FSBO vs Realtors

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.