Study: FSBOs Don’t Save Real Estate Commission

One of the main reasons why For Sale By Owners (FSBOs) don’t use a real estate agent is because they believe they will save the commission an agent charges for getting their house on the market and selling it. A new study by Collateral Analytics, however, reveals that FSBOs don’t actually save anything, and in some cases may be costing themselves more, by not listing with an agent.

In the study, they analyzed home sales in a variety of markets in 2016 and the first half of 2017. 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.” (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.
  • “Experienced agents are experts at ‘staging’ homes for sale” which could bring 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.” If more buyers see a home, the greater the chances are that there could be a bidding war for the property.

Three conclusions from the study:

  1. FSBOs achieve prices significantly lower than those from similar properties sold by Realtors using the MLS.
  2. The differential in selling prices for FSBOs when compared to MLS sales of similar properties is about 5.5%.
  3. The sales in 2017 suggest the average price was near 6% lower for FSBO sales of similar properties.

Bottom Line

If you are thinking of selling, FSBOing may end up costing you money instead of saving you money.

One response to “Study: FSBOs Don’t Save Real Estate Commission”

  1. Angie Weeks says:

    Thank you for sharing this article, too many seller’s think they will ‘save’ by selling on their own, but it really just turns into a stressful experience for every party involved.

    Selling a property is an art & a science that good agents are constantly striving to excel at. Each listing I take gets drone photos, professional staging, professional interior photos, a Facebook marketing campaign, & an intense online campaign….costing approximately $1000-2000 right out the gates.

    A typical FSBO doesn’t understand that doing these things right will bring them 10,000-25,000 or more in many cases. On top of that, if an owner does not ‘disclose’ or do their paperwork correctly, they could be looking at 10’s of thousands in legal fees.

    I’d encourage anyone thinking about doing a For Sale By Owner to call me at 949-338-7408 so you can net the most money, remain under the legal umbrella of agent protection, and get your property sold without headaches!

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