Selling a house to a friend

Forums › Home Workshop DIY › Selling a house to a friend

kingdragonfly

11984 posts

Uber Geek
+1 received by user: 12867

Subscriber

#268056 26-Feb-2020 07:32

My friend is looking for a house in Churton Park, Wellington, and I'll be moving in start of April to be near a new job.

I considered renting it, but frankly I've heard and seen the destruction of tenants.

Anyhow, a house of very similar construction sold for $585,000 a year ago (2BR, cross lease, body corporate about $1,000/year).

I was going to deduct the cost of selling it by agent, and make him offer it at that amount. I'd also pass along any other savings I could make via a private sale.

Any idea how much a private sale versus an agent sale difference is?

Thanks

1 | 2

11924 posts

Uber Geek
+1 received by user: 9675

Trusted

Lifetime subscriber

#2427188 26-Feb-2020 07:49

The only difference with a private sale is the agents commission and associated marketing costs.

Legal fees etc are the same

ShinyChrome

1603 posts

Uber Geek
+1 received by user: 686

ID Verified

Trusted

#2427193 26-Feb-2020 07:57

Yup, I went through a private sale 3 years ago. We paid just the legal fees for them to draw up a sales contract, conveyancing, title search etc

If your house hasn't been re-valued in awhile, I would grab a simple QV report to give you both a rough idea of the market value.

MileHighKiwi

782 posts

Ultimate Geek
+1 received by user: 581

ID Verified

Lifetime subscriber

#2427196 26-Feb-2020 08:05

We sold our house 2 years ago to a family member. To arrive at a sale price we got 3 agents to do an appraisal and then we sat down with the family member and negotiated the price. The 3 estimates ranged from $510,000 to $560,000 and we settled on a price of $530,000. The neighbors house was on the market at the same time, very similar properties, they sold 2 weeks after us for $528k.

Also use the QV reports, Homes.co.nz etc to do your research and don't be afraid to engage agents in an appraisal, you never know if the private sale will fall through and you may need an agent anyway.

dafman

4054 posts

Uber Geek
+1 received by user: 2652

Trusted

#2427199 26-Feb-2020 08:16

The thing is, unless you go to market, you don't really know what the house is worth. As a seller you should seek the maximum number of offers - the greater the number of offers, the greater your potential for a higher price. By selling to a friend for an agreed price, you are restricting your options and might be walking away from a range of offers from the market for a higher price.

sen8or

1897 posts

Uber Geek
+1 received by user: 1402

#2427203 26-Feb-2020 08:27

We sold our house in Auckland to a friend. We had been to market and had a sale collapse (through an agent), when the exclusive period ran out on our listing, we agreed with a sale price between what we would have netted for the house (sale price less agency fees) and the base sale price. We ended up with slightly more in the hand, they paid slightly less, win win.

I would be inclined to encourage your friends to do all the normal due diligence, building inspection report etc, that way there should be limited surprises if things come up.

kingdragonfly

11984 posts

Uber Geek
+1 received by user: 12867

Subscriber

#2427208 26-Feb-2020 08:41

Back to my original question, how much more cost is it to use an agent vs a private sale, for $585,000?

Do agents usually charge a percentage?

I'm not looking to get rich; I like my friend, and if I get the same in-pocket as my neighbor, who used an agent, I'm happy.

Geekzone support

Support Geekzone with one-off or recurring donations Donate via PressPatron.

trig42

5889 posts

Uber Geek
+1 received by user: 2094

ID Verified

#2427212 26-Feb-2020 08:49

Most agencies advertise their commission rates (between 2 and 4 percent, depending on value of house).

I'd get a registered valuation done (add that to the price of the house) then you and your friend have some assurance that the price is 'fair'. If they wanted, they could get their own valuation done, and you could meet in the middle, after taking off the commission value (valuation will be a price you could sell it for, on the open market through an agent).

MileHighKiwi

782 posts

Ultimate Geek
+1 received by user: 581

ID Verified

Lifetime subscriber

#2427213 26-Feb-2020 08:56

kingdragonfly: Back to my original question, how much more cost is it to use an agent vs a private sale, for $585,000?

Do agents usually charge a percentage?

I'm not looking to get rich; I like my friend, and if I get the same in-pocket as my neighbor, who used an agent, I'm happy.

It depends. Of the 3 agents we spoke with, one offered a flat fee of $10K, which based on the sale price would be 1.8% commission. The other two were around $15-$20k from memory.

Legal fees are the same regardless of sales method.

wellygary

8810 posts

Uber Geek
+1 received by user: 5287

#2427215 26-Feb-2020 08:58

kingdragonfly: Back to my original question, how much more cost is it to use an agent vs a private sale, for $585,000?

Do agents usually charge a percentage?

