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Do private sales save you money?

Many a vendor has begrudged the fees charged by agents to sell their home. If the sale process all goes smoothly it can seem like easy money to those not working at the coalface. The reality can be quite different.

In a boom market like 2020/2021 it was certainly a feast for many agents. Provided they could get a listing, there were often multiple buyers queueing up to buy within a matter of days. Open homes were packed, auction rooms were overflowing, and it was celebrations all round. Even if vendor expectations were a bit high, the market soon caught up and a sale was concluded.

In more typical market conditions, however, an agent will be completing many appraisals, only some of which will turn into listings. Of those that do, often the vendors expectations can be too high to attract buyer interest, and week after week of open homes takes up the agent’s precious family time, fuel in their car, and a level of distain ensues from their frustrated vendor. Some of these properties will never sell as they perhaps withdrawn from the market or else the vendor elects to change to another agent in hope of a better result. Balancing their work week, the agent also has numerous enquiries from buyers, some demanding considerable time and attention that leads nowhere. Other buyers are just bored and looking for a way to spend their Sunday browsing houses for sale. Again, the agent is not getting paid for this.

So is it all champagne and Ferraris? No. And as to whether you should always use an agent - again I would also say no. It depends on the property and the skills and willingness of the vendor to engage face to face with prospective buyers.

It’s also worth noting that it’s unfair to compare an agent commission of up to 4% of the sale price with zero cost to sell privately. At a minimum, to do a reasonable job, you will need to pay for a professional photographer, copywriter, sign writer, Trademe advertising campaign, and additional time with your solicitor in preparing sale & purchase agreements. Where the tricky part comes in is holding viewings, answering more technical questions, and negotiating any offers. And it’s these parts where a good agent earns their money.

My observations of those selling privately is the common view that they will get the same sale price as with an agent but save tens of thousands in commission. Whereas purchasers immediately take one look and slice the same amount off their offer as “they’re saving on commission anyway”. So whether the vendor or purchaser are correct here probably depends on the state of the market as to which end of the scale the final result falls. And did the private seller really get maximum value? How did they price it?

I do notice that in a quieter market, many buyers claim to be put off making offers to private sellers as they are uncomfortable negotiating firmly with them - whereas having an agent in the middle depersonalises it. Furthermore, an agent’s involvement gives a level of protection to the purchaser about representations of the property which might not otherwise apply.

In summary I would say while you don’t always need an agent, a good one is worth every penny, and the savings by selling privately aren’t necessarily as great as you think.

Till next time,

Scott Morison, Registered Valuer

NB: those the public typically refer to as an ‘agent’ are in fact salespeople under the Real Estate Agents Act 2008. The agent is the one holding an agency license and most likely supervising the real estate office. For readability here however, I’ll refer to salespeople as agents.