This popular article talks about the pros and cons of FSBO, discount services of Property Guys, Fair Square and other discount brokerages. Originally published in 2021, it has been updated for 2023.
In a sellers market or hot market, FSBO services such as Property Guys or other low real estate commission services promise real estate savings, the cheapest realtor commission and MLS exposure.
But is it really true?
Like the old adage: quality, service and price. Pick two.
Sometimes if you’re looking for the fastest way to sell a house in Guelph, you think about a DIY model such as Property Guys or others. Really, how hard is it to sell a house? Houses for sale in Guelph have been selling really quickly- list it, buyers buy it up and you’re done! Right?
But let’s start there. That’s the wrong question to ask.
The real question that sellers should be asking:
In a sellers market, instead of asking “what’s the cheapest real estate commission?”, a home seller should be asking “what strategy gets me the most money in my pocket when the deal is done?”.
Isn’t that the real goal here?
Discount services like Property Guys and a handful of others use the hook of lower costs to list your house as a way to get you to work with them. And in fairness to them, it’s an effective marketing strategy that works for some people.
Consider the marketing campaigns of two of the big FSBO (for sale by owner) firms, Purple Bricks and Property Guys. You’d think that all of the Guelph real estate market is going to a low commission, high service savings bonanza based on their ads.
But that’s not even remotely close to reality. This isn’t a Property Brothers TV show where the owners sell their own homes without any hassle. Selling a house is a complicated, legal process that you shouldn’t take lightly.
Selling your own home by yourself is not nearly as popular as it may appear
In 2020, Property Guys in Guelph made up just over 1% of the total dollar volume in Guelph real estate listings. In 2022, that number has actually shrunk to under 1% of total sales. Although Property Guys continues to be a viable alternative, more that 99% of sellers in Guelph choose another option.
Many do-it yourself listing service models only list your home for sale in their local board, not even within Guelph. This is because they are franchise owners with a head office somewhere else. This is a whole other issue for those selling within the Guelph market. You do get your property online, but maybe not the way (or where) you expected- be sure to ask about this.
Would you willingly list your home with someone who doesn’t even list your house for sale in Guelph? We’re not sure that home sellers in Guelph are even aware of this.
How much can I save by selling a home by using a discount service like Property Guys?
Once you dig into the actual savings, we think you’ll be surprised. First, let’s clarify how commission works in a real estate transaction.
In a real estate transaction, the seller pays the commission to the listing agent (2.5%), as well as the buyers agent who brings the successful buyer to the home (2.5%). The total commission paid by the seller is 5% + HST. This commission is paid when the house is closed with the lawyer on the closing day from the sale proceeds of the home.
Not before.
Some discount services only charge a flat fee or fixed rate to list your home. In this case, they don’t have your best interest in mind, as they have no “skin in the game” or risk on the outcome. Don’t sell your house? Doesn’t matter because you’ve already paid them!
A realtors commission is an incentive to sell the home- if the home doesn’t sell, they don’t get paid.
for sale by owner sign
Do FSBO and discount brokerage home sales sell for as much as if the house was listed through a traditional real estate agent?
No. And we have the data to back it up.
On average in 2020, sales in Guelph made through discount services sold for 2% less than the rest of the market. This 2% equates to $14,000 less based on the average price of a house in Guelph. “Discount services” are any brokerage that give you a commission discount to sell your house with them. This includes Property Guys, Modern Solutions, 1% listing brokerages and many others.
So, on the average sale price in Guelph in 2020 those who listed through a discount service saved $17,500 in listing commission and gave up $14,000 on sale price. But remember that you have to pay for the marketing service and materials of Property Guys – let’s estimate $3000. It’s not a super hot great deal like you may think.
So, in this scenario:
Add $17,500 in savings in listing commission fees (2.5% at Guelph market average of $750,000)
Deduct $14,000 loss, as discount services generated 2% less return than market average
Deduct $3000 as discount service fee for materials
Net gain: $500
Not factored into this is the value of your time. Is $500 worth your time?
Of course, these numbers are not actuals and vary on individual situations. However the point is that the overall low real estate commission savings are not necessarily “saving thousands in commission” as marketed.
In fact, it’s possible that it will give you a worse result than listing with a Realtor.