I'm not looking to get rich; I like my friend, and if I get the same in-pocket as my neighbor, who used an agent, I'm happy.

This will give you a ball park

https://mikepero.com/fees/

Typically its 3-4% up to 5 or 600K , then 2% for the residual, + some fixed fees and some advertising costs..

Get a couple of registered valuations and if you are happy with them pick the mid point

eracode

Smpl Mnmlst
9332 posts

Uber Geek
+1 received by user: 6198

ID Verified

Trusted

Lifetime subscriber

#2427221 26-Feb-2020 09:11

trig42:

Most agencies advertise their commission rates (between 2 and 4 percent, depending on value of house).

I'd get a registered valuation done (add that to the price of the house) then you and your friend have some assurance that the price is 'fair'. If they wanted, they could get their own valuation done, and you could meet in the middle, after taking off the commission value (valuation will be a price you could sell it for, on the open market through an agent).

The main advantage of selling privately like this (called Sale by a Private Treaty) is that the agent’s commission is avoided. This benefit should be split equally between a seller and purchaser - so that it’s a true ‘win-win’.

Some years ago we sold our house privately to a colleague friend who was the in-house lawyer at the company I worked for. We agreed on an independent valuer who was acceptable to both sides, got a valuation report done and split the cost. The valuation showed the current market value - and not after the agent’s commission is taken into account. The valuation figure then became the sale price.

If the commission figure is deducted to get to the value/sale price, that means the cost of the commission figure is borne wholly by the vendor - and the benefit of not having to pay it is not split equally. I guess there could be a case for estimating what the commission would have been and deducting half of that to get to the sale price.

Sometimes I just sit and think. Other times I just sit.

dolsen

1483 posts

Uber Geek
+1 received by user: 319

Trusted

Lifetime subscriber

#2427249 26-Feb-2020 09:58

kingdragonfly: My friend is looking for a house in Churton Park, Wellington, and I'll be moving in start of April to be near a new job.

I considered renting it, but frankly I've heard and seen the destruction of tenants.

Anyhow, a house of very similar construction sold for $585,000 a year ago (2BR, cross lease, body corporate about $1,000/year).

I was going to deduct the cost of selling it by agent, and make him offer it at that amount. I'd also pass along any other savings I could make via a private sale.

The prices in Churton Park have increased significantly in the last year. I would check the building on homes.co.nz and see what the estimate sale price is for your property (it's free).

It's not good avoiding 15K in sales fees if you sell for 100K under the market.

HP

Shop now for HP laptops and other devices (affiliate link).

kingdragonfly

11984 posts

Uber Geek
+1 received by user: 12867

Subscriber

#2427376 26-Feb-2020 11:50

My friend took a pass anyhow. Too much wind, which is right.

I really don't using agents, since I consider them as parasites: even lazier / more dishonest than a used car salesman.

It's supposed to be a seller's market at the low end of the market apparently, so hopefully won't be too painful.

Anyone recommend a good agent in Johnsonville / Wellington?

eracode

Smpl Mnmlst
9332 posts

Uber Geek
+1 received by user: 6198

ID Verified

Trusted

Lifetime subscriber

#2427388 26-Feb-2020 12:06

@kingdragonfly Totally agree regarding RE agents. Their whole game is to build your expectations as a seller until they get you to sign - then to lower your expectations on price once you’ve signed so that they can collect their commission and move on to another sale.

The commission structure is all wrong too. If they can get you to accept say $30k lower for your house, it only costs them $1k less on their fat commission - but costs you $29k less in net sale proceeds.

Sometimes I just sit and think. Other times I just sit.

Paul1977

5171 posts

Uber Geek
+1 received by user: 2192

#2427407 26-Feb-2020 12:21

You guys are harsh.

Like with any profession some agents are bad, and some are good. I'm not sure I'd be that comfortable buying off a private seller, not really sure why though.

I would say be wary of any agent who offers a flat fee, they have zero incentive to get you a good price.

Make sure you are aware of ALL the agents costs:

Is the % commission GST inclusive or exclusive?
Is there an additional admin fee?
Are there additional marketing costs?
If marketing is included, is it the full marketing or do you have to "upgrade" for that?

If someone recommends an agent, go to one of their open homes before approaching them about selling your property and see how they operate. Or just go to a few open homes in the area and check out a few different agents.

wellygary

8810 posts

Uber Geek
+1 received by user: 5287

#2427411 26-Feb-2020 12:29

kingdragonfly: .

It's supposed to be a seller's market at the low end of the market apparently, so hopefully won't be too painful.

Anyone recommend a good agent in Johnsonville / Wellington?

Your only potential downside is the cross-lease, but at the moment the Wellington Market is buzzing, everything is selling pretty quickly,

1 | 2