Do-it-yourself home sales

Gamoff went back to propertyguys.com and last spring he succeeded in landing a buyer, who agreed to pay $1,264,000. The catch: the purchaser brought along a realtor, which resulted in Gamoff paying a 3% commission. "What could I do? Say no? You take that into consideration when you're negotiating. If someone came in with cash, I would have lowered my price a little more," says Gamoff, who saved an estimated $25,000 in commission fees. "All in all, I would recommend the process and I have, to several people."

Given the high cost of real estate in many Canadian communities, it's not surprising that people like the Gamoffs go it alone, at least in part, in order to have a say in the sales process and put more money in their pockets. (In the U.S., between 1997 and 2001, between 13% and 18% of all home sales, depending on the year, were "for-sale-by-owners" or FSBOs, according to the Washington, D.C.-based National Association of Realtors. Data on Canadian home-owner sales are unavailable).

In the same way that people have relied on their own investment skills to use discount brokers, homeowners have turned to organizations such as propertyguys.com. Over the last 15 years, it has developed a network of 100 franchise representatives in every province, with the exception of Quebec.

According to Walter Melanson, a Moncton, N.B.-based principal and director of partnerships, the company has a 30% market share in communities such as Whitehorse, N.W.T., Kentville-Wolfville, N.S., and Charlottetown, P.E.I. "It seems like an 'outlier' type of thing to do, but in some areas of the country it's become a common thing," says Melanson, adding that about 57,000 homeowners have used his firm.

Propertyguys.com offers a package service that starts with a listing on its web service for $399, and gradually builds up with a "for sale" sign, and professional appraisal and legal services to negotiate a sale. "You can spend as little as $500, or as much as $4,000," says Melanson. "But the median fee in the greater Toronto area is about $2,000. It all depends on how robust your solution is."

What does it take to be a successful vendor? "You don't have to be a salesman," says Melanson. "We're wrapping people in so many systems and tools that the average Joe can efficiently use our system. But the number one attribute is self-confidence. In fact, we meet with folks beforehand to make sure they have that self-confidence. The last thing we want is to work with the wrong profile and they don't give the system a fair chance."

Although homeowners are responsible for showing their homes, they can rely on a call-answering service to screen all inquiries, and to seek legal advice in negotiating the final sale. In addition, about 50% of clients end up on the MLS, or multiple listing service, which ensures wider access to the market. "The do-it-yourself thing which people used to think costs only $10, does cost more than that. That's true. But you are getting way more than what you might expect. Our innovation has been to take the real-estate transaction, dissect it, and figure out a way to do it cheaper."

But some critics argue that in spite of being able to bypass the traditional realtor route, selling your own home is fraught with risks and, in end, the savings may prove to be illusory. Doug Gray, a long-time former real-estate lawyer in Vancouver, and author of numerous books, including Making Money in Real Estate, says that unsuspecting home-sellers may encounter several pitfalls.

"One of the challenges is the legal paperwork, which could constitute a huge legal risk for the lay person," says Gray. "Many things could go wrong. Someone may present an offer with conditions that are unreasonable or unrealistic, and lock your property down for an indefinite period."

The key issue may be the timeline, in which the purchase is subject to financing, or home inspection. "If they are smart strategists they will tie you down for an extended period -- without putting down a good-faith deposit," says Gray, adding that many people ignore all the possibilities of things going wrong, and, inevitably, they pay for it.

The second major issue is that selling your own home is akin to riding an emotional roller-coaster and falling victim to hardball negotiation tactics, which can be very stressful. "Prospective buyers will say, 'here's the assessed value, you're overpricing it, here's what you're saving on commissions, and here's what we'll offer you.' It's going to be a heck of a lot less than what people are asking. It's a dog-eat-dog world and very competitive marketplace," says Gray.

As for netting more by selling your own home, Gray scoffs at the promise of doing better on your own. "It's just an illusion," says Gray. "First, the market may shift, and you may not fully market the house, the way a realtor might. Second, in terms of building awareness and hitting all potential targets your marketing may not be optimal and the number of responses will be commensurately less. And, third, if you are emotionally involved and do not have the sales skills of a broker, that will make a huge difference in getting someone to commit at a price that you want."

Add all this up, says Gray, and the chances of getting your asking price of $500,000, for instance, in a balanced market are remote. "You might get $450,000, and save $13,000 in commissions. But have you? You've lost the $50,000 you might have made, minus the $13,000 -- or $37,000. This scenario plays itself out all the time." In short, you would have to sell your home at $487,000 to match a realtor sale that will cost about $13,000 in fees.

But home-owners like Steve Gamoff argue that even though he had to pay an agent in the end, he urges others to follow the do-it-yourself route. "You have to do your homework, of course, and be realistic about the value of your home, and be flexible time-wise, when people want to visit," says Gamoff, adding that many people will traipse through your house before one makes an offer.

But besides saving a pile of money, Gamoff has a sense of accomplishment. "You don't need an over-priced real-estate agent to sell your home. It was fine to pay someone 5% or 6% in commission back in the day when homes sold for $300,000. But it's ridiculous when homes cost $1 million."