Privately selling your house?

Homeowners with properties to sell are breaking with tradition and ditching estate agents in favour of finding their own buyers. With prices under pressure, selling privately is taking off because of the money you can save yourself in commission. But isn’t a sluggish market the time when you most need the skills of an estate agent? We look at what it takes to sell your own home.After years of buying and selling investment properties, Cape Town-based investor Steve Binos decided to take a stab at selling his home himself.Binos placed an advertisement in the property supplement of the weekend papers, organised boards and brochures for a show day, and had an attorney friend draw up the paper work.When his Harfield Village house sold to a cash buyer on the first show day, Binos was blown away.At a cost to him of just over R1 000 and what he calls a "small hassle factor", he saved R80 000 in estate agent’s commission. "When I realised just how simple it was, I was sold!"But that was in 2006, when the market was hot and it seemed like everyone who could afford it (and many who couldn’t) was buying and selling property to get a piece of the action.Selling was also easier then than it is today. In the third quarter of 2006, properties took an average of eight weeks to sell, according to the residential property barometer of First National Bank (FNB). Now it takes twice as long. FNB’s report for the second quarter of this year shows that properties are on the market for an average of four months – or longer if they are valued at more than R1.2 million.The number of estate agents has dwindled, which the Estate Agency Affairs Board attributes to current market conditions. The board estimates that of the 82 000 agents who registered last year, 26 000 agents have not renewed their licences this year.Banks are not lending as freely as they were. In June, house prices showed a 7.3-percent fall from a year earlier, according to Absa’s house price index. Economists warn that South Africa is entering a period of house price deflation. Given all of these factors, the prospect of handing over tens of thousands of rands to an estate agent who has facilitated the sale of your house is particularly galling.In the heady days of the property market boom, it was common for agents to charge commission of 7.5 percent. But times are tough for them too, and their fees are "under stress", Willie Marais, the president of the Institute of Estate Agents, says. (See "Commission: how much leeway do your have?" below)Even if your estate agent is willing to accept commission of five percent, on a R1 million house that’s R50 000 before VAT. (You would pay another R7 000 in VAT.) It’s a lot of money to pay for what many homeowners regard as little more than the placing of a few adverts in the newspapers, the holding of a show house or two and the overseeing of signatures on a contract. (See "How estate agents add value" below.) The amount you pay in commission affects not only the seller but also the buyer, because it reduces the room the seller has to manoeuvre when considering offers. If you, as the seller, have to shell out R50 000 in commission, you have less room to negotiate the price of the property with a prospective buyer. This becomes even more pressing as increasing numbers of homeowners teeter on the brink of negative equity (a situation where the outstanding balance on your mortgage bond is greater than the value of your property).Justin Clarke, the executive chairman of Private Property Holdings, says the incentive to sell privately is stronger than ever, particularly in this market."A large percentage of South African homeowners are highly geared because it was so easy to borrow money against property. People have propped themselves up to the full value of their properties."In some areas, prices have fallen. So someone who bought an apartment for R3 million and can now get only R2.5 million is stuck if he’s got a full R3-million bond. How does he pay estate agent’s commission, let alone the bank to cancel the bond? So this market pushes people into the private-sale environment," Clarke says.The private routeIt may be more difficult to sell in the current market, but, compared with two years ago, there are more options for people who want to buy and sell privately.Immediately after Binos’s watershed experience with his own sale, he contacted Andre du Toit, a friend who was on the board of a national estate agency and an owner of two of its franchises. Reading the trends here and abroad, the two saw an opportunity to offer South African property sellers something new. At the time, ForSaleByOwner.com was one of the fastest-growing online companies in the United States and today it is one of the top five real estate websites in that country.

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