FSBO vs Realtors

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About a year ago I explained the concepts behind MLS and why complete real estate listings are not often found online. I’ve had a few recent comments by Michael Atkinson and Don Junkin of FSBOSystems, a company that aims to help people sell homes without the aid of a Realtor. Each comment likens their company to Etrade, saying that they will do for real estate what online stock trading sites did for real estate.

I’d like to cut through the marketing speak from the gentlemen from FSBOSystems. FSBO is nothing at all like ETrade for houses. That’s a false analogy.

ETrade cuts out the middleman and lets you execute trades without a broker. A Realtor is more similar to a financial adviser than a stock broker working a trade desk. The sort of stock brokers that Etrade eliminates don’t give you advice, help you find the best stocks, or plan your future.

That’s what a Realtor does. They help you find the best home, sell your home quickly, and guide you through the most complex legal process that most people will ever encounter. A FSBO or cut-rate broker won’t give you that.

I’m also wary of statistics from undisclosed sources. Mr. Atkinson claims that the “FSBO market is 25%” but fails to offer a verifiable source. Exactly what is meant by “FSBO market?” The number of homes sold? The number put up for sale? The number listed in the MLS?

The most recent numbers that I’ve seen shows that 16% of all homes sold in the US are FSBO. That’s a far cry from 25%.

What also doesn’t get mentioned by FSBO companies are statistics that are far more likely to interest a home seller. How fast do FSBOs sell and for what amount of money? In my experience, FSBOs take longer to sell and don’t receive as much per square foot as similar homes sold through an agent.

There’s all sorts of reasons for this but the primary one is that a buyers agent is much less likely to show a FSBO home or to sell the buyer on the home. It’s harder for the agent to work with an amateur, so many will avoid it. Another important reason is that FSBO homes aren’t sold as well as an agent-listed home. The less work put into selling a home, the slower it’s going to sell and will sell at a lower price. You already have a full-time job. Do you have time for another one? That’s what selling your home is.

And many FSBO sellers mis-price their home. How do you know what your home is worth? By talking to your neighbor about what theirs sold for? By getting an appraisal? Appraisals are largely fiction. When you refinance, your mortgage broker the appraiser what they’d like it to appraise for. As long as there’s no major reason why it shouldn’t, that amount becomes the appraised value. And so what if you know what the home down the street sold for? Do you know how much to add on for that pool in your backyard? Or how much to deduct because your roof is aging? Your Realtor does.

I recently sold my home. Even knowing what I do about real estate, I used a Realtor. And unless your job is real estate, I’d suggest that you do as well.

Jim Stewart
November 14, 2006 5:22 AM

Let me start by saying "There are no absolutes". Which means there is not one perfect way for all situations? There three types of sellers. The seller who knows time is money and has no desire to be involved in the marketing, selling and showing of his/her home. The other buyer doesn't have enough equity in their home to afford a real state agent. The third type of seller has maintained the home and wants to get the most out of it without paying a commission. Each type of seller has their place in the market and no one seller is better off then the other. Technology has changed how we buy and sell real estate in this country. Real estate agents are no longer the "Gate Keepers". Buyers are finding their own homes on the internet. Sellers are capable of filling in the blanks of the contract, addendums and disclosures. Real estate agents still provide three key ingredients that sellers cannot do themselves. They can expose their home to the world via the MLS. They provide the availability to show when a seller cannot (while they are at work, vacation, socializing etc). Finally they do have the process down to a science. They can expedite and streamline the process while working out the various kinks that always arise. They know who to call for various situations and they eliminate the "Junk Fee's". The latest trend is towards selling a home is "Discount Brokering". Brokers are drastically discounting the commission. They usually keep the commission to the selling agent higher and lower the listing agents side. This way they get the listing which generates phone calls which increases sales overall. The commission for the buyer’s agent is motivating and the buyer can still save thousands. It is an all around good solution for everyone. There is plenty of room out there for all of us and every situation is unique. I encourage FSBO to allow one time showings from real estate agents with approved buyers and place that information on their advertisement. This will also entice buyers who are apprehensive about buying a FSBO because they are unfamiliar with the process. I encourage agents to provide FSBO with free advice and CMA's to help them determine the best price while keeping the sale legal and ethical. Let FSBO know that you will coordinate the closing for a nominal fee. All of this keeps our profession respectful and provides a good service to the consumer. An agent can spend a lot of money advertising and marketing but establishing a good reputation is priceless!

