To FSBO or not to FSBO: The problem wiith the data

Before you go, we thought you'd like these...
Before you go close icon
With most people staring at significant declines in value on their homes, skipping expensive real estate brokerage fees has some appeal.

If your home went from a value of $300,000 to a value of $250,000, you can -- in theory -- recoup $15,000 by skipping out on a real estate agent.

But should you? National Association of Realtors data shows for-sale by owners near record lows, but as Inman News points out "many such transactions are complicated to classify, as they aren't technically on the open market because they were between friends or relatives, according to NAR spokesman Walter Molony."
The question of whether for-sale by owners make more money when they sell is similarly hard to answer. ForSaleByOwner.com points out that NAR data shows that sellers in the open market sold their homes in a median six weeks vs. 10 weeks for agent-assisted sales. Agent-listed homes sell for a median of 96% of asking price vs. 97% for FSBOs.

Here are the problems with this data:
  • Survivorship bias: Oftentimes sellers attempt to sell homes but fail. This happens with agent-listed homes and FSBOs. Which route gives you the best chance of selling your home? The data doesn't say.
  • The data on agent-assisted sales is far more complete because there are multiple listing services to rely on. If a guy posts an ad on Craigslist, that's unlikely to end up in any study.
  • Is 96% of sales price really materially lower than 97%? And given that many homes are undergoing multiiple price reductions before they sell, this statistic is especially meaningless. A condo not far from where I live was originally listed at $126,900 but the price was then dropped lower and lower until it fell to $79,900. Then it sold for $76,000 -- 95% of the asking price but less than 60% of the original asking price. But when it's entered into NAR's studies, it's listed as haviing sold for 95% of asking. WIth the number of price reductions that most markets have right now, the "percentage off listing price" statistic is totally worthless if you ask me.
It doesn't look to me like the broker vs. FSBO question is one that can be answered through data, as convenient as that would be. There's no easy answer to the FSBO vs. agent question but if you're looking to sell your house, here are two questions I think you have to ask yourself:
  • How much do you know about real estate? If you're familiar with phrases like pre-approval, pre-qualificatiion, short sale, escrow, contingencies, and REO, you probably know just as much as most real estate agents out there. If you're familiar with the process -- have bought and sold homes with an agent before -- and can do the market research to understand how much your home is worth, you might be fine as a FSBO.
  • How much time do you have and how valuable is your time? In 2007, the median Realtor earned $42,600. If you have a high-paying job and more work then you can handle, you're better off hiring someone else to do the grunt-work of marketing your house -- and saving your time to do higher-payinig work. Using a real estate agent might actually save you headaches and money. If you're unemployed and hard up for cash, selling a home yourself probably makes more sense.
Read Full Story

Markets

S&P 500 2,191.95 0.87 0.04%
DJIA 19,170.42 -21.51 -0.11%
NASDAQ 5,255.65 4.55 0.09%
DAX 10,513.35 -20.70 -0.20%
HANG SENG 22,564.82 -313.41 -1.37%
NIKKEI 225 18,426.08 -87.04 -0.47%
USD (per EUR) 1.07 0.00 0.00%
USD (per CHF) 1.01 0.00 0.03%
JPY (per USD) 113.50 0.02 0.02%
GBP (per USD) 1.27 0.00 0.01%

From Our Partners