Save on commission or miss out on a higher price? The pros and cons of selling privately: what would you choose?

Amid economic uncertainty and market fluctuations, more homeowners are reconsidering whether they really need a real estate agent to sell their property. Agents' commissions certainly account for a significant share of the sale price, and saving this substantial expense holds considerable appeal for many people. Yet while selling privately may seem to reduce costs, the risks and challenges involved cannot be ignored. Is selling privately a smart way to save on commission, or a gamble that could mean missing out on a higher price?

 

 

 

The appeal of saving on commission

 

 

Taking New Zealand's latest national average house price of NZ$905,357 as an example, commission on a sale through an agent is typically around 3% of the price. With the addition of goods and services tax(GST), the total commission can reach NZ$22,107. This is a substantial expense for many homeowners. Selling privately through a platform such as Trade Me may cost only NZ$1099 to NZ$1599, significantly reducing selling costs. For sellers hoping to maximise their returns, a private sale can look very attractive.

 

 

 

The risk of missing out on a higher price

 

 

However, saving on commission does not mean a private sale will deliver the best result. A key advantage of using an agent is their ability to create competition among buyers. Through auctions or deadline sales, agents can attract several buyers to compete at the same time, pushing up the final sale price. Without professional market knowledge, private sellers often struggle to manage competing offers and may ultimately miss the opportunity to secure a premium price.

 

 

Putting negotiation skills to the test

 

 

When you decide to sell without an agent, there is more to consider than saving money. Private sellers often have to negotiate directly with experienced investors who are highly skilled at buying property cheaply. As an ordinary homeowner, whether you have the negotiation skills to deal with these seasoned buyers is crucial to achieving your desired sale price. Poor negotiation could lead you to concede too much on price and lose a substantial amount of potential profit.

 

 

The complexity of market research

 

 

The property market is complex and constantly changing, and pricing is a crucial part of selling privately. Without an agent's support, sellers must personally attend multiple Open Home events and research local property sales to estimate a reasonable price range. Without a sufficient understanding of the market, sellers may undervalue their home and sell at a loss, or set the price too high, leaving it on the market for a long time without interest and missing the best opportunity to sell.

 

 

Limited marketing channels

 

 

Another important advantage agents offer is an extensive marketing network. Some major property websites allow only licensed agents to list properties, meaning private sellers may miss out on many potential buyers. Agents can also use professional advertising resources and channels to give properties greater exposure, while private sellers generally have to rely on a limited range of online platforms.

 

 

A lack of buyer trust

 

 

In property transactions, buyers often rely on a relationship of trust with an agent when deciding whether to make an offer. Agents build credibility through successful transactions, enabling them to manage competition among multiple buyers more effectively. Private sellers lack this foundation of trust, and buyers may be sceptical of their claims. Particularly when several parties are bidding, that doubt may reduce buyers' willingness to make offers and ultimately affect the sale result.

 

Does selling privately save costs or mean missed opportunities? We put this question to two experienced Auckland real estate sales consultants. Here is what they had to say.

Annie Xu (real estate sales consultant, Barfoot & Thompson City branch): I believe finding a professional, reliable real estate agent is the key to a successful sale, for several reasons. First, when buyers and sellers meet directly, negative emotions and poorly chosen words can arise during negotiations, causing the deal to fall through. Second, homeowners usually lack systematic training and professional knowledge, making it difficult to fully explain a property's condition and potential value. They may inadvertently mislead buyers or fail to adequately disclose potential risks and future development opportunities. Homeowners also generally lack the time to conduct viewings full-time, missing out on many potential buyers. They are usually unable to run an auction themselves, which can prevent them from achieving the highest price. Their limited knowledge of market prices and smaller pool of potential buyers can also reduce competition, potentially resulting in a sale below market value. Finally, if a dispute arises after settlement, homeowners may have to deal directly with buyers' demands and pressure, causing unnecessary stress.

Rose Hu（real estate sales consultant, Barfoot & Thompson Remuera branch): I believe selling privately is a viable option, but there are four aspects to consider. First, private sales are not prohibited by law. Particularly when homeowners already have a potential buyer, they can sell independently with guidance from a professional, such as a lawyer, to ensure the process complies with the law. Second, for most homeowners without a buyer already lined up, listing a property themselves requires considerable time, effort and physical energy. They also need to be mentally prepared for a complicated sale process. Third, selling through an agent offers advantages in advertising and resources. Large agencies have extensive client databases, and their professional salespeople can help select an appropriate sale method, screen buyers and assist with negotiations, making the sale more efficient. Finally, homeowners selling privately should seek advice from relevant professionals to ensure the transaction is lawful and completed smoothly.