Category: Family

Savvy Real Estate Series – Part 1: Should you sell your house yourself?

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Many money management blogs will focus on ways to save money by doing little things over a long period of time – things like meal prep, not buying coffee every day, budgeting for the holidays, shopping around for savings etc. And while those things are certainly important, I think its also important to consider areas where you can save a LOT of money in a short amount of time.

One of those things is by selling your home yourself and not using an agent to avoid having to fork over the commission.

This is something I’ve now done several times –  I’ve sold two homes and leased/rent several properties without using an agent and each time I’ve managed to do better than realtors had told me I’d get. So I decided to make a series of posts on this topic. I’ll start with this one – helping you determine if selling your house yourself is something you should do – and I’ll follow it with tips on selling your house as well as how to choose the best agent, if you decide selling your house yourself isn’t for you.

Why you should always look into selling your house yourself

In most countries, real estate agents charge a commission – i.e. a percentage of the sale price of your home – as their compensation for selling your house. In Canada, the buying and selling agent will typically charge 2.5% each – or 5% total. In New Zealand (where I’m currently living), only the selling agents get commission, and its typically 4.5% + GST.

Now this can amount to be a HUGE chunk of change. The average home in Canada now sells for about $475,000. This means that when you sell your house, you will have to pay the realtors $23,750 in commissions alone . Also, if the house you sell is your primary home, this money would also be free from capital gains tax, so it would be ALL yours to use as you please. That money could be used to pay off debt, beef up savings or a down payment for another home (so you don’t have to get as high a mortgage). And that is just the average – this number gets higher the more you sell your home for.

This leads me to another reason – many agents are just not that good, and in my opinion don’t really earn that generous commission. But it doesn’t take an idiot to do the math above and realize that if they are able to sell just a few houses in a year, it can effectively replace a 50 week, 9-5 salary – for significantly less work.

Granted, realtors don’t get to keep the entire commission (some goes to the brokerage, overhead costs, taxes etc) but in a hot market like we are currently experiencing where houses often sell within days of being listed, for ridiculous sums of money and no conditions, its no wonder that the number of real-estate agents is at an all time high. In what other profession can you take a quick course, have no post-secondary education and be licensed to work within a year, getting paid upwards of $20,000 per sale? Its no wonder that in Toronto alone, the number of licensed agents has doubled over the past ten years. As a result, there are a ton of inexperienced agents out there that really don’t know what they are doing any more than you do.

Another main driver for me was the fact that selling your home is work to you regardless if you use an agent or not. In most cases, YOU have to clean/tidy your home before showings or open homes, YOU need to organize your family to be elsewhere when these showings take place, YOU need to pay for staging, YOU choose who to sell to and where to compromise and YOU have to pay for a lawyer to deal with the legal stuff.

You should also some market research to know what to expect what your home will sell for – sometimes agents will low-ball a house just so they can sell it faster. For every $10,000 the agent gets $500 extra – it might not be worth the extra effort to a realtor to market a house for $10,000 or $20,000 more for a few hundred dollars but to the seller, that is a lot of money, especially if that is what it is worth and could sell for. So whether or not you use an agent, YOU should still know approximately what your home is worth. In sum, a lot of it is on you anyway, so shouldn’t YOU get some compensation for that?

However, selling your house yourself is still work – don’t kid yourself – there is a reason that there is a whole profession dedicated to selling houses. So I’ve developed a guideline to follow for  when it would make sense to do it yourself.

When to sell your house yourself:

  • You have time and are flexible. This is one of the main reasons I do it myself. I am a work-at-home mom and I was available to show my house at any time, on any day of the week. I’ve even had people ring the doorbell and asking to have a look because they knew they’d be dealing with the seller directly anyway and I was able to show it. No need to worry about a busy agent showing another client’s house or personal time and potentially losing a sale.
  • In a seller’s market. This is when house prices are on the rise and supply of houses is low. Basically, the situation right now in many big cities like Toronto or Vancouver or Auckland. Buyers have to be less picky and can’t put as many (or any) conditions on purchase, which pretty much guarantees you the sale if your home is in the location they want.
  • Your house is in an excellent location. There is a reason that “location, location, location” is the dogma of real estate. If your house is in a good location, even if its the worst house on the block, it will sell. And in a market like this? It will pretty much sell itself and will sell very quickly.
  • You aren’t easily offended. Look, buying real estate is a big deal for most people, so purchasers will be critical (in order to not seem too keen, because its easy to criticize when its not your home, people have different tastes etc) and it may be hard to hear someone mutter about the hideous curtains/wall colour you lovingly chose, renovations you’ve done etc. You can’t let it discourage you.
  • You have some business savvy/confidence and be a bit of a risk taker. A home sale is a business transaction at the end of the day. You need to know how to market your home, stage it and understand the market well enough to be able to negotiate effectively (I will do a post on tips to sell your home soon).
  • You are and can afford to be patient. Selling your home yourself will probably take longer than with an agent. Selling agents may avoid showing your house to potential clients (since they don’t get any commission), buyers themselves may not want to deal without agents and in general you will not be able to reach the same number of potential buyers that an agent can. It can get discouraging when you put in all this effort to get it ready only to have no or little interest after your first open home. But if you are able to give it some time, selling yourself may be a good idea. Remember, you can only have one buyer at the end of the day and chances are that if you are in a sought after area, you will have no problem finding interested buyers.

