Pros and cons of private selling laid bare
Category Industry
Selling and moving home is associated with a menagerie of emotion and costs, both foreseen and unforeseen. With many variables in the process, sellers need to make a few informed decisions and need to consider all their options based on what will work best for them in their unique situation.
When reflecting on this Antonie Goosen, Principal and Owner of Meridian Realty, says that sellers should be informed enough to decide on what would suit their situation best when considering selling through an agent or selling privately.
Droeks Malan, Stellenbosch iAgent at Meridian Realty says that many agents do not like to discuss the pros and cons of selling through an agent versus selling privately. While he is a strong advocate of selling through an agent, he says, "That is not to say that private selling has never worked. There are instances where it is successful!"
Market conditions conducive to private sales:
Malan says the number one instance where a private sale can work is where you have what he calls a "soft sell" situation. "For instance, if someone you know personally has show interest in buying your property and has asked you to inform them when you intend on selling or if you have a tenant in your property who would like first option to buy, the sale may be easy," he says.
Malan says, "Other instance (conducive to selling privately), is if you are in a very strong, forgiving sellers' market, where buyers are falling over their feet to buy property. Demand is higher than supply and despite any mistakes you could make, the momentum of the market can push you through the door (to conclude a sale)."
Goosen agrees and says a "soft sell" and a forgiving market are not always the case and an inexperienced seller can potentially end up in a difficult legal situation and this is where an agent's skills start to shine through. Goosen says the current market is fraught with economic pressures and many buyers are tightening their belts and astutely considering buying property.
Malan says, "You (sellers) must ask yourself; Do you have the skills and equipment easily on hand to facilitate a smooth sale?"
Virtual shopping necessitates stand out listings:
Malan lists several skills that agents might possess in tougher markets that an individual selling privately might not have. Firstly, he mentions an agent's database and knowledge of potential buyers in the market. This includes knowing buyers' requirements, area preference as well as price range. "An agent can bring serious buyers to the table quickly, by matching buyer needs to what a property has to offer," he says. Those considering selling privately must therefor afford themselves more time to conclude the sale process.
Virtual shopping and, in some cases, even buying, are now the norm. Property Portals are the go to for buyers and the way a property is presented virtually is of the utmost importance. Malan stresses the importance of professional photography, drone videos and virtual tours to ensure properties stand out. This applies more so as you move up the property price ladder, with some international sales concluded purely virtually in this market. Malan also mentions the importance of succinct and professional copywriting that will entice buyers to look at a property. This includes a catchy caption and an appealing and accurate description of the house within property portal parameters.
Goosen agrees and says, "Your virtual listing needs to stand out and the added touch of professional photography and videography can attract more potential buyers. If you are skilled in this field, then this will stand you in good stead. Many private sellers do not have a database of potential buyers so their listing must stand out both visually and in description."
Getting the price right:
Private sellers might arrive at a price for their property based on purchasing a report from Lightstone, looking at properties for sale on property portals and arriving at an average figure from there, says Malan.
However, arriving at the best price often requires experience in the market and knowledge of actual properties in the area. Agents typically possess this experience through years of working in an area and knowledge of what the interior and exterior of previously sold houses are like as well as the trajectory of sales in the area.
"Private sellers must do their homework to arrive at the most competitive price for their property," says Goosen. "This is not impossible," he says, "But things like location, safety, redone bathrooms and kitchens and general upkeep, must be considered and compared between properties in the area".
Divergent needs:
Malan points out that there is an inherent tension between the buyer and seller, each wishing to advance or their own needs and wants. This is natural, as each party wants to get the best deal out of the sale. Malan says, even though he is an estate agent by trade, when he sold his own properties, he opted to use an agent to facilitate the process. He points out that some people considering selling privately might be put off by having to deal with tension, drive negotiations and possibly deal with conflict.
Goosen elaborates by saying that, "The private seller wants to save commission. The buyer, on the other hand, will be cognisant that the seller is saving commission and might, want to pay a lower price for the property and possibly less than what it is worth."
Malan says, "So you've got the buyer that wants to be discounted on a private sale, and you've got the seller that wants to gain more out of a private sale. And that's where you get that clash of expectations that makes the negotiation process very difficult."
Transfer of ownership:
Malan highlights that knowledge of the transfer process is also of the utmost importance from sale to the actual transfer of ownership. "Is there a bond, for example? Here we (agents) connect to a bond originator and connect with the buyer and monitor the process," he explains.
Typically, the seller should appoint the conveyancer (according to common law). If a knowledgeable estate agent is involved this will be pointed out to the seller. The buyer doesn't usually get a say in who the transfer attorney is, unless agreed otherwise. This could be the case in a private sale, where a buyer wants to use their own transfer attorney. The danger here is also that the transfer attorney could be a friend or colleague of the buyer and will favour the buyer in the transaction.
"If you're selling privately, you generally don't have access to a bond originator and transfer attorney, at best the buyer is going to have his own bond originator, and the seller will not have tight control over the process," Malan points out.
Regulatory bodies and consumer protection:
A private seller is also not registered with the Property Practitioners Regulatory Authority (PPRA), so a buyer is not protected by the body as they would be if they dealt with an estate agent who is registered with the PPRA. Private sellers may also not be compelled to adhere to any of the Consumer Protection Laws or to do property condition reports, like a registered agent is required by law to do. So, a buyer will not have the protection that they normally would have when dealing with an agent.
A long-term relationship:
"A private seller typically has no interest in a long term relationship with a buyer, like an agent would have. They just want to get the best possible price for their property and are acting in their own interest." says Malan.
He concedes, "Yes, agents work in the interests of a seller but the agent is also governed by rules and regulations. And, as an agent, someone who bought property through me will in turn become a seller. Nurturing good relationships means continual business and a good reputation in the market. This is something all agents want to achieve to ensure their long term livelihood."
Goosen concludes by saying that market conditions must be right for private sales. He continues by saying that private sellers must be willing to take on a certain amount of risk in the process, to save on agent commission. "Experience in selling will certainly help those wanting to sell privately," he adds. He adds there are some industry disruptors in the market at the moment who are assisting with property listings and the transfer process, with varying success. "It really is up to the seller what their preference would be and how much time and effort they have to dedicate to the process," he says.
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Author: Meridian Realty
