Homeowners may wonder about selling their properties “By Owner”. The main reason property owners choose to list their home as a “For Sale By Owner” (FSBOs) is because they believe they can save money by not paying broker commissions. However, if you dig deeper into the subject, you will come to appreciate the full value that a professional local Realtor brings to the process. In fact, by NOT using a Realtor – you could end up losing money – not saving it.
There is no doubt that it’s easier and safer to sell your house when using a real estate professional. But what does an Agent do other than put it on the Multiple Listing Service (MLS)? Below are a few things an owner may not immediately think of:
- Greater exposure to more buyers and agents through their professional networks and thus more showings to increase buyer competition
- Professional negotiation skills and experience dealing with the plethora of issues and circumstances that undoubtedly arise
- Professional guidance in navigating the process and ensuring that both parties perform their respective responsibilities
- Legal liability protection from possible legal issues that could surface
- Safe and secure environment for showing the home and tracking visitors
- Access to and use of California Association of Realtors legal forms with their built-in protections for all parties to the transaction
- Supervision and oversight of professional property inspections including home inspections, termite inspections and negotiated repairs
There is no doubt that these services are valuable – but how valuable?
A study by Collateral Analytics, however, reveals that FSBO transactions don’t actually save the owner money and, in some cases, cost them more by not listing with an professional 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.”
The study cites a few reasons why that’s the case:
• “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:
- FSBOs achieve prices significantly lower than those from similar properties sold by Realtors using the MLS.
- The differential in selling prices for FSBOs when compared to MLS sales of similar properties is about 5.5%.
- The sales in 2017 suggest the average price was near 6% lower for FSBO sales of similar properties.
If you are thinking of selling, trying to do it yourself may end up costing you money instead of saving money and exposing yourself to substantial legal liability.