It never hurts to do a friend a solid, does it? That’s what good friends do, don’t they? In this market that could mean giving your friend the opportunity to buy your home before it goes to market. The overwhelming majority of homes are still sold on the MLS system, but private sales do occur with some regularity, more so in some neighbourhoods than others.

For our purposes, let’s talk about homes that aren’t listed on MLS and that are bought by a friend of the seller or a cousin of a friend or a physiotherapist of a friend i.e. any buyer who found out that the home would be going on the market and approached the seller about buying it privately before it was listed on MLS.

Most private buyers want to buy privately for two reasons: 1. They think they’ll get a better deal since the seller won’t have to pay commission; and 2. They won’t have to worry about losing out in a bidding war. In their dreams, they envision their friend the seller saying something along the lines of this: “Steve, My agent tells me my home is worth about $1,500,000, but we’ve been such good friends for so long, going all the way back to high school, and I won’t have to pay any commission if I sell it to you, so if you want to buy it, pay me $1,300,000 and it’s yours.” But do private sales actually work this way? Rarely.

In almost all cases, the sellers want to sell for the highest price possible. A few years ago clients of mine called and said “Our friends just got transferred and are willing to sell us their home. We’d like to buy it, but we’d like you to look at it first so you can give us your opinion on its pros and cons and on its fair market value.” We looked at it and determined that it was a good home for my clients and the price the sellers were asking was fair. My clients put in an offer for $2.4m. The seller countered with “I know I told you $2.4m, but my agent is telling me I’ll get more if I list it so how about $2.45m?” My clients put in an offer for $2.45m. The seller countered with “I know I told you $2.45m, but my agent is telling me there may be someone else interested in it so how about $2.5m?” My clients put in an offer for $2.5m. The seller countered with “The other buyer is offering $2.525m so how about $2.55m and I give you my word I’ll accept it and we have a deal?” My clients offered $2.55m. The seller countered with “Sorry. I sold my home to the other buyers because they paid more.” Buyers can dream all they want about the good deals they’re going to get by buying privately, but this is more likely the reality they’ll face.

So I ask you – is it worth it? Is it worth risking your friendship to do a private deal? Do you think my clients are still friends with the seller? Sometimes things do work out, but this is just one example of what can go wrong and things go wrong more often than not.

When I got into this business 2o something years ago, I told myself I wouldn’t work with friends or relatives unless they absolutely insisted on working with me. I didn’t want to talk business at social affairs and I didn’t want to risk something going wrong with someone I’d most certainly have to see at future parties or family functions. (Truthfully, seeing people at parties wasn’t that big a concern for me because I tend not to attend too many large parties.) I’ve ended up working with some friends and family over the years who’ve insisted on working with me, but we’ve set firm ground rules right from the start. Our business relationship is separate from our social relationship. They treat me like they’d treat any other agent and I give them the same great service I give all my other clients. No special deals either way. Thankfully, I haven’t had a problem yet with a friend or relative.

I’d suggest you use the same strategy if you’d like to buy your friends’ home. Set firm ground rules right from the start. What price do your friends want? When do they want to close? Are they going to negotiate with other buyers at the same time? Is there a deadline by when you need to do a deal otherwise your window of opportunity to buy their home privately will close? The more clearly you define the process, the less the chance of something going wrong that could damage your friendship. Remember, homes are like buses. Don’t fret if you miss one because another one will come along soon. But good friends are few and far between.

Things can be complicated in today’s fast moving market. If you know how the market works and have a good Realtor to help you, your chances of being successful increase exponentially. If you know anyone who’s interested in learning how the market works and who’d like to receive the kind of help that involves honest answers, straightforward advice, no pressure and being treated like family (without actually being family), please let me know the best way for me to connect with them because I’d like to offer them this kind of help. And as always, don’t be shy if you have any questions or comments about this post! Thanks for reading.