I really thought we had put this issue to bed a year ago - the real cost or savings of for sale by owner - when some smart guys finally looked at the problem the correct way. For years the National Association of Realtors made outrageous claims about how a real estate agent could get 20 - 30% more for a house than a seller going the FSBO route. This claim was based on the simple observation that the average FSBO home sold for substantially less than the average realtor listed home, conveniently ignoring the fact that FSBO homes tend to be less valuable homes. Realtors then went around publicizing this misleading fact in an effort to get listings from FSBO sellers.
Finally, last year a couple of PhD types looked at the cost of selling a home yourself correctly and actually adjusted for differences in the quality of the homes. Once they did this the advantage of using a realtor basically shrunk to about 5.5 - 6.0%, which is not coincidentally roughly the same as the real estate commission. I don't think it's coincidental because I think the seller negotiates less aggressively because the FSBO seller feels like they are saving on the commission.
Well, despite the NAR acknowledging this excellent study by putting a summary of the findings on their Web site, they have now come back around full circle to their original position. Once again they are disseminating the fake news story on their Economists' Outlook Blog that the average FSBO seller is losing $60,000. Frankly, it's embarrassing.
What's really strange though is that this blog presumably is written by economists and any halfway decent economist knows better than to misinterpret the data this way. So I went back and reread the post again and I suspect that the author, Amanda Riggs, exactly knows better than this but might have been coerced into writing this particular piece by someone higher up. I believe she may have intentionally put some clues in the post to warn us not to believe it's conclusion:
66% of FSBO sales were detached single-family homes, compared to 81% of all homes sold.
13% were mobile or manufactured homes, compared to 3% of all homes sold.
The median income of all FSBO sellers was $86,500 and for those who sold only through an agent was $102,900.
Then, right after talking about the difference in median prices between FSBO homes and agent sold homes she puts in this Note: Home sale prices vary according to many factors, including the type of home, location, a city’s cost of living, and for example, whether a home is sold at “arm’s length. Basically she's telling us to ignore what she just said.
Maybe this post is a cry for help from the author. She's trapped in a building with a group of people who either don't understand how to look at data or are determined to misuse data to promote their own agenda.
#FSBO #ForSaleByOwner #NAR #Realtors #RealEstateAgents
Gary Lucido is the President of Lucid Realty, the Chicago area's full service discount real estate brokerage. If you want to keep up to date on the Chicago real estate market, get an insider's view of the seamy underbelly of the real estate industry, or you just think he's the next Kurt Vonnegut you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.