FSBO vs Agent What about the NAR statistics?

Real Estate Agent with StepStone Realty, LLC

You've heard the statistics about FSBO vs Agent:  For Sale By Owner sells for 13% less than an traditional listing.  Does anyone know this is true?  How is that statistics derived?  It is a statistic that comes from the National Association of Realtors.  So that does make the average person wonder how accurate or unbiased the statistic is.  The other factor is that it is a statistic for the entire US so does not take into consideration your particular area and its demographics.  FSBOs are an average of about 9% of the sales and are normally done by people whose homes are at the lower price points and include some homes that would not be easily sold due to financing conditions, etc.   It is not necessarily an apples to apples comparison.

So do I think FSBOs sell for 13% less than a traditional listing?  Not necessarily because it depends upon a number of things such as the market conditions and the seller having access to properly price their house.  In my experience,  most times sellers overprice their house because of their emotional attachment but also because they have not walked and viewed most of their competition in person.  Pictures on the web do not fully present a home.  Walking it does.  Walking lets you see the good, the bad and the ugly.  You can see the wonky floor plan, the beautiful view, the awful next home for sale door neighbors, the parking on the street, the feel of the neighborhood.   The other factor for us is that Texas is a non disclosure state so the real sales prices are not published on an public site.  That means a house listed at $250,000 may have sold for $260,000 or $240,000 but only members of the local MLS will see those figures.   So if you have a product for sale and all you can see is the retail price but not the actual sales price how can you determine a real competitive sales price for your product?  

I have shown FSBOs to my clients but have never had a client pick a FSBO house except one time. 9 times out of 10 my clients didn't like the FSBO house enough to make an offer.  Did the FSBO sell?  Most times it did; just not to my clients.  Did it sell for asking price?  I have no idea as that data is not published anywhere.

Once,  I had  clients who had seen this FSBO house on that big name site and wanted to view it.  So I called the phone number and never got a call back. I emailed.  No response.  Of course, I had identified myself as a Realtor in my VM.  So we drove by and the yard sign was gone.  Thinking it was off market, the clients made an offer on another house they liked; not perfect but the best of all they had seen and they did like it alot.  This particular house had 3 offers within the first weekend it was on market. Our full price offer was  $252,500 for a home built in 2014 1768 sf 3/2/2 on .23 acre. We did not get the house because my buyer had a home that was closing in about 3 weeks and their offer had a contingency that their house must sell for them to buy.

The FSBO was just about a mile away in a very small town so there is not a lot of distinction between areas as most are mixed.  The FSBO was built in 2002  1920sf on .51 acre  4/2/2  listed for sale in July at $269,900--dropped to 262k then to 260k and down to 259k in September.  Nice home on a larger lot with more square footage.   Turns out the FSBO would not work with realtors so would not answer calls from a realtor.  My client drove by again and spoke to the owners mother who invited them in to view the house.  My clients ended up buying the house directly from the owner absolutely happy that they got a larger house with more yard for less than the other house; they paid $249,000.  This FSBO's house sat on market for over 4 months and had it sold for the same price / sf as the other home it would have sold at $275,800 without even considering the larger yard which is a premium.  This FSBO not only lost money but they lost time which incurs holding costs.  Not only did they lose over $10,000 they had to handle all the paperwork themselves.   

Parties:   Do you know what title insurance is and what it does? Do you know how to read it?   Sellers:    Did you know if you make a mistake in your advertising and any statements such as the square footage on a house you can open yourself to a lawsuit? Did you know that the sq footage listed on the appraisal district is not always correct as the district does not come out and actually measure your home?  TX:   Caselaw on home sale sf    ( Also know that every state has its own rules and laws.) 

FSBO leaves a seller to do the negotiating. The seller will be relying on his own skill to finalize a contract, leaving himself open to potential legal problems and a smaller profit when all is said and done.  Whatever one may save in commission they will pay for in stress, sweat and equity to keep up with the legal aspects of the contract. 

Unless one has a background in contracts or law, they may want to leave the paperwork to the experts. The closing process can entail more than 20 pages of complicated legal paperwork, including the contract and addendums designed to cover all aspects of the property from lead based paint to seller disclosures. Do you know which pages you need and what ones to keep in your legal paperwork?   What happens if a seller fills out a sellers disclosure incorrectly? In Texas do you know what a MUD or PUD or a propane zone is?  Is your home located in one of those?  IF it is do you know how to disclose?

Does either party know what to do if the appraisal comes in low or high?  Or requires repairs?  And there is more than the negotiations to sell/buy the house, there are negotiations during the inspections and possibly other areas as well.

What an agent does to help: Your agent will take care of all property disclosures and corresponding documentation to avoid future liability. They are experienced in this as that is their training.

“If the seller does not use an agent and doesn’t know every law and required paperwork specific to their state, they open themselves up to lawsuits,” warns the legal experts.

But many will do so as they either think it is not a big deal or the savings will be worth the hassle.  But ask a real estate agent how many times things have gone south in transactions due to emotions.  It is the real estate agent's job to marshall those emotions and keep the transaction on track.  Does the FSBO have the fortitude to manage not only their emotions and stress level but the buyers' emotions and stress level throughout the entire process?

You know the old saying "A man who is his own lawyer has a fool for a client."  so lawyers' wisdom is that it is not wise to represent yourself.   But with that being said there is a market for For Sale by Owners and some will always do it themselves. 

Posted by

Faye Y.Taylor

StepStone Realty, LLC

210 216-7722

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Erika Rae Albert, Austin Real Estate Expert
E*Rae Real Estate Group- Brokered by eXp Realty LLC - Austin, TX
Exceeding Expectations in Every Transaction

Great article Faye!  I too had questioned the legitimacy of the NAR claim.  I also read recently that an extremely high percentage of FSBOs end up getting sued!

Mar 05, 2018 02:53 PM #1
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

It is interesting reading NARs statistics with FSBOs, and homeowners are protected when using a professional.

Mar 05, 2018 03:52 PM #2
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Faye Y. Taylor

Homes for Sale Floresville, La Vernia & San Antoni
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