FSBO vs. Real Estate Agent – Do Agents Sell Homes for $40,000 More?

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RealtorMag just came out with an article about the latest study from the National Association of Realtors (NAR), the 2015 Profile of Home Buyers and Sellers.

The study said real estate agents sold homes for $40,000 more than homeowners who sold their homes themselves without using a real estate agent (also known as, For-Sale-By-Owners or FSBOs). That $40,000 is 19% more.

Does that seem plausible to you? $40,000 or 19% more!

This is, of course, a NAR cultivated myth. Any real estate agent who tells you that you shouldn’t sell your home yourself because real estate agents sell homes for $40,000 more is selling you.

Home sellers have a lot of good reasons to hire real estate agents but this $40,000 argument is so exaggerated it’s misleading.

What’s the trick?

Mobile homes. Probably the biggest factor NAR used to skew their results in favor of real estate agents was to include mobile and manufactured homes in the sample. Mobile homes in particular are cheap compared to other homes and they’re much more likely to be sold as FSBOs. Including mobile homes in the results naturally brings down the median price of FSBOs.

Along the same lines, manufactured homes and condos tend to be cheaper than single-family homes and tend to be sold as FSBOs more often than single-family homes.

It’s not that FSBOs sell their homes for less than real estate agents, it’s that FSBO’s tend to sell less expensive homes.

Try finding a real estate agent to sell your $10,000 mobile home.

When a house costs as much as a used car, it’s likely to be sold like a used car, directly from the seller to the buyer without a broker in between.

Study design. The survey was sent out to home buyers, not home sellers, and apparently it was not sent out to mobile home and manufactured home buyers at all.

Internally inconsistent. More importantly, NAR didn’t mention mobile and manufactured home BUYERS once in their report so why did they include mobile and manufactured home SELLERS in their report? It seems like they’re manipulating the data to get the results they want.

Rural areas and small towns. FSBOs are more popular in rural areas and small towns. Both areas have less expensive homes.

The whole geeky truth isn’t that real estate agents can sell homes for more money, it’s that FSBOs tend to be more popular with inexpensive homes (mobile homes, manufactured homes and condos) and in inexpensive areas (rural areas, small towns and the Midwest).
FSBOs vs. Real Estate Agents. Do agents really sell homes for 13% more?

The Real Number Is…

If the National Association of Realtors wanted to prove real estate agents sell homes for more money than FSBOs, they could easily publish a comparison of the median sale prices of homes sold with and without real estate agent assistance – and here’s the important part – for single-family detached homes (only) in one region, state or metro area (only).

If NAR released that data – data they already have –  I bet it would show the advantage to using real estate agents is less than 6%.

My guess is that NAR would never release such a number to the public if it wasn’t a lot higher than 6% because 6% is what a lot of people pay real estate agents to sell their homes.

Stop The Scare Tactics

Most people are better off using real estate agents to sell their homes.

NAR doesn’t need to resort to deceptive scare tactics to explain to home sellers the value of hiring real estate agents to sell their homes.

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Here’s my detailed post on this subject, FSBOs vs. Real Estate Agents. Do agents really sell homes for 13% more?.

NOTE: Whoops! In the video, wherever I say “$44,000,” I meant “$40,000.” Wow, I watched that video several time and didn’t notice that tick until just now!

 

3 COMMENTS

  1. Great article and video! I especially like your data point about mobile homes. In my experience as a FSBO attorney who has helped over 100+ clients, a lot of my FSBO clients happily sell their homes at a discount because they are selling to family members and friends. Another huge segment of my FSBO clientele is landlords selling to tenants — landlords routinely discount the sales price by 5% or more because they know they are saving money by not having to pay real estate agents, and also because they avoid the expenses that frequently come with listing (i.e., making pre-listing repairs that make the home more showable).

    John Wake is correct in his analysis. When you put all the factors together, it is clear that the NAR statistic is an NAR cultivated myth. I think the professionals in our industry who actually take time to study the numbers, and who have years of practical experience, are likely to know the NAR statistic is a myth. But will that stop the myth from traveling around the U.S. as a FSBO scare tactic – not a chance! And that’s a shame, because…

    As an experienced FSBO attorney, I completely agree with John’s assessment, “NAR doesn’t need to resort to deceptive scare tactics to explain to home sellers the value of hiring real estate agents to sell their homes.” There are already excellent reasons to hire a real estate agent rather than pursue FSBO. To the sellers out there reading this comment — I’m an experienced FSBO attorney and I’m the first to admit this. FSBOs are for confident people, smart people. They are not for the timid and they are not for everyone. For example, you may be in a high-end market where most everyone lists with an agent (and you’d be nervous or embarrassed to do something different in your neighborhood). Or perhaps you lack the confidence to show your home to potential buyers and answer questions from real estate agents. Or maybe you’re nervous you’ll say something wrong or somehow create a liability issue. Or perhaps you don’t know how to set a price for your home, and you want an agent to help you. Agents are also trained negotiators in your corner. All of these are factors supporting real estate agents that should be considered by a seller before pursuing a FSBO. But that NAR statistic is not a reliable data point on which to make a decision. Well done John with tracking the data.

    Based on my experience, FSBO sellers are not foolish- they act in their informed best interest. I would venture that when we exclude mobile homes and family-friend sales from the statistics, it would be seen that FSBO sellers in the aggregate net slightly more profit than sellers with agents. Indeed, I’ve assisted on many transactions where the pricing negotiations were so sensitive that the only way the deal happened at all was because it was a FSBO and the seller didn’t have to worry about 6% commissions.

    • Wow! What a great comment, Greg! I learned a lot from your comment. I especially like your point about the importance of confidence in being successful in selling your home FSBO great. Thanks again, John.

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