In today’s stressful housing market, selling your home can seem difficult. Home sales aside, the list of things to do in preparation is massive. Generally, these tasks are done by a real estate agent. But, what do you do if you’re on a tighter budget and want to avoid a costly real estate agent? Selling your home privately is a separate method, especially with agent fees ranging between 3-6% of the home’s final selling price. On top of this, the home sellers cover commissions for both the seller and buyer’s agent. With this in mind, you may be curious about what it takes to sell your home privately. But is this the right route for you?
Can you sell/list your home privately in Ontario?
Yes! Many people in Ontario choose to sell their homes privately to avoid the costly fees that come with using a realtor. There are many ins and outs when it comes to selling your home privately, as well as many downsides if you are inexperienced. On top of this, there are many responsibilities.
Generally, even when selling your home privately, people choose to still be in contact with other sources of assistance. For one, you’ll still need a lawyer to finalize any sales legally. Websites such as FSBO listings can help those selling their home privately reach a wider audience. Technically, you can’t directly post your property on the MLS database without a real estate agent. However, it isn’t impossible to get your listing on there.
Many people will contact real estate brokerages to list their homes, a service known as a “Flat Fee MLS listing service.” It will cost you an upfront fee of about 5-6% of the agent commission. This is essentially the act of hiring a real estate agent to only post your home to MLS, as well as make any changes you request after posting. Unlike traditionally hiring a real estate agent, they won’t help with other services, like assisting in offers or finding buyers. Once a home is sold, you won’t be charged any real estate commissions.
Do you need a lawyer to sell your home privately?
Yes, it is important to get yourself an experienced lawyer when selling a home privately. At the end of the day, a contract is a legally binding document, even when done between two individuals privately. Issues can arise, no matter how much a seller and buyer have discussed specifics. Most issues in the world of real estate can be difficult for even the most experienced real estate seller. Due to this, any issues that arise can become litigious.
The amount of fees that a real estate lawyer may charge is influenced by various factors. These can include local regulations, the property’s location and value, and the transaction nature. Generally, these fees will range anywhere between $700 to $2,500. These fees will generally cover things, such as drafting and reviewing contracts, as well as resolving legal issue negotiations.
What are the pros of selling your home privately?
As mentioned above, the biggest reason one may choose to sell their home privately is to avoid pricey agent fees. A homeowner may be interested in taking responsibility for the home-selling process. This will include scheduling the showings, staging the home, and setting the price. The fees you will pay when using an agent will vary depending on the province you live in and the brokerage you use. Let’s assume a total commission of 5% is taken from your agent. This accounts for 2.5% of the living agent and 2.5% for the buyer’s agent.
According to the Toronto Real Estate Board, the average cost of a Toronto home is $1,136,280. Using this information, the person selling your home will pay $64,200 in fees that go toward agents. This is $28,407 to each agent with $7,386 in HST. Let’s face it, that is not a small amount of money! This is not taking into account other expenses when selling a home.
What are the downsides of selling your home privately?
Like any real estate venture, you’re going to find some drawbacks. Selling your home privately is no exception. Here are a few reasons you may want to use a real estate agent instead:
- The process is time-consuming. The work done behind the scenes by agents is massive. The process of answering calls, prepping your home, and answering any questions can take up your time. This is especially true if you also work full-time.
- There is a lot of negotiating. If you aren’t much of a negotiator, selling privately isn’t for you. Negotiating a deal with a buyer requires skill and expertise that not everybody has.
- There are legal risks involved. If you aren’t organized with paperwork, selling privately may not be for you. There are several legalities when it comes to selling your home and being truthful about its past. If you are not truthful, you could be taken to court for fraud.
- Finding buyers can be more difficult. Real estate agents have a plethora of relationships with other clients and agents. This expands your pool of buyers greatly. On top of this, you don’t want to waste your time with an unqualified buyer. If you lack experience, you may end up wasting time with a buyer who is either not serious or lacks the finances to purchase the property.
How to sell your home privately
1. Find any issues with the home
As mentioned above, you have a legal obligation to disclose any specific issues with the property you’re selling. This can include foundational or roof damage or the presence of mold or asbestos. When found, it is in your best interest to fix any issues to optimize the chance of your home selling.
2. Determine the price point you’d like to list your house at
This can be challenging without the help of a real estate agent, so it’s important to do your research. Find comparable homes in your neighbourhood that have sold recently and do some comparing. Pay attention to both the list price and the sale price, as well as how long it was on the market.
3. List your home on the market
Make sure you take flattering photos and write an enticing description. It’s important to list your home on as many sales platforms as possible. Don’t forget the “For Sale” sign on the lawn!
4. Manage your showings and offers
You are responsible for scheduling your showings and being present. If you are unable to, you can always hire someone to host the showings.
Congratulations, you have listed your home for sale privately. Now, you wait for the offers to come in. Once they do, you can decide whether to decline, accept, or counter-offer. When viewing offers, make sure to pay attention to if the buyer wants all inclusions. Discuss deposits and conditions, and most importantly, make sure a lawyer is there to help you review any paperwork sent by potential buyers.
Who pays the Land Transfer Tax in Ontario?
When you purchase any type of home or land in Canada outside of Alberta or Saskatchewan, you are subject to pay a land transfer tax. This is always paid by the buyer of the property; a seller will never pay. The buyer’s lawyer will generally arrange for land transfer taxes to be paid once the deed of the new home is transferred to your name. The formula for how much you will pay is as follows:
- 0.5% of the value of the property up to and including $55,000
- 1% of the value which exceeds $55,000 up to and including $250,000
- 1.5% of the value which exceeds $250,000 up to and including $400,000
- 2% of the value between $400,000 and $2,000,000
- 2.5% for amounts exceeding $2,000,000, where the land contains one or two single-family residences
If you are located in Toronto, you can expect to pay more with the Toronto Land Transfer Tax on top of the original Land Transfer Tax. This can be calculated as follows:
- 0.5% of the first $55,000
- 1% of the value between $55,000-$250,000
- 1.5% of the value between $250,000 to $400,000
- 2% of the value between $400,000-$2,000,000
- 2.5% of the value between $2,000,000-$3,000,000
- 3.5% of the value between $3,000,0000-$4,000,000
- 4.5% of the value between $4,000,000-$5,000,000
- 5.5% of the value between $5,000,000-$10,000,000
- 6.5% of the value between $10,000,000-$20,000,000
- 7.5% on the value above $20,000,000
It can be confusing to follow, so check out a Land Transfer Tax Calculator to see what you can expect to pay.
How much are the closing costs for the seller?
Whether you use an agent or sell privately, your closing costs can vary greatly. Generally, you can expect to pay 1.5-4% of a home’s final purchase price. For example, the closing costs on a home that sells for $300,000 can cost you anywhere from $4,500 to $12,000. Though you are saving money by not using a real estate agent, closing costs can still be hefty. They depend on the following:
- Legal fees
- Land Transfer Tax
- Toronto Land Transfer Tax (if in Toronto)
- Home inspection fees
- Home appraisal fees
- Provincial Sales Tax
So, is selling your home privately the right choice?
At the end of the day, it’s up to you as the seller to determine whether or not selling privately is right for you. The freedom and extra money that comes from selling privately are intriguing to many. With this said, there is a reason real estate agents get paid so well, and why many people consider them crucial assets when selling their property. Our homes are likely to be some of the biggest investments we make, so having a real estate agent can deliver great peace of mind. However, if you’re up to the task, you can sell your home privately AND successfully.
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