Study FSBOs Dont Save Real Estate Commission

Dated: 08/24/2017

Views: 26

Image title

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. Find out what your Connecticut home is worth http://bit.ly/2rAckwg

Blog author image

Kris Morin

I was born and raised in West Hartford, spent most of my summers on the Connecticut shoreline and Block Island. I had found my love for real estate in 1990 assisting my mother, before launching my car....

Latest Blog Posts

Pros and Cons of Smart Appliances

Smart appliances can make life easier and more convenient. Since the technology is relatively new, many manufacturers are still working out problems and resolving glitches. Before you purchase a

Read More

Which Home Improvements Offer the Best Return on Investment?

Remodeling your house can be a major investment. Depending on the type of project you choose, you could spend up to tens of thousands of dollars. You want to know that you’re making a wise

Read More

Changes to Real Estate Tax Deductions for 2018 from Bridget Morrissey

As a homeowner, or soon to be homeowner, you can get some pretty sweet tax deductions from things related to your home. Some tend to change from year to year, like those for energy-efficient

Read More

Mystic Real Estate Market Report September 2018 by Bridget Morrissey

The Mystic Real Estate Market Report is a monthly statement of the average sales price for and number of  2 BR, 3 BR and 4 BR homes sold, the total number of sales, the number of active homes

Read More