FSBOs Don’t Save Real Estate Commisions

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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.

Additional Reasons

Check out the infographic. It shows that the average home sells for about $40,000 more when using a realtor than FSBOs do, in the example, it amounts to 23%. Depending on the price of home, the percentage will vary.  In today's hot market in Snohomish County and other areas of the Puget Sound, realtors may field several offers and help the seller sift through them to find the best fit.

FSBOs take an average of 19 days longer than FSBOs to sell. If you don't have that kind of time, it's best to use a realtor.

In general, people don't realize how much a realtor does behind the scenes. 70% of FSBO sellers found major difficulties in the selling process. A realtor has experience in the process, and the tools to get the sale to completion.

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.

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. A good realtor can market the home in its best light on the MLS and provide more exposure of  the home to other realtors and buyers. A realtor can handle all the showings, do all the paperwork, and usually sell the home more quickly. A potential to make more money and save you time and stress are some of the best reasons to use a realtor!