In this fast moving, hot real estate market, some homeowners might consider selling their homes on their own or For Sale by Owner (FSBO). They believe that they don’t need a real estate agent and that they can save the commission for the services a real estate agent offers.
However, a study by Collateral Analytics reveals that FSBOs don’t actually save anything, and in many cases may be costing themselves more, by not using the services of an experienced agent.
In the study, they analyzed home sales in a variety of markets. 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 had used an agent?
The study makes several suggestions:
“There could be systematic bias on the buyer side, particularly buyers who rationalize lower-priced bids with the logic that the seller is “saving” on commission. Such buyers might specifically target sellers who are not being represented by a skilled agent.” In other words, ‘bargain lookers’ might shop FSBOs in hopes of getting a deal.
“Experienced agents are experts at ‘staging’ homes for sale” which could bring more money for the home.”
“Properties listed with a broker 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 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.
Conclusions from the study:
FSBOs achieve prices significantly lower than those from similar properties sold by Realtors using the MLS.
The data suggests the average price was near 6% lower for FSBO sales of similar properties.
As Dave Ramsey, America’s trusted voice on money, explains: