there for the sale. She was away for the weekend so a partner of hers that we'd never met came and did the close," Mrs. Shivers said.

"There was no advertising done," Mr. Shivers said. "The only thing we got for nine grand was the sign on the front lawn and the . . . listing. We found it very hard to justify that kind of money when we only met the realtor once. That was it. It was, thank you very much, and there's nine thousand bucks."

So this summer, when they moved from Oakville to a home just outside London, Ont., they decided to sell the Oakville property on their own, saving what they figured might have been more than $15,000 in commissions they would have paid a broker.

Each year, thousands of Canadian homeowners are doing what the Shivers did: Selling their own home without the services of a licensed real estate agent.

However, there are no reliable statistics yet on the number of home sales without a broker.

The Canadian Real Estate Association (CREA), the Ottawa-based group that represents the country's 70,000 real estate brokers, says it believes its members account for between 75 and 80 per cent of all resale transactions in Canada in a given year. Last year, that added up to more than 440,000 homes sold by a broker.

Conversely, that means there could be as many as 150,000 homes sold in Canada last year without the help of a broker.

The Shivers sale had a happy ending. They listed their Oakville home for just over $319,000 and sold it for $316,000. But this time, in one of the hottest real estate markets in the country, it took three weeks to sell their home.

"At various points, you do get nervous," Mrs. Shivers said.

The Shivers said the experience was made more nerve-wracking by real estate agents who tried to frighten them into signing up with a broker. Two or three would show up at each open house they held and would tell Mrs. Shivers, who conducted the open houses while Mr. Shivers took their two-year-old daughter out of the house, that they would never be able to sell on their own.

"We let them in," Mrs. Shivers said. "Some of them were not friendly. One guy told me we were bringing down the value of the homes in our area and that our neighbours wouldn't appreciate us listing it at that price."

One agent was driving by their home two or three times a week, presumably to see if it had sold, and called Mrs. Shivers several times over the sale period.

Mr. Shivers said they would get a call at least once a day from an agent claiming to represent a buyer that was interested in the property. The Shivers would arrange to meet with the agent but it would become quickly apparent that they had no buyer and instead were trying to sell their own services to win the Shivers' listing.

"They had nothing," Mr. Shivers said. "It was just to get in and then they'd throw their pitch at you."

The Shivers said one way brokers would try to scare them into signing up with them was by warning how complex and difficult the paperwork would be to close a sale. Mrs. Shivers, who handled the closing paperwork herself, said the agents were dead wrong. "It couldn't be more simple," she said.

As they would have with a broker-assisted transaction, the Shivers had a lawyer -- working for a flat fee --advising them on the transaction and reviewing their paperwork.

Shamir Bachir, a Montreal broker and president of CREA, said licensed realtors are bound by a code of ethics that should govern their behaviour when soliciting new business. "It's a strong code that that's there to promote professionalism and assist customers in selling their homes," he said.

Officially, CREA is taking a more positive approach than some of the realtors in the Shivers' neighbourhood to convince Canadians to use a brokerage. It is currently running some television commercials that extol the benefits of using a realtor.

"I would never dream of selling my house without a broker," said James McKellar, professor of real estate at York University's Schulich School of Business in Toronto. He said that while some do-it-yourselfers, particularly in a buoyant market, may be satisfied with the price they get on the sale of a home, some studies he's seen suggest that, by and large, most sellers will not do as well without a broker as those who use one.

"There's no question that a good broker is worth every penny you pay them."

Even though Mr. McKellar firmly believes in using a broker to sell a home, he says that decision, too, carries some risk. "There's no substitute for a good broker although there's all sorts of substitutes for a bad broker," he said.

Homeowners must carefully research and screen potential brokers. The commission structure, he said, should also be a central part of that research and any negotiations with a broker.

Most real estate brokers ask for a commission of between 5 and 6 per cent of the sale price. That commission -- which is negotiable --is paid, in most cases, by the seller.

The single biggest factor in favour of using a broker is the Multiple Listing Service or MLS, a giant database of real estate listings that can only be accessed by agents who are members of CREA.

"The MLS was the big draw," Mr. Shivers said. "Without that, you lose the exposure to people who want to buy right then and there."

To market their home, do-it-yourselfers can choose from a growing number of companies that will assist homeowners for a flat fee.

The quality of the work these companies do can vary widely, experts say, putting the onus on the seller, once again, to do some homework.

The Shivers chose a two-year-old company called Private Real Estate Corp., based in Stoney Creek, Ont. They paid the group a flat fee and for that, received some lawn signs, a listing in a newspaper published and distributed by Private Real Estate, and a listing in the company's website. "The Internet is extremely important," said Bryan Lang, Private Real Estate's president. "Without the website, it would make it a lot more difficult to get people to the homes."

Private Real Estate belongs to the Canadian By Owner Network. This network provides on-line links to companies like Private Real Estate across Canada and in the United States.

Even with the assistance of these kinds of companies, though, homeowners who sell on their own should be prepared to do a considerable amount of work. The Shivers had the time to put into the project. Mr. Shivers is a high-school math teacher and, as the house was on the market for most of August, did not have to be in school and could spend more time at home. He said he figured he vacuumed the house daily for almost three weeks.

Mrs. Shivers, a training specialist, was on short-term disability leave as she neared the end of her pregnancy and, as a result, was able to be at home, as well, to do more work to sell the house.

The couple went through material that provided tips and advice on marketing a home. Mr. Shivers looked over the historical sales data for homes in their area. That information is normally available for anyone to review at a local land registry office or a local library.

"The price you pay is not monetary. The price you pay is time. And you have to have patience. And there is a fair amount of worrying," Mr. Shivers said. "But if you go into this with a solid plan and a good product, it should sell."

David Akin is a CTV correspondent and a contributing writer to The Globe and Mail.

© The Globe and Mail