Real Estate Blog - The FSBO Marketing Hype - FSBO Statistics Don't Lie

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The FSBO Marketing Hype - FSBO Statistics Don't Lie - Or Do They?

"Whoever deals with current public questions is compelled to rely greatly upon the information and judgments of experts and specialists. Unfortunately, not all experts are to be trusted as entirely disinterested." - The Quotable Calvin Coolidge

I recently read several posts written by for sale by owner ("FSBO") marketing companies and facilitators regarding the efficacy of the practice of selling homes for sale by owner. Admittedly, I am not a fan of FSBO transactions. It isn't that an owner can't effectively market and sell their home. It is simply that there are significant potential problems associated with any sale that compels me to fall squarely within the "use a qualified real estate professional" camp. Nevertheless, I was curious about the statistics that are casually and repeatedly thrown around by both sides of the debate.

PREA Signature Realty - www.preasignaturerealty.com

NAR vs. FSBO - COMPETING CLAIMS

NAR CLAIMS: For advocates of using Realtors, the National Association of Realtors often uses the result of its annual survey to support or buttress its argument. On the NAR website, it provides this statistic "the typical FSBO home sold for $187,200 compared to $247,000 for agent-assisted home sales." (2007 National Association of Realtors Profile of Home Buyers and Sellers) The other often quoted statistic is that Realtor assisted sale achieves a 16% premium over FSBO sales.

FSBO CLAIMS: For advocates of FSBO transactions, FSBO facilitators often cite a 2007 study from Northwestern University that concluded that there was no statistical difference between Realtor sales and FSBO sales. For a copy of the study, click on: Northwestern FSBO Study.

MISUSED STATISTICS

Honestly, I am not a fan of the statistics based rhetoric touted by either side. Here are some of the many reasons:

First, there are too many unknown variables. It seems nearly impossible to identify and track FSBO statistics. For example, there are variations of FSBO with sales directly by owner, sales with marketing by FSBO companies, and sales via MLS-only or limited service options available from discount real estate brokerages.

Second, I don't necessarily agree with the NAR statistics. If the average FSBO home sold at a discount between 16% and 25%, it would seem that buyer's agents would target FSBO homes. However, I do not typically see FSBO homes listed at a substantial discount. Often, FSBO homes are overpriced as opposed to underpriced in the market. That is, an unrepresented buyer may, instead of getting a bargain, be overpaying for a home listed FSBO.

PREA Signature Realty - www.preasignaturerealty.com Third, the Northwestern University study should be read by some of the FSBO marketing companies before it is widely quoted. Here are some of the problems with the study that are rarely mentioned by the FSBO companies marketing materials.

The study was limited to the Madison, Wisconsin real estate market. The Madison market is unique in the high percentage of FSBO transactions (26% of all homes listed for sale in Madison are FSBO).
The study was limited to the period 1998 to 2004 which was a seller's market in Madison, Wisconsin. The study indicates a need for further study of the impact of the cyclical nature of the real estate market.
The study found that there was no premium associated with listing a home for sale on the MLS versus FSBO by owner.
The study found that 68% of FSBO listings sold compared to 86% of MLS listings sold. On an annual basis, the success rate (ie. sold) for FSBO listings ranged from 55% to 72%.
The study found that a significant percentage of FSBO listings that sold where located in neighborhoods adjoining college campuses in Madison, Wisconsin.
The study found that MLS listing sold with fewer days on market (ie. faster).
The study didn't quantify the impact of holding costs on FSBO transactions and didn't quantify the impact of the stale FSBO listing on sales eventually achieved via the MLS.
The study concluded that the MLS performed better as a sales model or platform based in terms of expected time to sell and probability of sale.

Before you decide to attempt a FSBO listing with a FSBO marketing company or before you list your home with a discount brokerage offering MLS-only or limited service, you may want to explore the possibility of listing your home with a full service brokerage under an exclusive agency agreement. Under an exclusive agency agreement, you employ a real estate brokerage to list your home for sale and agree to compensate that brokerage if they procure a buyer while retaining the right to market and sell your home directly without paying a sales commission.

