FSBO: For Sale By Owner Saves Commissions at Expense of Sales Price

water-filling-bucket-with-holesWith so many free, digital resources available, have you been tempted to sell your home as a For Sale By Owner (FSBO)? You’re not alone. The decision to forego the assistance of a Realtor or other real estate professional is more complex than you might think.

You can find plenty of articles and studies online on the topic. Each will come to a different conclusion. Each will suffer from a different weakness or limitation in study design. However, “Saving Real Estate Commissions at Any Price,” a just-released research study conducted by Collateral Analytics, attempted to reconcile these previous conclusions and correct for flaws in previous studies.

The researchers collected data for sales that occurred in 2016 and part of 2017 from the following 13 counties: Los Angeles CA, San Diego CA, King WA, Clark NV, Maricopa AZ, Harris TX, Dallas TX, Fulton GA, Cook Il, Suffolk MA, Mecklenburg, NC, Prince George’s MD, and Fairfax VA.

Their hypothesis was, “FSBO sales will, on average, sell for something less than comparable regular sales when markets are in equilibrium.”

Their conclusions:

  • “[The] results from this study suggest that successful FSBO sellers achieve prices significantly below those from similar properties sold more traditionally by REALTORs via the MLS.  The data used for this study came from a rather normal housing market, not one in rapid rise or decline, and covered all of 2016 and the first half of 2017.”
  • “Using three different sorts of the data and methodologies, we find that the differential in selling prices for FSBOs when compared to MLS sales is remarkably close to average commission rates.  Here we find an average difference of about 5.5% lower prices achieved for FSBO sales compared to MLS sales for similar property, using the most accurate method ever used to control for property differences.”
  • “Assuming that both buyers and sellers pay the commission, one might have expected something less than this average -5.5% result.  It appears that many sellers are avoiding commissions while netting home prices less than they would with an agent-represented MLS sale.  They are avoiding commissions at any price, even one that exceeds the commission rate.”

The study does not land on a definitive answer to the big question — exactly WHY do homes sold by agents via the MLS bring higher sales prices. However, they do identify a number of factors that could have an upward effect on the sales price of agent-represented sales, such as:

  • MLS-listed properties regularly get more exposure among potential buyers than FSBOs do
  • Agent-represented properties are more likely to be staged and presumably more appealing to buyers
  • Agent-represented properties get wider marketing distribution through broker channels
  • Sellers’ agents can offer financial incentives to buyers’ agents

They state that, “The extent to which of these factors dominates is not clear and may in fact change as a function of market conditions. ”

Have you ever done a FSBO sale? What was your experience like? Would you accept a lower sales price for the sake of not paying real estate commissions? Please comment below.

As always, we are grateful for your trust in us and for your referrals. If you — or people you know — are looking to buy or sell a home, I would love to help! Contact me here.

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