Shawn Doucette
November 16, 2006 1:23 AM

Private sale right for you? Sitting there wondering which is the best way to market your home? Here are some things to consider. Private home sale is growing here not because its the right marketing system for every one of you, but because its the right option for most of you. Every year, more of you go private than the year before. Thats a statistical fact. In time, the private sale market will surpass the MLS. Its a simple matter of self-interest. Youve made For Sale By Owner NB the only growing segment of the New Brunswick residential resale market because most of you think that $20,000 or $12,000 or $8,000 of your homes equity is a lot of money to lose to a commission. Private sale is right for you if you understand that the real estate market is an economic tide that lifts the price of all homes on the market (or, in a tight market, lowers all home prices). You understand that the marketplace (thats really you and everyone else shopping for a house) and the mortgage lenders who have to approve your loan, dont care how a house is marketed. Either the house and the price are right or theyre not. Private sale is right for you if you think you know more about your home than any realtor will ever know. Its right for you if you resent the scare tactics designed to keep you from selling your home yourself. You think they are an insult to your intelligence. Its right for you if you personally know one of the hundreds of people who are already successful For Sale By Owner NB clients. For you, the myth that the Multiple Listing Service and that high commissions are necessary, has been shattered for all time. And its right for you if it has occurred to you that the only reason the private sales market has grown is because it works. The competition suggests that each private sale is a fluke. But hundreds of flukes later, its clear private sale is here to stay. And most of all, private sale is right for you if you understand this one immutable truth: If your asking price is in the ballpark, your home will sell; if its not, it wont, no matter how much or how little youre paying to market it. So, if youre still wondering which way to go, just do the arithmetic: How much would you walk away with if For Sale By Owner NB helped you sell your home or if you paid a Realtor to do it? Best Regards Shawn A. Doucette President For Sale By Owner NB Ltd. 658-0000 www.forsalebyownernb.com

Bruce Fournier
November 21, 2006 3:52 PM

I have worked with for sale by owners and found them to be quite friendly and a great source of business.Thier home is on the market along with all the other homes and watch for an opprtunity to sell the home for a fee that is fair. If they don't want to pay my fee, I don't try to sell the home. I offer to help with any paper work, ect. What ever I can do. I get leads for Buyers, I have the opportunity to sell them a home or I often get the call to list the home. I see it this way; it's thier home they can take a chance or hire me.

Mark C
December 5, 2006 9:20 PM

Most FSBO listings that I have come across in the last little while are open to, and generally offer right on their listing a “buyer commission” or an invitation to cooperate with a “buyer agent”. It appears most are quite happy with the 3% listing agent savings, which amounts to @ $8500+ (nothing to sneeze at) on the average home sale. Most have paid the fee for of Flat Rate MLS listing (Realtors breaking rank) to take advantage of the additional exposure that Realtors enjoy over FSBO’s. I agree, many homeowners are simply not cut out to successfully list and sell their own home and expect to save the entire 6% real estate commission. I do however feel that a Flat Rate MLS and an agreement to pay a Realtor a pre-agreed upon percentage to bring them a buyer and negotiate a successful sale is very realist. Realtors, especially in large cities where the majority of home sales take place, rarely “double-end” (list and sell) a home sale. Typically they are splitting the commission between themselves and another agent (listing agent and selling agent) so a Flat Rate MLS really doesn’t appear to cost them anything. If their client wants to buy a FSBO with a Flat Rate MLS they show it, write up an offer and sell it and collect their regular commission. It does, however, affect them in the long run and their association is well aware of this, it could take a large chunk of their collective revenue if they simply became “Buyer Agents” and were only able to collect half the commission on each home. That explains why they are legally challenging their own (Discount Brokers and Flat Rate MLS brokers). Discount Brokers are registered Realtors that have decided they can do the same for less, or they are relying on volume or simply have a lower standard of living then other realtors (go figure). Flat Rate MLS are again, registered Realtors that have decided they can make more money selling a $25 MLS fee for $475 to a homeowner list their home. Regardless, it’s happening, registered realtors are offering Flat Rate MLS everywhere and it appears there is little they (NAR and CREA) can do to stop it. Anyways, national sites like www.freefsbo.com and www.allthelistings.com are here to stay – if the Flat Rate MLS industry can continue then Raeltors will see significantly less $$$$ going into their pockets and more staying in the homeowners ($8500)