Are you Considering Listing your Home For Sale by Owner? Before you do so, contact Ryan Shaughnessy at PREA Signature Realty at 314-971-4381 or by e-mail to Ryan@PREASignatureRealty.comfor a free consultation to discuss the potential problems of FSBO transactions and to discuss how our brokerage can assist you with the marketing and sale of your home.

For more information on how PREA Signature Realty approaches the listing, marketing and sale of homes, view our slideshow listing presentation or visit our website:

Listing Presentation - PREA Signature Realty

View more OpenOffice presentations from Ryan Shaughnessy.

________________________________________________________________________________________________

PREA SIGNATURE REALTY

PREA Signature Realty is a full service brokerage located at 1709 Park Avenue in the Lafayette Square neighborhood of the City of St. Louis. PREA Signature proudly serves the following city neighborhoods: Lafayette Square, Soulard, Benton Park, Benton Park West, Downtown Loft District, Forest Park Southwest, Central West End, Tower Grove East, Tower Grove South, Compton Heights, Shaw, The Hill, Dogtown, Carondelet, Holly Hills, St. Louis Hills, Dutchtown, and the Other Historic Neighborhoods of the City of Saint Louis, Missouri.

The opinions expressed herein represent the opinions of the author only and do not reflect the opinions of PREA Signature Realty. All photos and written content were produced by PREA Signature Realty. All Rights Reserved - PREA Signature Realty (2009). This content may not be reproduced or reprinted, except for Active Rain re-blogging, without express written permission of PREA Signature Realty.

For more information, visit our website at www.PREASignatureRealty.com or contact Ryan Shaughnessy at 314-971-4381 or send an email to Ryan@PREASignatureRealty.com.

Posted by Ryan Shaughnessy, Broker/Attorney - Your Lafayette Square Real Estate Partner on 06/08/2009 05:22 AM

Comments (39)

FSBO's in the Home Selling Channel

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39 Comments on The FSBO Marketing Hype - FSBO Statistics Don't Lie - Or Do They?

JUN

Ryan

I have worked FSBOs for years and I agree that there are many companies that put a lot of distortion on FBSOs. Just like any other home if it is not priced right you are coming out of the gate with a disadvantage.

Tom - I absolutely agree - staging, competitive pricing, good marketing, and qualifying the buyer result in a sale. The post that I read was especially irritating as it complained about commission - but failed to explain any of the pitfalls of FSBO. Add to the mix the Madison statistics and it was one of the most misleading FSBO marketing company ad pieces that I have seen in recent years.

I've sold FSBO homes. Who got the credit for that? The FSBO owner/seller or the Realtor who managed the transaction? Mmmmmmm.

I believe that the stats for SOLD FSBOs are all inflated. They include a lot of Realtor assisted sales, MLS assisted sales, etc.

I speak with FSBO owners regularly who want me to find a buyer for them. FSBO owner/sellers know how to list their homes. What they don't know is how to sell them.

I am a compulsive market watcher. IMO, the actual number of FSBO managed sales is probably no more than 3-5% of the total closed transactions and that may be high.

I spoke with a relocating buyer in TN last week. She has her home advertised as a FSBO. I asked her how it was going and she said O.K. She had an open house and lots of folks came through.

The difference in an Open House by a FSBO seller and an agent is that the agent knows how to guide buyers to making an offer. FSBO sellers just smile. Or, they take an offer from a buyer with a 450 credit score.

Ryan,

Great post. Thank you for dispelling the myth on those statistics. Also, I like your presentation.

Ryan...

Are we talking about true FSBOs, FSBO Brokers, or limited service brokers ... as you said, you can paint any picture you want with statistics. I am going to examine the study, I know that I'll find some flaws in it!

Watch out Ryan you have now got the ENFORCER hot on the trail of flaw finding. ;-) This is a good study and in my humble opinion a look at both sides of the argument/discussion.

BTW, congrats on the gold star.

Great post. It looks at both sides. There are savy sellers who can do well if they have the time but most sellers have other jobs so they do better listing with agents.

