A recent study by Collateral Analytics reveals that FSBOs (for sale by owner) don’t save the seller money, sometimes they end up costing more by not listing with an agent. Some sellers believe that they will save money on commission if they market and sell it themselves.
With this study, they analyzed home sales in a variety of markets in 2016 and the first half of 2017. The data indicated 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.” (emphasis added)
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 trying to same money for themselves.
- “Experienced agents are experts at ‘staging’ homes for sale”, this may bring in 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.” When more buyers see a home, there is a greater chance that there could be a bidding war for the property.
Three main conclusions from the study:
- FSBOs receive prices significantly lower than those from similar properties sold by Realtors using the MLS.
- The difference in selling prices for FSBOs when compared to MLS sales of similar properties is about 5.5%.
- The sales in 2017 noted the average price for a FSBO was near 6% lower to similar properties in the area.
If you are thinking of selling, FSBOing may end up costing you money instead of saving you money.
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