Brandon Schlichter
December 28, 2006 12:14 PM

Every time i read a article like this with comments , i always chuckle a bit. I know when i got into real estate , the first thing my broker told me about fsbos was "Rule of thumb is that they sell for 16% less without a Realtor than a comparable would do". To prove or disprove that fact , i took a large subdivision in my area, the sales in this subdivision are very regular and very easy to predict. I took a look at the whole market , ones with realtors and one going FSBO. On the market at that given time , (June of 06) there were about 7 houses listed. 3 FSBO properties and 5 or so listed with local brokerages. The ones listed with the brokers ranged from a price of $106,000 to a price of $125,000 and the fsbos were $105k , $106k and $125k. Every house in this subdivision is a cookie cutter home , 3 bed with 1 bath and a 1 car garage, brick front , small porch on back. Every house's construction is identical ,yard is identical , and the like. Being a listing agent on one of these properties (and this was a fairly popular subidivsion) I had been in every home in the neighborhood atleast once (One of them I showed around a dozen times). Anyway , after tracking all the properties , here's what happned , The LOWEST one had sold with a broker was $105,000 , this particula property was in badly need of repair and renovation, about $5,000 worth of work. The others sold for $115,000-$118,000 with one selling for $122,000 (This one was in the best shape). Now , the marketing time for the FSBO properties was similar , they used the normal means of advertising around here , several websites , yard signs and newspaper ads. Both FSBO properties were in great condition and one had recently been renovated with a complete overhaul , and the second one a partial overhaul. One FSBO sold for $98,000 and the second one sold for $97,000. From my understanding , the FSBO properties sold with $3,000 worth of seller consessions while only part of the ones listed with a broker required a consession. Now lets take a look at that FSBO properties AVG Sales Price = $94,500 Sales price after consession (No closing fees are Included). Broker Listed Properties AVG Sales price = $114,500 after partial consessions are factored. $107,630 would be the Net To Seller price. So , after all that , the individuals who picked a realtor recieved $13,130 MORE in cash at the end than those who did it by themselves. Now , the dreaded National Association of Realtors says that its about a 16% that exists between FSBO and Broker Listed Properties. So in conclusion , my market research says that NAR is right and FSBO companies (And believe me , companies make lots of money when FSBOs are sold without Realtors) Are wrong.

Richard Newquist
January 15, 2007 2:10 PM

From what I've seen, the real estate industry is changing. Listing commissions make no sense because they are about the same percentage for a $100,000 house or an $800,000 house and the agent doesn't do that much more work for the latter case. It is interesting that the big brokers are secretely offering the low-cost flat fee listing to FSBO's who are intractible about selling their own property. FSBO's run into a lot of problems selling their own homes none the least of which is security. I have personally viewed a gaggle of FSBO's properties and they obviously had NO understanding of the risk they are taking. They didn't know who I was and they still showed me the whole place, valuables and all...told me when they would be home...they had no personal security plan. In essence, they were wide open to a robbery or a burglary. It seems to me, that a realtor with a good sense of security could sell that expertise to a FSBO using it as a great way to either get their listing or a flat fee listing (which will probably convert later). The realtor, however, should actually do something to educate the FSBO about safety and security. THAT--would be providing additional service that has actual value!

