David McDonald says buying his first home in the latter half of 2021 was stressful — though maybe not for the usual reasons.
Even though he was working with a Realtor he trusted, he didn’t like that he couldn’t speak directly to the people selling their homes around North Bay, Ont., or that he’d repeatedly lost to other house-hunters in blind bids.
That’s partly why, when a friend forwarded a private listing in the area, he and his girlfriend jumped at the chance to see it.
“Being able to meet someone, look at the house and make an offer and have a handshake agreement right off the bat … that was, like, so much more of a transparent, clear process that I definitely found pleasing,” said McDonald, 38.
He closed the deal without his Realtor, which McDonald estimates saved both sides roughly $15,000 in commissions.
And while that might be reason enough for some to entertain the idea, industry insiders warn that going without a Realtor comes with risks.
“It was difficult to know where to find information about private sales,” said McDonald.
For most people, the buying and selling of any property involves a Realtor or other agent. But there are those who go it alone — and ways to get help.
Rob Reay runs For Sale By Owner, a flat-fee platform for private-home sales where people can post and browse listings and get a breakdown of how such transactions work.
He says private sales might be particularly beneficial to people now, in light of inflation, a slowing housing market and steep interest rates. They just might not know where to look.
“Letting the consumers know that they have this option has not been easy for us,” Reay told CBC News.
The most popular tools available to buyers and sellers are controlled by the Canadian Real Estate Association (CREA) or local real estate boards and associations — including the Realtor.ca site and its Multiple Listing Service (MLS).
CREA represents more than 160,000 licensed brokers, agents and salespeople through over 65 boards and associations in the country. Only its members are allowed to use the trademarked word “Realtor” in Canada and are subject to a “high standard of professional service and a strict code of ethics” according to its website. It declined to be interviewed for this story.
Even Reay has to use some of CREA’s tools. About 70 per cent of his customers opt to list their homes on MLS, even if they intend to sell privately.
While specific numbers are hard to come by, all indications suggest that private sales make up a tiny sliver of overall real estate deals in Canada. For example, For Sale By Owner recently had some 116 listings in all of Ontario, while some mid-sized cities in the province showed more than 1,000 on MLS.
Reay says interest in private sales has increased as technology has allowed people to browse the market themselves, and then accelerated once the COVID-19 pandemic started.
“There’s a couple of people who are not winning,” with private sales, he said. “I don’t need to say who they are.
“But the two winners are the buyers and the sellers — and they are both very happy at the end of the day.”
The other professionals most often involved in real estate deals are, of course, lawyers.
In a private sale, they can still co-ordinate funds and oversee the transfer of property, says Daniel MacAulay, a partner at McLeod Law in Calgary who specializes in real estate.
But, he warns, they can’t provide any insight on the value of a property, on market trends or a contract’s conditions — all things agents tend to do before the contract gets to the lawyer.
Lawyers are largely reliable on what clients present, MacAulay says, meaning it’s up to clients to make sure they’ve done their due diligence.
“Having a good Realtor and having a good lawyer, that’s a good situation for everyone involved,” said MacAulay.
He especially doesn’t recommend private sales for first-time buyers.
For Dalle Morrison, a Toronto-area broker for Bosley Real Estate, the thought of a buyer or seller being unrepresented makes her uneasy.
“It’s like someone walking around without any insurance, and I hope people wouldn’t do that,” she said.
She says good real estate agents can make the process easier for their clients by helping them net more when they sell and conduct thorough research on the properties they want to buy.
“You don’t know if there could be something faulty with the house unless you get a home inspection done. You don’t know if a big train station is about to be moved in next door. You don’t know if the land is sinking. You just don’t know what you don’t know,” Morrison said.
Realtors also have access to a wide network of fellow agents that can increase traction on a given property, Morrison says, which could be the difference between getting a few eyeballs on a listing to getting dozens of offers on a house.
“Having boots on the ground and knowing what’s going on … is a big difference from just doing it yourself,” she said.
While commissions may be a pain point for some, she says they aren’t all pocketed by the same person. In Ontario, typically five per cent of the sale is split evenly between the seller and the buyer’s agent, with a portion of that going toward their individual brokerages.
On top of that, making a sale is never guaranteed, and typically only top-performing agents get frequent sales. Many don’t make a sale at all in a given year, she says.
“It’s not just as simple as saying, ‘Oh, well, you guys are overpaid,'” Morrison said.
Ben Black, a software engineer in Squamish, BC, bought a house privately for north of $800,000 with his partner in 2021. He says he tried working with an agent but found their price recommendations to be higher than what he thought the houses were worth.
“It’s like the default to go with the Realtor, but I don’t think it should be,” said Black, 31.
While he understands Realtors can put in a lot of work for each sale and can be handy in smaller markets, Black says he still can’t get behind a percentage-based commission model. He’s confident in contracting a lawyer or a notary to oversee the transaction while he does the research himself.
That’s what he says he’s doing with his second property. He hopes to sell it with the help of a flat-fee real estate service and says he’s more likely to sell it to someone who also wants to buy privately.
“It’s … easier to bypass that whole process,” said Black.