FSBOs may be losing millions: Bellingham Real Estate with Kathy Auerbach

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FSBOs may be losing millions

FSBOs (For Sale by Owners) may be LM (losing millions)

by Lew Sichelman, United Syndicate

Reprinted from LATimes.com (Housing Scene – May 19,2006)

This is "The Case of the Missing 10%." It's a tale of lost millions, and it stars the thousands of owners who sell their own homes without professional help.

It seems that in their desire to save the 5% or 6% fee that real estate brokers charge for their services, FSBOs – as in For Sale by Owners – earn 16% less than owners of comparable houses who put the transaction into the hands of an experienced agent, according to a survey conducted by …the National Assn. of Realtors…The 1.2-million-member Realtors group says it has the research to back up its claim. A poll of 7,813 recent buyers and sellers located through county deed records found that the median price achieved by sellers with agents was $230,000 compared with $198,200 for those without agents.

That’s a difference of nearly $32,000, or 16%, with no significant differences between the types of homes sold.

The Realtor group isn’t alone when it says the desire to save on commissions can backfire on sellers. Research by two instructors at the University of Texas at San Antonio found tdhat sellers realize little net gain when they turn to limited-service agents to perform some—but not all—the tasks needed to close a sale…Their study revealed that limited-service listings sold for 1.7% less than full-service ones and took 17.1% longer to sell….It seems that limited-service brokerage offers “no dollar advantage.”

Of course, not everyone does worse in the attempt to go it alone. At the top of the market, where even fixer-uppers are selling within hours, it’s tough for sellers to make a mistake. People with “best-in-the-neighborhood” cream puffs usually fetch top dollar, too.

But…the mystery here is this: if you figure that would-be buyers automatically knock 6% off their offers to FSBOs because they know there’s at least that much fat in their asking price, where does the remaining 10% go? One glaring clue to the gap appears to be the inability of FSBOs to market their houses as widely or as professionally as, well, the professionals.

Nearly two-thirds of the unrepresented sellers in the Realtors’ study used yard signs to alert would-be buyers that their homes were on the market. And almost half used word-of-mouth among friends, neighbors and relatives as a marketing tool. Some also advertised in their local newspapers or for-sale-by-owner magazines. One-third held open houses, and a small number used direct mail, just like the pros.

These are all good tools. But fewer than one in five listed his or her home on the Internet, either on its own website or with one such as forsalebyowner.com. Yet, the Realtor study found that three out of every four buyers—77%—went house-hunting online. So go-it-alone house peddlers are missing a big part of the market.

Internet users in the survey visited more houses than nonusers—a median of 11 vs. 6, but with one in 10 touring at least 25 properties before making a decision. Once they jumped behind the wheel, three out of four actually went to see something that caught their attention online.

Interestingly, brokers control all the sites used most frequently by home searchers. Realtor.com, NAR’s official site, was visited most often, followed by sites operated by local Multiple Listing Services, real estate companies and agents. Of course, to list a property on these sites, a seller must sign up with a broker, either a full-service office at full or near-full commission, or a discount firm that charges a smaller fee for the privilege.

FSBOs who participated in the Realtor survey also said they had more difficulty in understanding and completing the necessary paperwork, preparing their homes for the market and setting the proper price than they did in attracting buyers.

It’s hard to see how handling the paperwork affects the eventual selling price, but staging the house so prospects see it in its best light and determining the correct asking price can have a profound effect.

Many folks don’t know how to make their homes show well. They fail to remove the clutter or put away personal items that distract visitors.

If there is a fatal mistake, though, it’s probably that FSBOs don’t price their properties correctly. Do-it-yourselfers simply don’t have the resources to determine an fair and solid asking price.

Although there are websites with tools to help owners determine what their homes are worth, most agents have the best tool—the Multiple Listing Service, which reports both list and sale prices—at their disposal.

Agents aren’t always right. Indeed, they can misread the market, too. But with the ability to determine the prices of the most recently sold homes, they have a sense of the market that nonprofessionals simply can’t match.

Interestingly, brokers control all the sites used most frequently by home searchers.

