HGTV star Scott McGillivray explains how to avoid the biggest thing that 'kills profit margins' when selling your home
To make sure you're earning as much as possible on the sale, Scott McGillivray, the host of HGTV's "Income Property" and a real estate expert who's invested in over 100 properties, recommends avoiding one thing that he sees sneak up on sellers again and again: transaction costs.
"Transaction costs in real estate is usually what kills people's profit margins," McGillivray told Business Insider. "You can do a great job creating equity or creating value in a property, but if you are not careful with transaction costs, all of your profits are going to go to someone else."
Transaction fees refer to everything from title insurance costs to penalties for inspection issues, and can run up to 10% of the price of home. The largest percentage of these typically come from a realtor's commission, which can be between 4% and 6% of the sale price of the property.
McGillivray's solution: Try listing your home online yourself instead.
Websites such as Zillow, Homebuyer.com, and Owners.com allow sellers to post listings online for free or a small flat fee, eliminating the the middle man. For his own transactions, McGillivray chooses to partner with Owners.com, which connects users with professional agents and provides ongoing support and advice throughout the process, minus the egregious fees.
Of course, there are also cons to the for-sale-by-owner approach.
"The greatest downside [to selling your home yourself] is the demand on your time, and the legal and financial risks. Mistakes may cost you the money you're trying to save," Zillow's blog explains.
If you're planning to list your home yourself, it's important to do your homework first. Before putting your place on the market, you'll want to learn how to properly price it, how to combat scams, and how to attract qualified buyers, among other key factors.
If you'd rather stick with a traditional real estate agent regardless, you can still help maximize your profit margins by creating a great listing that attracts a multitude of buyers.
According to McGillivray, the key to a top-notch listing lies in impeccable photos. He suggests taking updated photos whenever your house looks its best - immediately after a renovation or a fresh coat of paint - even if you're not planning to sell yet. It could make or break someone's interest in exploring the listing further.