Lenn - I agree with your comments and assessment. I had heard the statistics from the Madison study quoted. However, I hadn't seen or read the actual study. It is worth taking a look. It is about as useful as the national statistics on existing home sales (at least as they relate to my market).

Emmaniece - Thank you for reading. It is an interesting study. However, it is often misquoted by FSBO marketing companies. The actual conclusion is that MLS is a more efficient economic model. More importantly, there are many caveats - which render it virtually meaningless in most markets.

Richard - If I understand the data, it is based on listing data supplied by FSBOMadison.com. It appears to focus only on those homes sold via the FSBO website. It is interesting because it doesn't seem to distinguish between the various types of FSBOs. Similarly, it doesn't seem to recognize that there are brokerages that are not members of the MLS. Maybe it does - but I didn't see it if it is in there.

Gita - I found it interesting that the study does seem to support the theory that if you don't need to sell and are patient enough you may achieve a higher price. The study is interesting because it actually supports both sides in different respects. However, when I searched for comments and citations, it seemed to be used solely by FSBO marketing companies.

Don - The study would seem to have some glaring flaws. The sample is based on Madison, Wisconsin. It relies on data provided by MadisonFSBO.com. It only looks at a market that was generally appreciating. I am curious how those statistics would play out in today's market.

Ryan, great post and worthy of that star you have there.

All statistics are tough, I know there are things which skew my own market stats. Homes that expire, homes that are relisted, etc. But to base the information for the reason to go FSBO on one small market in an area of the country that doesn't apply to the rest of the country is really wrong.

Thanks for this info, I have bookmarked this and will be referring to it often.

Andrea - I long ago discovered that statistics didn't mean much to my business. But, this one kept popping up periodically so I thought I would read it. I can't say it has much impact in my market - except that it is used to promote FSBO transactions.

Give me some numbers and I can make the statistics look good for whomever you want them to look good for. Ask the right questions, they might not look so good.

Gabe - I absolutely agree with your comments - plus only one part of the study is ever quoted. There is something for both side in this one.

If I were a traditional agency in Madison, WI I would definitely be putting the results of the study in my advertising.

Ryan, you can make statistics say anything you want, just like you can skew values to say what ever you want (almost) when looking for comps. But, I do believe that realtor assisted sales yield a much higher price and that's not just because I'm a realtor/broker.

I love that...."If you torture data, they'll admit to anything" that is brilliant...

The study of FSBO sales should include monitoring the stress level of those who choose the FSBO route. I have "rescued" so many FSBOs by now (26 at last count) who say, "I'm just so glad not to be handling this anymore!"

I will not quote statistics, but make an observation. Writing a Board certified contract in Oklahoma that is approved by the real Estate Commission, fact checked by attorneys, approved by the State legislature since we are a state that has statue real estate representation seems to be a safer path. It stands to reason that without a Realtor and the protections in a legally well scrutinized contract with specific guidelines, that the chances of a lawsuit based on the transaction would be much less that two amateurs going at it alone.

Cherry - It isn't a pro-MLS study. It concludes that MLS is most efficient model. However, FSBOs that do sell achieve a higher price.

June - I agree that Realtor assisted sales achieve a higher sales price on average. However, I don't know how to truly classify the sales. It seems that a number of sales get charged to Realtors under the study that are not sales by full-time listing agents by full service brokerages. In addition, the study doesn't tell me how many FSBO homes are sold by real estate agents.

Konnie - My favorite quote is from President Coolidge so I gave it the headliner spot. But, I did like the tortured quote comment.

Dawn - There is a convenience factor. There is also a capability factor. Not all owners are willing, able or capable to do all of the things that need to be done to market, sell and convey a home.

Joe - I agree with your comments. Working with real estate professionals does decrease the likelihood of mistakes and gives the seller and purchaser a certain piece of mind.

Ryan, I think it's fair to say that I'm in support of limited service brokerage and flat fee mls listings:) And I agree with previous posters that statistics can support either argument. Working in this business model, I agree with Lenn's comment that the actual FSBO numbers (at least in MD) are much lower than reported. Considering it's such a small segment of the business, there will probably always be misused statistics, unfortunately.