In fact, the fast legalese in the former Purplebricks radio ads says something to the effect of “actual savings don’t include co-operating (buyers agent) commission”.
For sale by owner (FSBO) services meet the needs of some consumers who want to take control of the process of selling a home- and that’s just fine with us! But if you want the full, professional service of a Realtor, we’re here.
Why wouldn’t a home seller just use a traditional real estate agent instead of Property Guys or another discount service?
We believe in providing potential clients with all the information and allowing them to form their own conclusions based on facts. The reality is that it costs more money to work with a traditional real estate agent. But, the outcome is also potentially much greater- both with a great experience and a greater sale price.
We’re sure you’ve heard “its costs money to make money” and selling a home is no different. Real estate agents have access to tools that the average person doesn’t use. Realtors also have the skills to negotiate on your behalf- which done correctly could be a substantial advantage.
Sometimes, potential sellers don’t have a real estate agent that they trust to either help them sell their existing home or find a new home. So, they call up a company such as Property Guys to help them. There is nothing wrong with that at all! But it doesn’t cost anything to get the advice of a real estate agent so that you have a comparison.
The other potential issue with listing with a low real estate commission service is that the market may perceive that you, as the seller, are hiding something. Although it’s unlikely that’s actually the case, it can be viewed that way.
What services does a traditional real estate agent offer?
The role of a real estate agent has changed over the past 10 years. Home buyers and sellers have more information available to them (like HouseSigma) and realtors have had to change their marketing of homes. To get an amazing result for your home, here are some of the things we do:
Professional photos, video and floorplans
Professional photos, floorplans and video have become a key component to a Realtors listing. Serious buyers are making the decision to view a home based on the photos and videos they can see. If your photos are not professional, you are going to lose a potential buyer.
Staging is key
All our listings are professionally staged in some way. This doesn’t mean moving trucks of furniture, but it means a professional stager will provide insights and ideas that make your photos shine. These are not services that you get from services such as FairSquare or Property Guys and it can be a huge benefit!
Understanding the buyer is more important than ever
Where is a buyer of your home likely coming from? In Guelph, the past number of years have been dominated by Greater Toronto area buyers. What is your Realtor doing to reach them? We’re members of both the Guelph and Toronto real estate boards, unlike most local real estate agents.
Media marketing
We don’t just list a house. We market it, with the goal that everyone knows about the home, sometimes before it hits the market. That way, buyers have time to get their finances, pre-inspections or anything else in order.
The goal is to make it as easy for a buyer to make a competitive offer as possible. Marketing could include local radio, print, targeted social media, Canada Post mailers and much more!
And lastly, since many of these low real estate commission services are not actually based in Guelph they don’t know the neighbourhoods. It’s important to have local knowledge of location (related: using neighbourhood realtor maps). Local realtors know the best areas, have local relationships and know Guelph real estate market data (watch our Guelph real estate videos here)
All of the above are included in our commission rate. There are no additional add ons, upsells or surprise costs!
Do you negotiate and guide me through offers?
That’s our favourite part! And it’s the most important part in our opinion.
With almost all sellers holding offers these days, it can get quite competitive. Our goal is to negotiate the best possible sale price for our clients, while ensuring they’re protected in the contract they accept.
Many times, real estate agents will not negotiate on their clients behalf, which we believe is a key component. Some people believe that “negotiation” is an unethical term.
It’s not.
And, it’s not always related to money. It could be negotiating to get the best overall terms, inclusions, closing dates and much more. They key that you need a team on your side that is comfortable with negotiating for you.
With a rapidly changing real estate market in Guelph today, it’s not as easy as listing your house. Pricing strategies can literally cost you thousands of dollars if you get it wrong. This alone could offset any potential savings of a low real estate commission service.
And we get results! We’re Guelph real estate agents that get results. We’ve sold every home we’ve ever listed, to our clients satisfaction!
Will you meet with us without obligation to work with you?
Beth and Ryan Waller are Guelph real estate agents working Home Group Realty. We’ll show you what we offer and if this meets your needs, we’d love the opportunity to work with you.
Source: GDAR single family residential data, Jan 1-Dec 31, 2020 and Jan 1- Nov 30, 2022