That all said, there are times when I would recommend using an agent.

When to use an agent:

  • You are just too busy and don’t have the flexibility to show the home whenever a potential buyer is interested, it really is in your best interest to use an agent.
  • In a buyer’s market. This is when there may be an abundance of houses or the market has cooled off for whatever reason and a realtor will potentially be better able to reach  a bigger network of interested buyers and be better able to help you negotiate. This is where an experienced agent is key.
  • Your property is very unique or difficult to sell. The easiest houses to sell are those that appeal to a larger group of people – that also means they are pretty conventional and in popular locatoins. But if your property is very unique – for example, its a luxury property, or has some unique features, or is in a less than desirable location – a good agent that specializes in that type of real estate would be good to use to make sure you are getting the best price.
  • You are not a natural negotiator and/or don’t like conflict. There are some people who are born sales people or negotiators and there are some who aren’t. The latter are the people who will mess up selling their own home and will be the horror stories that realtors will tell potential clients with glee. Like I mentioned before, selling by yourself is work and its not as easy as it looks.
  • You need to sell ASAP. If you have to move quickly, I’d recommend using an agent for sure. My approach to selling on my own involves having a timeline of how long I am willing to list without an agent before giving in and getting an agent and still making the timeline I want to have my house sold. If you don’t have the luxury to wait it out selling yourself, don’t do it.

Convinced yet? If so, stay tuned for my next post which will include tips on how to sell your home yourself!

6 things worth going into debt for when you have a family – and 3 things that AREN’T

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First of all – apologies for not updating this blog for such a long time! I’ve had some major life changes (moved from Canada to New Zealand, pregnant with my 3rd baby, enrolled in a university course…) so it’s taken a while to find my footing again.

Anyway, I was talking about financial priorities with a friend recently and we were debating whether there are any purchases worth going into debt for. My first instinct was NO, there is NOTHING. I don’t like debt as a general rule.

But then I started thinking – I do have some debt (mortgage) and that’s worth it (more below). And I also know that there are somethings that really are more important than money. So, are there some things worth buying, even if they mean going into debt? Yes and here is my list:

  1. Life/Disability Insurance

Even if you are struggling to make ends meet, I really think that having adequate life and disability insurance is a MUST for someone who has a family. In my opinion, families should have life insurance coverage that would cover living and housing costs for 10 years at the very least.

If you earn a lot of money, you should also consider how much money your family would be missing out on if you died or became disabled. For some professions, the disability portion maybe even more important to look into. For example, if you are say, a dentist, you need your hands to be functional to make a living, so even a minor accident can devastate you if you are no longer able to perform your job.

Tip: The younger/healthier you are when you get it, the cheaper your premiums for a long time.

2. Health Insurance

If you live in a country like Canada, where there is universal health care coverage (i.e. paid for by the government), then additional health insurance is gravy – usually something that covers dental care, vision care, massages etc – and is something many employers provide. If you don’t get this extra health insurance, it’s not that big of a deal but still worth looking into.

But if you live somewhere where the isn’t universal health care, like the US, please, please get health insurance. Put it as a priority even above life insurance. Put your monthly premiums on your credit card if you have to. Because medical bills are the #1 reason people go bankrupt in the US. Just one adverse medical problem can devastate a family overnight.  And I’m not talking about a cancer or a major disease diagnosis, but normal life things like birth or accidents can end up costing hundreds of thousands of dollars. Unfortunately, even insurance is no guarantee that you won’t be faced with high deductibles or some out of pocket expenses, however hopefully the brunt of it will be taken care of by the insurance.

If you live in a country that has a two-tier system, like New Zealand, I’d still consider getting additional health insurance especially after seeing the benefits of having it with a family member who was diagnosed with cancer recently.

