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Study: FSBOs Don’t Save Real Estate Commission | LuxuryValleyHomes.com

Study - FSBOs Produce No Savings

One of the main reasons why For Sale By Owners (FSBOs) don’t use a real estate agent is because they believe they will save the commission an agent charges for getting their house on the market and selling it. A new study by Collateral Analytics, however, reveals that FSBOs don’t actually save anything, and in some cases may be costing themselves more, by not listing with an agent.

In the study, they analyzed home sales in a variety of markets in 2016 and the first half of 2017. The data showed that:

“FSBOs tend to sell for lower prices than comparable home sales, and in many cases below the average differential represented by the prevailing commission rate.” 

Why would FSBOs net less money than if they used an agent?

The study makes several suggestions:

  • “There could be systematic bias on the buyer side as well. FSBO sales might attract more strategic buyers than MLS sales, particularly buyers who rationalize lower-priced bids on with the logic that the seller is “saving” a traditional commission. Such buyers might specifically search for and target sellers who are not getting representational assistance from agents.” In other words, ‘bargain lookers’ might shop FSBOs more often.
  • “Experienced agents are experts at ‘staging’ homes for sale” which could bring more money for the home.
  • “Properties listed with a broker that is a member of the local MLS will be listed online with all other participating broker websites, marketing the home to a much larger buyer population. And those MLS properties generally offer compensation to agents who represent buyers, incentivizing them to show and sell the property and again potentially enlarging the buyer pool.” If more buyers see a home, the greater the chances are that there could be a bidding war for the property.

Three conclusions from the study:

  1. FSBOs achieve prices significantly lower than those from similar properties sold by Realtors using the MLS.
  2. The differential in selling prices for FSBOs when compared to MLS sales of similar properties is about 5.5%.
  3. The sales in 2017 suggest the average price was near 6% lower for FSBO sales of similar properties.

Bottom Line

If you are thinking of selling, FSBOing may end up costing you money instead of saving you money.

 

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Comment balloon 4 commentsJane & Jeff Daley, PhD • September 09 2017 08:01PM

Comments

Agreed!  Don't go FSBO, use a quailified agent....the stats prove it is wiser

Posted by Kristin Johnston - REALTOR®, Giving Back With Each Home Sold! (RE/MAX Realty Center ) 2 months ago

FSBO sellers also incur higher days on market, higher rate of transactions that fall apart, more contract disputes, costly mistakes made in negotiations, costly mistakes related to repair requests. FSBO sellers typically cannot anticipate correctly what their net will be at closing. If there are liens, judgments or other title problems, FSBO sellers usually are bewildered by the process and are prone to costly mistakes. 

 

There is a lot more to selling a house than sticking a sign in the yard and going to closing to pick up a check. 

Posted by Dave Halpern, Louisville Short Sale Expert (Keller Williams Realty Louisville East (502) 664-7827) 2 months ago

I read the study closely.  While the results are the results, I'm not sure the conclusions can be broadly applied.  The study focuses on 13 highly populated counties only.  Only 150 counties (of over 3,000 counties) in the US comprise 50% of the population.  The study uses AVM methodology as a tool to derive their results.  AVM models do not work well in low population housing markets.  Extrapolating urban results to rural areas is risky.

Also, it does not appear the study excluded Flat Fee Listings, which are typically used by FSBO sellers to advertise in the MLS.  Including Flat Fee Listings as agent represented most likely leads to overstating agent represented results and under-representing FSBO results. 

And one comment my stat professor consistently mentioned: "Correlation does not necessarily mean causation"

Posted by Mel Ahrens, MBA, Kelly Right Real Estate, Customized Choices for your Real Estate Needs (Kelly Right Real Estate) about 2 months ago

Greetings Mr. Ahrens:

None of these studies are meant to be applied locally. These are stats from a national perspective and meant to give a benchmark against your local market. Using 150 counties across the country is a good statistical sample.

Gather your local stats by city and that may not be germane to a large community development or even a zip code. Then compare it to the broader example to see the trends of your personal study. This is not meant to be an exact science but a trend benchmark that one can compare to your own marketplace statistics. Make those comparisons and you can help with an improved, informed decision for your client. 

Posted by Jane & Jeff Daley, PhD, Scottsdale Real Estate Arizona (Luxury Valley Homes For Buyers & Sellers Phoenix AZ Area) about 2 months ago

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