For Sale by Owner Center
January 17, 2007 9:38 AM

It's a shame that REALTORS focus on scare tatics of why consumers should use their services vs. what actual value you bring to the transaction. A) REALTORS do not screen their buyers either... what at the open houses they take a driver license? Come on... B) As for the legalities... don't forgot that escrow, title and the mortgage lender is involved in the transaction and they must also have a legal transaction in order to close. The REALTOR is not the only gatekeeper in a transaction. Must people are honest and they will complete the property disclosures properly. The NAR purchase contracts are designed to protect the REALTOR not necessarily the buyer and seller. Take a moment to read it and you'll see. C) The data provided by the NAR regarding average sales price is flawed. They use a MEDIAN not an average. The median is a "middle number" in a series of numbers... the average is a sum of all numbers divided by the total number. Most agents don't even understand this fact.... and it's extremely important because a the difference is based on a single number in the set. Here is more information regarding this... http://www.forsalebyownercenter.com/blog/2006/10/do-nar-statistics-of-for-sale-by-owner.html Lastly, the number of successful FSBO's is actually going up. According to last years 2006 NAR Survey... 12% successful FSBO and another 8% used "mls only" which is just a power FSBO. This equals 20% of the market or 1.2 million home owners sold SUCCESSFULLY via FSBO. If you add in the additional 9% who succefully used a "discount brokers" who charge 2-3% which again is just a FSBO on steriods.. you get a total of 29% of the market that sold via a alternative FSBO type model. If 29% of the market sold for 16% less as REALTORS state then the entire national average sales prices in the US would have gone down. Don't get me wrong... some REALTORS are extremely good at what they do and they deserve the income they make... and some FSBO's shouldn't be selling FSBO because they have no clue... but likewise... there are many REALTORS who have no clue and shouldn't be selling real estate and there are many FSBO's who understand real estate better then the agents they interview.

Brandon Schlichter
January 19, 2007 8:59 AM

FSBO Center - There are agents that DO take down DL numbers and license plate tags at open houses. I personally do require them to provide information. For reference , my company's policy is to get everyone we show houses to pre-approved, that way their social security # is on file with someone in case of a event. The use of FSBO is going down , but the use of partially-assisted FSBO is going up. Alot of MLS services require a home to be listed with a broker in order to be on the MLS service , so some people do go with flat-fee brokerages and then co-op to agents. NAR Also has the statistics on agents that do quite poorly. In fact , only about 20% of agents do a good enough of a job to get reffered and continue in business.

Ryan H
January 31, 2007 9:20 PM

Glad to see that Mark C is present to represent his website, FREEFSBO.COM. Mark, you're awfully quick to attack the Realtors both personally and professionally. Could it be that you have an agenda and a personal stake in making Realtors look bad (such as your own pocketbook?) Wouldn't that make you the biggest hypocrite here? You're transparent man. Nobody's buying it.

mark c
March 1, 2007 5:41 PM

Ryan, I really don't think I am personally or professionally attacking realtors - my mother is a well respected 30 year agent - and a wonderful one at that. That said, I also know how "relatively" easy it is to get a real estate license. If you follow my posts, read my articles or visit our website you will see that we/I make it very clear that FSBO is not for everyone. From my perspective, and it is my opinion, the internet has dramatically leveled the playing field when it comes to real estate sales. I suspect you are a realtor, look at your own statistics - they are alarming when it comes to the amount of $ spent on internet related advertising (websites, search, etc) by real estate agents in relation to how prospective buyers search for property - I didn't make them up - http://www.realtor.org/CRTWeb.nsf/files/2006_REALTOR_Technology_Survey_Final.pdf/$FILE/2006_REALTOR_Technology_Survey_Final.pdf I was also in new homes sales and marketing for 12 years – I know the ropes. As far as FreeFSBO.com is concerned we don't "Charge a fee" - hence the name - FreeFSBO.com - we have vertical partnership agreements to redistribute FSBO seller information - that exclusive partnership group INCLUDES realtors that want to approach FSBO sellers to list their homes if and when they are unsuccessful selling it themselves. So we really don't have a "personal stake". I am tired of the NAR scare tactics over the years – “do you know who is walking through your home” – the question I have for Realtors is do you??? My mother’s house was robbed after an out of town Realtor showed her $1 million dollar property to two men in a van (she was robbed of $250K in jewelry). They were never heard from again and the Realtor didn’t have accurate information to track them down. The new “scare tactic” is using a flawed formula (medium price) to make claims that FSBO’s sell for 15% - 20% less then realtor generated sales. As far as being "transparent" or "hypocritical" I have never done anything but represented myself as President of FreeFSBO.com – if I was trying to promote our website I could be significantly cleverer. And again, we're FREE - we don't charge a 6% commission fee!

