November 27, 2007, 7:40 am

My Favourite Money Mistake

by: The Financial Blogger    Category: Miscellaneous,Properties
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The funniest part about taking your time and energy managing your personal finance is that you become more inclined to make money mistakes. The idea behind all this is fairly simple; the more you know about finance, the more you want to make things by yourself. Sometimes it works, sometimes it doesn’t. Today’s post is in related to Canadian Capitalist 3rd year anniversary contest where he was asking bloggers about their money mistakes. I thought it could be interesting to write about how I dilapidated ten thousand dollars a few years ago. Yes, I lost ten thousand loonies in a single decision at the age of 24 when I decided to sell my house with a real estate agent.
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house cash

Selling in a hurry

It all started when my wife and I fell in love with a house in our neighbourhood. We visited the property and made an offer the very same day (and we got late for our Easter supper with my parents!). The next morning, we put our own property for sale in the hope of a fast sale. We put it in the newspaper, on the internet and even tried the TV! After three weeks, we had about five visits and several phone calls but no offer yet. The owner of the house we wanted to buy we still having visits and phone calls as we only made a conditional offer. After a month, even though we already spent about $1,000 in ads, we decided to accelerate the process and give the mandate to a real estate agent. Big mistake!

No results whatsoever

I wrote in my introduction that I have a tendency of doing things myself when it comes down to finance. Well I should have done it in this case! We kept having the same rate of visits per week and most of the time, the potential buyers were coming from other agents, not even ours! In the end, it took him four additional months to sell our property and he convinced us to drop our asking price by a couple of thousands in order to make sure we don’t scare the people away.

How much does it cost?

Since he “sold” my property, I had to pay him a pretty fat commission. 5% of the selling price were making 10K that I could have keep for myself. Instead, the agent simply created additional miscommunication between all parties. In result of this communication breakdown, I had to pay an additional $600 in interest penalty to the buyers. This fee could have been easily avoided if communication were related to each party properly. As we have no right (or so every agent is telling us) to contact the other party without going through any real estate agent, it just creates a big mess.

The reason why it is my favourite money mistake is because even if I loss 10K out of this story, I learned a lot from it:

#1 The use of a real estate agent does not accelerate of your property

#2 They cost way too much for the service they provide

#3 They add more confusion and miscommunication as the buy and the seller can not talk to each other directly

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Comments

Hey FB: Thanks for the entry and thanks for this post. I’ll collect all the links and publish them next week. Cheers!

Hey, this is so interesting because #1 I share your assessment of realtors and #2 this is what I think of banks also (cost too much for what they provide, confuse rather than simplify, etc).

The real estate industry is a “fake” monopoly that are trying to keep their low-value services relevent by controlling as many pieces of the transaction as possible and making it too hard for individuals to succeed. That said, I’ve found a couple of good realtors, one of which is in Montreal! Check out how Etienne Mellor helped me buy a house for a quick description. As you advocate for bankers, professional and competent realtors ARE worth their pay. However, 90% of them are not.

I actually liked my RE agent, she sold our condo way above our minimum, and found the condo AND house we actually liked (she has good taste, and sells million-dollar-homes, just not ours @@)

It’s hit and miss just like used car dealers or many other stereotypes
If your property is in the hot area, it’ll get sold without anybody (say Toronto)
Otherwise it’s hard to say

I dropped by because I’m reading all the entries in Canadian Capitalist’s birthday contest. I would have to disagree with comment #3 above, in that I don’t think it’s hit or miss. While it’s possible for a dedicated, knowledgeable owner to sell his/her own house I believe the RIGHT realtor will do it quicker and easier than the average person.

There are millions of realtors. You have to carefully pick the right one for your situation. I know several realtors and recognize the names of the most prolific ones in the city. I did choose one I knew, but in large part because I had seen him hold an open house on the weekend and the following week the condo or house would be sold, not once but week after week after week!

He took great pics of the place, featured it on his site as well as getting it up on mls for a few days, held ONE open house and it sold that day! We only had to be out of the house for 2 hours, a ton of people came through all at once and it was a done deal. A realtor like that is worth every penny of the commission.

Do your research before you settle on an agent. Look to see who does a lot of business in your area and check out their web sites. Interview several of them if necessary, and choose the best. Ask for feedback after the showings and take any suggestions to heart.

MY suggestions? Clear all clutter. Clean like you have obsessive-compulsive disorder. Depersonalize (kid art off the fridge, family photos away, etc.). Do all the little jobs before you start showings (put the closet door back on its track, fix the handle on the toilet, etc.). Remember that a lot of buyers are visiting multiple places in a day. You want to stand out in a good way, rather than having them refer to your home as the “place that smelled like a cat box” or the “one with the nasty kitchen” because that’s not going to get you on their “short list”!

by: The Financial Blogger | November 27th, 2007 (9:26 pm)

CR, am I mistaking or you pay a big $0 when you buy through an agent? I guess you are right when you are saying that he worth the price you paid for 😉

In my experience, I only paid when I sold my house. While my agent did nothing I could not have done myself to sell it (and he is selling a lot of properties in my area btw), he did a really good job to find a house that suits our need. While he did a great job for something I did not have to pay for it!

NSB, Shevy, I don’t think putting a property on the internet, taking a few pictures worth 10K to 20K. I personally help my parent sell their house (they live in a small village of 1,500 people in a remote area) and it took only a month to sell. All that for a big $500 instead of 17K (the price they would have to pay for a RE agent). So if you think it worth it, good for you. I prefer to keep my thousand of dollars in my pockets!

If I may also point out many real estate agents will negotiate their rate with you. If you have two properties that they may make a commission on then you have the ability to talk them down. If you “shop” around you can find a better fit with a real estate agent… and a better deal.

Like many sales industries real estate is one where the Pareto principle applies. The top 20% of agents make 80% of the money and usually for good reason. The ones who get the job done right consistently are the ones that get repeat business.

There are many services that help you sell your own property nowadays too. Check out http://www.comfree.com – for about $700 they will list your property on an online listing service and give you all of the paperwork, legal advice, etc. you need to sell your home yourself. This is a fast expanding segment of the real estate market. The traditional real estate percentage is quickly becoming a thing of the past.

Couldn’t agree more.