Will You Retail or Wholesale Your Home? – Which Approach is Right for You?
by Stuart Neal
on Friday, October 6th, 2017 at 6:05pm.
Before you sell your home, you should learn about the distinct kinds of home buyers available to you. Together, these different buyer groups form the ‘whole’ market.
Try to think of the home sale market like a ‘layer cake’. Each layer has particular characteristics and the quality of the buyers you meet and your outcome may be affected by which layer you sell into.
We like to think of these layers as: - Retail layer, - Wholesale layer and - Sub Wholesale layer
Here is a quick overview of each layer:
This is the top layer of the market, where most homes and condos are sold.
In this layer, you will be exposed to the highest quality ‘retail’ buyers.
Retail buyers are expecting to see well-prepared homes, they expect to enjoy an easy streamlined purchase experience and they expect to be safe in their decision.
Unfortunately for you, this is often the most expensive layer in which to sell your home. Why? Because this is the layer that traditional REALTORS® service.
Traditional REALTORS® may charge high commissions for several reasons:
The industry is slow to change. The internet has driven down the costs of marketing and client servicing and yet the industry grinds on and fails to listen to a growing segment of the market that demands more transparency and lower transactions costs.
Traditional REALTORS® often pay large fees to trade under the well-known brand name presented on their business cards and signs. They have no choice, but to pass these costs onto you the consumer.
You pay for their failures. Most homes listed DO NOT SELL, (based on MLS® stats from Jan 1st to Sept 27th 2017 the sales to listing ratio WAS ONLY 40%). In other words, traditional REALTORS® must make money on homes that do sell, to pay for their expenses of those that do not sell. Does this make sense?
This is the middle layer of the market. In many cases, you will be approached by experienced investor types looking for a deal and some people of the ‘retail’ buyer group mentioned above.
You will find these buyers by purchasing a “for sale by owner” service such as Comfree, now called PurbleBricks (an online company from the United Kingdom, or by listing with one of the discount brokerages. There are 3 challenges to this approach:
You may set up an expectation that the buyer can get a deal too. That is with lower transaction costs there is more ‘wiggle’ room and buyers are going to want a share of the savings.
Because you are open about wanting to save on commissions, some buyers might wonder if you have tried to skimp in other areas like home maintenance, or permitting.
Because companies providing these services are working for very low margins. Be prepared to accept lower levels of service, less communication, newer inexperienced REALTORS® working on your file and a simple listing on the MLS® System. To be successful you need more than this.
Expect to receive lowball offers.
We hear of countless situations where sellers in this segment received offers, but they were well below expectations.
Sub – Wholesale
This is the bottom layer of the market. If you restrict your advertising to a homemade ‘for sale’ sign and advertise on free websites like Kijiji, you will most likely meet 2 kinds of buyer.
The first group is predatory investor types. They are looking for home sellers who don’t know the market, or the true value of their homes. They are looking for great ‘under market’ deals.
Expect very low offers.
The second group is a little more colorful. These folks may be challenged by: no credit history, poor credit history and in some cases poverty. Expect these buyers to ask about no money down and rent to own options.
We have noticed that lower-priced homes and condos can be sold this way, but not without a lot of time and effort.
Want more information about our discounted flat fee home selling programs? Please feel free to call our broker-owner Stuart Neal.