Tim Cowan
June 19, 2007 11:23 AM

Facts are Facts. There are plenty of people out there buying and selling through FSBO, but who is looking ou tin there best interest? If you are considering buying or selling your home, do your homework. Find a REALTOR that is willing to work hard for you. Find a REALTOR that knows how to market your home. Find a REALTOR that knows the trends of the area. Find a REALTOR that will keep you in the loop. Once you find this REALTOR, then compare it to how much work you are willing to put into selling your house. Does it compare? If the answer is "yes", then by all means sell your house FSBO. If the answer is "no", then call me. There are many people that went to college and took a prelaw classes. We all know the basics, but when it comes down to it. How do you want representing you? Someone that thinks they know what is going on or someone that does it everyday? As a REALTOR, I work under a strick code of ethics and I take pride in representing my clients to the best of my ability. I live, sleep and eat Real Estate everyday.

Alan Jacobson
June 25, 2007 9:39 PM

Read a cautionary tale about a FSBO gone wrong. http://www.fsbogonewrong.com

AzDave
November 7, 2007 3:27 PM

Mark, you do have a personal stake when providing information to clients of yours is your business. You have to perpetuate certain perceptions to ensure future income for yourself. As far as for your mothers incident. Any Realtor worth their fee should be prequalifying anyone they don't know personally before they get in their car. Also... if your mother had a quarter million dollars worth of jewelry why was it not in a safe, especially if you are going to be allowing people into her home? There aer too parts of foolish with that situation. So no one here claims that you are fabricating it, do you have any way to prove the claim?

Mark
February 12, 2008 3:08 PM

Her jewelry was in a safe, in a closet. They took the entire safe which was later located on a backroad - they opened it with what appeared to be a sledge hammer. The safe was supposed to have been bolted to the floor but never was. All it ended up being was a heavier then normal "suitcase" full of expensive jewelry.

Linda
July 18, 2008 12:57 PM

In San Diego, CA, FSBO's have all but dried up and blown away. Just like a lot of Realtors. Realtors can't afford to spend money on houses that are pulled from the market because they aren't making money anywhere. Traditionally they could "average" their loses over several listings. Now the loses in many cases have mounted higher than the income. Buyers spend 100's of hours looking, then find out their previous loan qualification is no longer valid (for sometimes arbitraty reasons, like "We no longer loan with less than 30% down."). Many Realtors have dropped out because their "fat" paychecks (ave. income $25,000 to $49,000) have put them below the poverty line due to sharply increased hours coupled with decreased transactions coming to fruition. Most FSBOs drop out for the same reason. It takes too long, costs too much, and gets too little result. FSBO's would much rather turn the tedious wait over to the few Realtors who have the savings to wait it out. Putting the risk (for ad dollars, time--in terms of dollars per hour, and unimaginable agony from the occassional frivolous law suit) onto the Realtor is the number one reason I can think of to list with a Realtor instead of going FSBO. I would rather save $10,000 on the sale of my own home, too. But even as a Realtor (perhaps especially as a Realtor, knowing what I nkow), I would rather list than go FSBO. For FSBO proponents, why not try negotiating a little back from your Realtor? Sometimes that works, and you still get all your protections.

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