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!

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Is multi-level marketing right for you?

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I recently did a post on whether or not one can afford to be a stay-at-home parent and I mentioned that one way would be for the parent staying at home to get a part time job or a MLM (multi-level marketing) sales job on the side.

Multi-level marking (or “network marketing” as its sometimes called) is a selling strategy used by some companies where their sales people are compensated by selling the company’s products via a commission as well as the sales of other salespeople that they recruit. While there has been some criticism of MLMs being “pyramid schemes”, many of these companies are truly legitimate and require you to sell at a consistent level (and providing coaching to your “downlines)” in order to be rewarded for their sales – so you can’t reach a certain level and then just coast. It has become a multi-billion dollar a year industry and there are new ones popping up all the time and joining the ranks of Avon, Mary Kay and Tupperware.

Lots of women are doing this. I know a Nurse Practitioner who is very high up at a children’s hospital who sells Arbonne. A friend of mine who sells Stella & Dot is also a Manager at a large consulting firm. I myself did it for two years as a sales rep for Stella & Dot (though officially sales reps are called “stylists”) and it was a great way to have some fun and make a bit of extra money – which was my goal. But being a business school graduate and CPA, I also knew what to do to make sure I didn’t lose money on it.

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However, before you call your Avon lady or Stella friend and ask how to sign up, there are some things you need to keep in mind in order to make sure this is right for you.

1.  You get out of it what you put into it

After hearing a recruiting speech, you may have visions of white MercedesPink Cadillacs or amazing vacations dancing in your head, but the truth is that success in a MLM job is directly related to the amount of effort (read: WORK) that you put into it. In reality, while you may be told that you “only” need to sell at two shows per month to make hundreds of dollars in commissions, or “only” need to recruit 1 person per month to qualify for all those extra incentives, the truth is that the people who make a lot of money in these companies are ones who treat it like a real job and put in the same number of hours that a “real” job would. Sometimes, this is a LOT of hours; they are constantly sourcing hosts for their parties, chatting up recruits and attending these sales shows.

2. Set realistic goals and expectations

My friend got me into Stella & Dot when she asked me to host a party. I checked out the website and really liked the jewellery, so I said sure. Then I had such a great time at the party (and loved getting some great freebies out of it), I thought it would be fun to do. I liked that it got me out of the house occasionally and I liked that I was getting some real sales experience. I also did “earn” quite a bit of free jewellery and enough money to treat myself to a nice pair of shoes or dinner out every month (on average). That was my goal though. I didn’t want to spend too much time, effort or money on it (especially the last part).

If your goal is to pay for your kids’ private school tuition or to pay off your mortgage in the next year or even replace your salary all the while being a full-time stay-at-home-mom, then you will be sorely disappointed. This is not the silver-bullet solution to making a ton of money while staying at home. Its a great option to earn a little extra on the side OR a potentially lucrative-ish full-time job if you are great at sales and want flexibility.

3. Treat it like a business

If you sign up to sell products for one of these companies and your goal is to make money (as opposed to feeding an accessory/skin-care habit with a discount which is a reason many people do it), you need to realize that this is a business and you need to treat it as such.

As a sales rep you will earn a commission on everything you sell plus a “bonus” based on whatever your “downline”/recruits sell. But this IS NOT profit or what you are really earning. You also need to spend money on membership fees, samples, shipping and taxes as well, which needs to be deducted from the commissions you earn.

So say you make on average $500/month in commissions (with Stella & Dot for example, this would require about $2,000 in personal sales). But you spent $1,500 on samples plus another $200 on fees (membership fee, website fee, shipping) when you started out. That means that you are not making a penny in profit until the 4th month of “work”. And in the meantime, the company may have released new products which you will be encouraged to buy.

Therefore it is very important that you set yourself a strict budget on how much you are willing to spend, both initially and every time new products are released. Make sure you keep your receipts for gas used to drive to and from parties, for coffee/lunch dates with your team or potential recruits and of course, for all samples or supplies you purchase to run your business. It also means you need to spend time on calling potential hostesses, working on your sales pitch and get to really know the product you are selling.

Its very, very easy to spend a TON of money on the samples that you “need” to get your business going and later to make sure what you have is fresh and up to date but it can quickly get out of hand and I know MANY, MANY people who are clearly losing money.

4. Remember, the company is making money off of YOU too

I signed up for a Facebook group for Stella & Dot when I was selling with them and there would often be disgruntled stylists complaining about how its “unfair” to pay more for shipping than customers or annoyed that the product credits they earned didn’t get them enough new samples or whatever.