3. Marital/Relationship Counselling

Divorce/separation is expensive – not just the actual cost of divorcing (legal fees etc), but the aftermath as well. Going from two incomes to one income to support pretty much the same sized family is tough (or having one income support double the living expenses). Not to mention the emotional cost and psychological cost that a divorce has on the children.

As such, I highly recommend that couples seek counselling prior to officially separating and really trying to work on the issues the counsellor identifies. This may take more than one or two sessions so it is important to be patient. But you married/started a family with that person for a reason and it was likely very legitimate! Hopefully a bit of guidance can help you get back to the way you were.

Even if you still choose to separate afterwards, I think that attempting counselling can be good for closure (you tried everything) and you may get tips on how best to go forward to minimize the negative effects on your family (which can have a huge effect on your financial situation).

Counselling doesn’t have to cost a lot either – there may even be great free options at a church or community center.

Of course there are certain situations where divorce is really the best option. But I believe only extreme cases warrant a divorce without an attempt at fixing what is broken.

4. Mortgage

A mortgage is debt – make NO mistake about this. And it can be bad debt if you buy a house that you can’t afford. But it can also be good debt. Good if your mortgage (and other home-ownership costs) can be managed comfortably in your budget (see here for my recommendation on how much of your budget should be allocated to your housing costs). Good if you buy at a time when prices are on their way up (thus creating equity). And good if owning a home is an important life goal for you (it isn’t for everyone, so for those people, buying a home may NOT be the best idea) and you are at a point in your life where you are up for the responsibility.

5. Car loan

A car loan is debt. For some reason, I’ve met many people who seem to think that their car payment doesn’t count. Sorry, but yes, if you have an obligation to pay for your car – whether it is to the dealership, a family member or the bank, it is debt. And yes, a lease is debt too!

However, in this day and age, having a car is pretty important – especially if they need it to get to work (and especially if public transportation options are not available, very limited or plain inconvenient). So I think going into debt to buy a car is usually totally acceptable. That said, I don’t think going into any amount of debt is justifiable – and I discuss how to determine what a reasonable amount for car ownership/lease is in greater detail here.

There were some other things that I considered and things that I’ve seen mentioned on Facebook or whatever as worth going into debt for.

But I disagree –  here are some of the things that did NOT make the cut:

  1. Travel to make memories

Sorry, but going into a lot of debt to “create memories” is not a good reason. You can make memories with your family by organizing a great “stay-cation” and exploring your home town, choosing cheaper activities (camping vs going to a resort), cheaper travel methods (driving vs flying) and my favorite, SAVING for trips. These are the best way to really give your family experiences and creating memories because you will be doing so without the stress and burden of debt.

In my mind, the only exception for going into debt for travel is for something like visiting a loved one who is sick or dying or perhaps attending a funeral.

2. Once-in-a-lifetime experiences

OMG – the Rolling Stones/[Insert your favorite band or singer] are coming to your city! Tickets are expensive but it’s their LAST TOUR.  You HAVE TO GO.

No, no you don’t. If you don’t have the money saved, don’t go into debt. Its not worth it. Unless you can squeeze it into your budget or take away from an unnecessary category (for example, taking from your vacation budget or forgoing going out for dinner for your next three date nights), then sure, go for it. But if you really don’t have the money to pay upfront for those tickets, it’s NOT justifiable.

3. AH-MAZING sale or offer

Recently I went to the jewellers to get a ring I have fixed. It had a design flaw and the stones on it were always loose – I even lost the centre stone one time (luckily found it) and I was worried it would happen again. I had avoided wearing it for fear of losing a stone again so when I noticed that the jewellery store had a policy where you can “upgrade” your jewellery by trading in your older piece for a new one, if the new one was more expensive, I decided to look into it.

At first, this seemed like a great deal. Not only could I use the value of my ring as credit towards my new item, the manager at the store offered me a further discount. I’d be getting a way bigger stone ring, worth $3,500 and would ONLY be out of pocket $900.

Except $900 is a lot of money. And even though we actually HAD the money was this really something worth doing? Did I NEED a more expensive ring? A ring that I didn’t even know existed until that day?

No. I didn’t. Other than the opportunity to get a nice piece of jewellery for a great price (it really was a great price), there was no benefit. Especially when I did the math and realized I’d have to lose and replace the loose stone of my original ring like 6 times before I’d be out of pocket $900.

This applies to everything – whether it’s a handbag you’ve been coveting, a great deal on an appliance or whatever, if you don’t have the money saved for it, it’s NOT WORTH going into debt for. Because at the end of the day, if you are paying interest on it, you aren’t *really* getting a deal. And remember, these deals come around again and again you will have plenty of opportunity to take advantage of them in the future. My advice? If you really, really, really want it, start making it a priority to save for it!