Hi Ryan -- A true statistics person knows that study design, size of the dataset, and a host of other things (including dependent and independent variables) make the analysis of real estate next to impossible in most cases.

Nishika - I am not a proponent of FSBOs or sites that promote FSBOs. Many FSBO listings are not shown by our office simply because they make it too difficult to show or because they do not guarantee or protect an agent's commission. I view our role as a counselor and problem solver offering solutions to our customers. We do some legal work for owners who have gone the FSBO route - but it is mostly contract review or undoing a transaction that has gone terribly wrong.

Chris - I agree. Methodology and data sample makes a huge difference in the results. Real estate is extremely difficult to track because the data often isn't available or is too non-specific to be useful.

I don't like the NAR stats because they are not used well. At least in my area, higher end homes are sold almost exclusively through agents because working folks don't have a ton of time to sell their own home. This really brings up the averages for us. Most FSBO's in my area, are less expensive to begin with. The average prices are bogus as a result as far as I am concerned.

The Northwestern Study and there was a Stanford study that had a similar conclusion. The Stanford one was also based on FSBO's around the campus, rather than a real comprehensive look. There are neighborhoods where FSBO's do just fine around me, and others that I know will be listed by an agent. I can skew a study either way depending on which neighborhood I choose.

Bad data, on all fronts.

Sigh, I think I've seen some of those 'stats' too. :) We recently went on a listing appointment and everything went great except the seller could not get over the have to pay commission part. They decided to go FSBO - with a lower price than we suggested. Needless to say there as been ZERO action what so ever. Out of all the FSBO stories I think I have heard of 1 went ok - not sure if the buyer got a deal though. ~Rita

Ryan, the NWU also has another flaw. When you read the actual study there is a brief mention that the authors of the study adjusted the sales data to account for various differences in the properties... So, how accurate were the actual prices quoted? We don't know.

I wrote about it a couple of years ago.

JUN

Melina - I agree with your comments. The study and the quoted statistics really don't mean much in my book - except to be able to respond to them when someone mentions them at a listing appointment.

Rita - I had someone who was listing their home FSBO. They had no showings in part because they created obstacles to showings. Call to show. Owner to accompany. No Supra or lockbox. Showing times before 9 a.m. and after 4 p.m. Just didn't make any sense - didn't sell and is now for rent.

Lane - I saw the adjustments. The interesting part is that the study is really about FSBOMadison.com vs. MLS and not sales by Reators vs FSBO. However, the stats have been widely misquoted.

Ryan,

Congrats on the gold star. Yes, statistics can be manipulated.

Ann

Ann - Thanks for reading... manipulated by both sides in this case...

Ryan,

This just does not seem right!

Ann

Like Lenn, I wonder how many FSBO's that sold reflect the fact that the buyer had an agent? I like the way you look at the issue and think that any study that looks at only one market area is flawed when applied nationwide.

Christine - Thanks. Lenn and you are absolutely right. The study doesn't delve into how many sales are procured by buyer's agents.

JUN

Ryan, thanks for checking this out and giving another side to the story. I have always thought the NAR stats weren't right, especially the part about the % difference the homes sell for. I can't honestly use that statistic because it always seemed so overblown.

Sharon

Sharon - Bad stats on both sides make for an interesting mudsligging contest.

JUN

I dont watch the stats that much what I can tell you is usually when I call on a FSBO it is overpriced. Thats my two cents.

Carl - I tend to agree with you. It may be a good deal for the seller if they can find someone to overpay for a listing but I haven't found many bargains for my buyers.

JUN

Ryan - You have a lot of valid points regarding FSBO's, as do many of the agents who commented. I think the best information you have given is to try and get an Exclusive Agency Agreement with the FSBO's. It's the best of both worlds, by allowing you to find a buyer, and allowing the FSBO to still be able to find their own buyer.

Troy - I know some agents don't like exclusive agency agreements. I am willing to take the risk with an exclusive agency agreement because I believe that real estate professionals bring more to the table than a sign in the yard and balloons on the fence post. So far, I have had one listing cancelled because the owner leased a unit before we did. Every other time, we have sold or rented the unit first.

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