I would often remind them that while we like to think we are employees of the company, we are in fact, a different level of customer as well. I, personally, was ok with this and understood that this is just the way it works. I know that when I bought samples at 50% off, they are still making profit margin on that. Otherwise, it would be a bad business model.

Another reason I wanted to mention this is  because I want to caution anyone doing this type of selling to remember that these products are not super amazing, unique, special or that better than other products sold in stores. They are consumer goods and they have great marketing campaigns, but you aren’t doing anyone a major favor by introducing them to these products. They may claim they are better for you than other products, or they are better quality or better value or whatever, but you need to take this with a grain of salt. Also, some are borderline unethical, especially anything to do with weight-loss, like this product (please don’t go into an MLM that requires you to prey on women who are already dealing with low self-esteem/body image issues just to make a few dollars).

Of course you need to like the products (heck, even LOVE the products) and like using them, because you shouldn’t be selling something you don’t like or believe in, but PLEASE don’t become brainwashed into thinking they are the be-all and end-all of all products.

For example, while I really like most of Stella & Dot’s jewellery and think that the quality is good, I don’t think it’s superior to a lot of similar stuff. Yes, I’ve had pieces wear incredibly well and some break after minimal use, I’ve had good and not so good interactions with their customer service (but on the whole, it was excellent) and there have been collections I loved and some I didn’t really like. Just like many other brands I like.

Similarly with the make-up and skin care companies like Arbonne. I like some of the products I’ve bought from them but some I wouldn’t buy again. I also don’t like how they focus their sales pitch entirely about what is NOT in their products vs what IS in them (but don’t get me wrong, it’s a good product and I know a lot of people who love it).

5. Its not as easy as it looks

Direct selling is hard. Its scary, even. You also need to develop a thick skin and resilience to the word “NO” – because you will hear it a LOT. On average, you will need to contact 10 people for every 1 that will agree to host a show. And a good chunk will chancel, sometimes on the day of. Then, you will need to remind your hostess that for every 4 people she invites, only 1 will come.

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Its tough because if YOU really love the product, at first you will find it unimaginable that others don’t. You will find it uncomfortable to approach people to help you by hosting shows and after you tap out on the “low-hanging fruit” – ie. your family and friends, getting new business is not that easy.

You will have events where you sell nothing or very little. You will have months where you will sell nothing.

6. Do some research before you join

Even though it might be tempting to sign up right away (the consultant trying to recruit you may need to hit certain targets by end of month for example and may entice you with free products), make sure you are ready and really understand how the commission/pay structure works and if it works for YOU. One thing I really liked about Stella & Dot is that I got a straight commission on whatever I sold. If I sold $20 in jewellery, I got $5 in commission. If I sold $2,000 I got $500 and once I sold more than $2,300 the commission amount went up. I didn’t have to hit any targets or sales goals to keep earning commission and that worked really well with me because some months I just didn’t have the time to be able to do many (or any) shows. However, I know that some companies DO require a certain sales volume, so if you aren’t sure you can maintain it, don’t do it.

On the flip side, take the “horror stories” you read online with a grain of salt as well. I think some women join with unrealistic expectations or without considering how much money can really afford to invest in a business like this and are disappointed or feel “tricked” into joining. They like to point fingers and call it a scam, but in reality, like many investments, you need to do your research and need to be realistic about your potential outcomes.

7. Maternity leave & MLM aren’t a good idea

Now, I DID continue with my Stella & Dot venture while on maternity leave but sometimes I wish I hadn’t. First of all, you do need to declare all your income to Service Canada every two weeks (it can be a bit of a pain to determine what you are actually earning since the commissions you earn need to be netted against your expenses, but those don’t necessarily coincide with your commissions earnings), then they will deduct what you earn from your maternity leave benefit, which kind of defeats the purpose of the mat leave benefits. If you are earning good money though, it may not matter to you to lose your benefits, but I think for the majority of people doing MLM, its not worth it. One thing I do want to note is that the reason I continued was because I liked the social aspect of it – the parties gave me an excuse to dress up, put on make-up and have some fun.

At the moment, I’m still registered as a stylist, but as soon as my membership expires this August, I will be retiring from Stella & Dot. I had fun, but to be honest, I got a bit bored of it. It was a lot of fun while it lasted though and I would recommend it to many people.