***

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	You are here: Home > Sellers > For Sale By Owner > FSBOs may be losing millions FSBOs may be losing millions FSBOs (For Sale by Owners) may be LM (losing millions) by Lew Sichelman, United Syndicate Reprinted from LATimes.com (Housing Scene – May 19,2006) This is "The Case of the Missing 10%." It's a tale of lost millions, and it stars the thousands of owners who sell their own homes without professional help. It seems that in their desire to save the 5% or 6% fee that real estate brokers charge for their services, FSBOs – as in For Sale by Owners – earn 16% less than owners of comparable houses who put the transaction into the hands of an experienced agent, according to a survey conducted by …the National Assn. of Realtors…The 1.2-million-member Realtors group says it has the research to back up its claim. A poll of 7,813 recent buyers and sellers located through county deed records found that the median price achieved by sellers with agents was $230,000 compared with $198,200 for those without agents. That’s a difference of nearly $32,000, or 16%, with no significant differences between the types of homes sold. The Realtor group isn’t alone when it says the desire to save on commissions can backfire on sellers. Research by two instructors at the University of Texas at San Antonio found tdhat sellers realize little net gain when they turn to limited-service agents to perform some—but not all—the tasks needed to close a sale…Their study revealed that limited-service listings sold for 1.7% less than full-service ones and took 17.1% longer to sell….It seems that limited-service brokerage offers “no dollar advantage.” Of course, not everyone does worse in the attempt to go it alone. At the top of the market, where even fixer-uppers are selling within hours, it’s tough for sellers to make a mistake. People with “best-in-the-neighborhood” cream puffs usually fetch top dollar, too. But…the mystery here is this: if you figure that would-be buyers automatically knock 6% off their offers to FSBOs because they know there’s at least that much fat in their asking price, where does the remaining 10% go? One glaring clue to the gap appears to be the inability of FSBOs to market their houses as widely or as professionally as, well, the professionals. Nearly two-thirds of the unrepresented sellers in the Realtors’ study used yard signs to alert would-be buyers that their homes were on the market. And almost half used word-of-mouth among friends, neighbors and relatives as a marketing tool. Some also advertised in their local newspapers or for-sale-by-owner magazines. One-third held open houses, and a small number used direct mail, just like the pros. These are all good tools. But fewer than one in five listed his or her home on the Internet, either on its own website or with one such as forsalebyowner.com. Yet, the Realtor study found that three out of every four buyers—77%—went house-hunting online. So go-it-alone house peddlers are missing a big part of the market. Internet users in the survey visited more houses than nonusers—a median of 11 vs. 6, but with one in 10 touring at least 25 properties before making a decision. Once they jumped behind the wheel, three out of four actually went to see something that caught their attention online. Interestingly, brokers control all the sites used most frequently by home searchers. Realtor.com, NAR’s official site, was visited most often, followed by sites operated by local Multiple Listing Services, real estate companies and agents. Of course, to list a property on these sites, a seller must sign up with a broker, either a full-service office at full or near-full commission, or a discount firm that charges a smaller fee for the privilege. FSBOs who participated in the Realtor survey also said they had more difficulty in understanding and completing the necessary paperwork, preparing their homes for the market and setting the proper price than they did in attracting buyers. It’s hard to see how handling the paperwork affects the eventual selling price, but staging the house so prospects see it in its best light and determining the correct asking price can have a profound effect. Many folks don’t know how to make their homes show well. They fail to remove the clutter or put away personal items that distract visitors. If there is a fatal mistake, though, it’s probably that FSBOs don’t price their properties correctly. Do-it-yourselfers simply don’t have the resources to determine an fair and solid asking price. Although there are websites with tools to help owners determine what their homes are worth, most agents have the best tool—the Multiple Listing Service, which reports both list and sale prices—at their disposal. Agents aren’t always right. Indeed, they can misread the market, too. But with the ability to determine the prices of the most recently sold homes, they have a sense of the market that nonprofessionals simply can’t match. Interestingly, brokers control all the sites used most frequently by home searchers. *** Printable version
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