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FSBOs

Recently a REALTOR® emailed NAR Research, asking about the advertising site ForSaleByOwner.com. “ForSaleByOwner” states that with a FSBO, “Sellers save big by not paying a hefty 6% commission.  They go on to state: “According to the National Association of Realtors (NAR), for sale by owner sellers not only sell faster, but they usually get closer to their asking price.”

We thanked the REALTOR® for alerting us to the website’s statements. This advertisement is an example of the old phrase, “We gave them the facts, just not all the facts.”  Here are more facts to take into consideration:

  • In 2010 for an arms-length sale, the median sale price through a Realtor® was $200,000 for new and existing homes combined, according to NAR’s 2010 Profile of Home Buyers and Sellers. The comparable FSBO price was $155,700. Avoiding the commission results in a sales price that is $44,300 lower than the $200,000 price that a Realtor® can help to obtain — a difference of 28 percent from the FSBO price.
  • “ForSaleByOwner” is correct that FSBO’s sell faster—but they neglect to mention that the faster sale is caused by significant under-pricing of the property, something a Realtor® knows to avoid.
  • And of course FSBO’s do actually sell closer to asking price—because the asking price is set significantly below market.

If any of your clients mention the website to you, please let them know that the information on the website is extremely misleading – and wrong! Their final comment may be their worst:  “Despite what an agent might tell you, selling your home isn’t difficult with ForSaleByOwner.com there to help you along the way.”

In fact, many FSBO properties are eventually listed with REALTORS® in order to get them sold. Unfortunately, by that time, the properties are “shopworn” and stale. Typically a REALTOR® can get a better price than a FSBO, but the price is generally less than what could have been obtained if the seller had initially listed with a REALTOR®.

The Profile of Home Buyers and Sellers is a survey of new and existing home sales transactions. Issued annually, the Profile provides answers to virtually all of the questions that a worried buyer could ask on such topics as the home search process, financing, buyer and seller characteristics, and the overall market.

Jed Smith, Managing Director, Quantitative Research

Jed Smith is Managing Director, Quantitative Research with the National Association of Realtors®. He has worked on real estate issues for the past 20 years, providing input on a variety of housing, commercial real estate, tax, and planning issues. Recently he has been involved in several international studies.

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Comments
  1. This is good information when working with FSBOs, but I have a question. You state that the median sold price for FSBOs is lower than for all properties, but have you removed the possibility that FSBOs tend to be at lower price ranges? This could account for the same difference.

  2. T.J. Doyle, Marketing & Communications Manager

    Jim, thanks for the comment. Yes, that is true, FSBO homes also are more likely to be in rural areas, and are more likely to be mobile or manufactured homes. However, the lower price is also related to the FSBO seller and buyer relationship – many sellers and buyers are friends and family and set the price as the contract is drawn up.

  3. Dr. Brad York

    Jed . . .

    I too support that a simple price comparison between conventional transactions & FBSO’s would result in skewed data. The mentioned 28% does not paint a true picture.

    Our Houston Assoc. of Realtors (H.A.R.) cites the differential to be 15-16% some 2.5 times the market commission rate. And in over 90% of FSBO transactions, the Buyer uses licensed representation who earn a 3% commission.

    My early ‘business plan’ focused primarily on FSBO’s in urban subdivisions, no manufactured homes. A FSBO sign in the yard meant they wanted to sell (no farming) and as our Texas transactions became more complex, it seemed reasonable that FSBO’s might need some ‘help.’ Most did!

    Over some six years serving the FSBO niche, I find the #1 reason for a FSBO was PREVIOUS POOR PERFORMANCE BY THEIR AGENT/BROKER. Cost of commission ranks 3rd!

    As an Independent Broker/Brokerage, I shaped my plan to be ‘commission rate responsive’ and offered a written “Service Performance Guarantee.”

    On average, 3 out of 4 FSBO’s contacted sought my representation. Of the 3, I qualitatively selected but 2. Then further, 1:3 Listing Contracts results in an Intermediary transaction.

    In summary, FSBO’s prepresent a unique market niche; generate meaningful commissions; and are always open to focused service.

    Is that not what we do every day? And did I mention referrals?

  4. Carol Palomera

    Hopefully everyone knows founder and former CEO of ForSaleByOwner.com had to hire a Realtor to sell his condo! Google it to read articles.

  5. Richard Tebaldi

    but of course, the NAR has nothing to gain by writing (or spinning) this article…..
    NOT!
    It may really depend on the home seller’s training and abilities, as well as the market, but I spoke with my R.E. lawyer, and “difficult” is not the word I’d use to attempt to save R.E. fees kind of money!
    What also bothers me is that I don’t feel the seller, who pays the bills, get proper representation. The buyers, on the other hand do. Maybe they should pay the realtor!

  6. What I’ve done is posted a rebuttal: http://www.chicagonow.com/getting-real/2011/10/can-a-realtor-really-sell-your-home-for-28-more/ to let people know how wrong this post is. It’s embarrassing that the NAR’s Managing Director of Quantitative Research would a) make a math error in their post and b) totally misinterpret data for the purpose of furthering the agenda of realtors. This is what gives realtors a bad name.

  7. Josephus Doe

    I wish the NAR would post an apology for their share of causing the real estate bubble. They’re quick to point a finger at everyone else, (Mortgage brokers, appraisors, heck, even the stupid consumer who bought their slick sales pitches) but never do they accept any fault for what has occurred in real estate. )And by extension, what they did to our entire economy and country.)

    Instead, it’s a lot of spin and a lot of HARD CORE lobbying to the stupid imbeciles in Washington.([Every home sold supposedly creates how many full time jobs? And how many of those purportedly created are commissions for the listing and buying agents?)

    Or the entire industry’s patent acceptance of conflicts of interest, like dual agency, or realtors that are also mortgage brokers, or countless other nefarious practices. (Would anyone else walk into court, accused of some crime or another, and ask for the prosecutor to also defend them?)

    Or when was the last time anyone heard of a Realtor (R) ever being disciplined or sanctioned for illegal, immoral, or deceitful practices? I guess it just never happens for Realtors (R), right?

    In any case, best of luck to all of you out there. Jed, there just might be a politician who needs a good spin doctor like yourself. Nothing quite like incomplete and/or misleading information, so as to forward a false conclusion, right? (After all, if you don’t tell at least one lie a day, you’re not a Realtor (R).)