Is For Sale By Owner A Safe Method To Sell Your Home During Economic Uncertainty

The world is currently experiencing an overall economic slowdown and tight credit markets where lenders simply aren’t lending. The impact thus far has been mostly felt in the United States, Europe and Asia but even with the world’s top ranked banking system will Canada be able to avoid an economic slowdown or recession? And if Canada’s economy goes into a recession is this really the correct time to be thinking about buying or selling a home privately?

Should I Sell In This Market?

Canadian Banks are better positioned to weather the global credit storm since their exposure to toxic mortgage assets in the United States is not nearly as great as their US counterparts. Former Bank Of Canada governor David Dodge says:

“We will come through this. The market will enforce improved behaviour. There will be some casualties along the way – there will be losses…But I would say the evolution of our co-operative way of dealing with this in Canada…has worked reasonably well.”

So it appears at first glance that Canada is in a better position than the US to weather this economic uncertainty systemically but is this knowledge enough to maintain market confidence and hence keep current property values high? The Prime Minister of Canada, Steven Harper has indicated Canadian Banks do not want or need a bailout:

“There is no question, no possibility of bailing out the banks,” Harper said. “The banks aren’t seeking to be bailed out.”

So, the Canadian banking system is in good shape but the indications at this point are that the banks are not lending their credit right now which would obviously make it hard for any potential new homeowner to secure financing if they want to buy your home.

“The global credit crisis is starting to restrict the ability of Canadians to obtain loans for mortgages, cars and investments, Canada’s finance minister said Thursday. Finance Minister Jim Flaherty said he is looking to increase liquidity in the market but declined to release details.” Source: Yahoo News

The Canadian banking system is not overly exposed to the toxic securities that US banks are but they are also not lending credit either which can have a negative effect on the economy at a time when it needs to be stimulated. If people can not secure financing then they can’t meet obligations like payroll or paying creditor bills. If they can’t pay employees or meet creditor obligations companies need to start laying off employees. When employees get laid off their pay checks stop coming in and they are powerless to help the economy get kick-started since they have no money with which to consume goods.

Is the Private Sale Method Suitable In Uncertain Market Conditions?

The for sale by owner method can be applied in both good or bad real estate markets depending on what your goal is as a seller. The amount of work and the duties you will need to perform will not change in a bad market when selling privately. But realizing that it is extremely hard to get financing right now may be enough reason to hold off on selling your home for now at least until the dust settles on the lending side.

Remember, you are already competing with others for potential buyers. One advantage you have as a private seller is you can lower your price slightly to make it more attractive to buyers since you do not have an agent commission to pay when you sell. If you are under pressure to sell (maybe you are moving to a new country for example) just remember to keep a cool head and realize your home may be on the market a little longer than you want it to be right now. Pay special attention to the prices of other homes for sale in your area and try to spot trends if others are lowering their selling prices or taking their homes off of the market. What others are doing can go a long way to helping you decide what to do during this crisis.