Tuesday, February 17, 2009

To FSBO or not to FSBO?

How you sell your home is a lot like when you choose to buy your home -- you get to make the decision based on what's best for you.

by Broderick Perkins
© 2008 DeadlineNews.Com
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Deadline Newsroom - Some homeowners who sell their homes without the assistance of a real estate agent or other professional can get a better price and sell their home faster than others who use a real estate agent.

That's a fact.

FSBOs who close a better deal than those working with a real estate agent are the exception rather than the rule.

That's also a fact.

The small and shrinking share of homeowners who actually succeed in the FSBO (for sale by owner) world typically do so because of conditions unique to the transaction.

More fact.

Don't be discouraged about attempting to sell your own home. It's your right to go FSBO if you choose.

But also don't be misled by FSBO hoopla that promises a hefty windfall without disclosing the risk. Depending upon the price of the home, both savings or losses could be in the thousands or tens of thousands of dollars.

In the open market, in the time it takes a FSBO to successfully sell a home, he or she has to achieve a level of professionalism akin to a level real estate agents spend years obtaining.

Yes, you can sell your own home. It just isn't always a slam dunk.

ForSaleByOwner.com recently announced that the "2008 National Association of Realtors (NAR) Profile of Home Buyers and Sellers" reveals FSBOs receive 97 percent of their asking price, while those who sell with an agent get only 96 percent.

The data also reveals a home sold through an agent takes 10 weeks, while it takes just six weeks to sell a home "by owner."

"This data from NAR shows that people can sell their homes quicker and for closer to their asking price if they don't involve a real estate agent," says Greg Healy, operations vice president at ForSaleByOwner.com.

FSBOs, however, are most attracted to working without a net to save thousands on the cost of a commission. In most instances, the seller pays for the cost of the commission out of the home sale proceeds.

"While the study didn't mention the costs of a real estate commission, it's clear that using an agent means that the seller would generally lose another six percent of their home's sales price," Healy added.

NAR begs to differ. Raw statistics rarely tell the whole story, especially when the data is a relatively small and shrinking sample.

ForSaleByOwner.com's news release cherry picks NAR data without revealing the share of FSBO sales in 2008 was 13 percent, up slightly from the record low 12 percent in 2006 and 2007, but still trending down from the 18 percent peak in 1997.

If the FSBO way is such a good deal, why are their numbers shrinking?

"Forty-five percent of FSBO transactions are between people who knew each other in advance, such as family or acquaintances. The homes are not placed on the open market and are transacted quickly at an expected price," says Walter Molony, NAR spokesman.

The kinship between the buyer and seller would tend to retain the price point and shorten the sales time.

There's more. Factor out properties not placed on the open market and the actual number of homes that sold without a real estate agent plummets to about 7 percent of all resales, down from 10 percent in 2004, NAR says.

And still more. The median home price for sellers who used an agent was $211,000, for FSBO's $153,000, but that's because FSBOs in the NAR study were more likely to be in rural areas or small towns where sellers were more likely to know potential buyers, the home was more likely to be a manufactured home, and the owner's income was likely lower than that of sellers who used agents, according to Molony.

More contradictions

Other reports also reveal the FSBO way isn't a sure thing.

• Last year, "The Relative Performance of Real Estate Marking Platforms: MLS Vs. MadisonFSBO.com," from economics professors at Northwestern University found no gain in the price in selling the home through the Madison multiple listing service (MSL) compared to homes sold on MadisonFSBO.com.

FSBO sellers did, however, save on the commission, as much as $12,000 on a $200,000 home. Listing on the MadisonFSBO.com site cost only $150.

The study also found homes sold faster on the traditional MLS than on the FSBO Web site and 20 percent of FSBO listings wound up relisted on the traditional MLS, which also translates into longer selling time.

Longer selling times can spell disaster even for homes in the best shape. A home on the market too long tends to become stigmatized. In a rapidly falling market, a listing that languishes unsold can also lose value in the eye of the buyer beholder.

"How Much Value Do Real Estate Brokers Add? A Case Study" by Stanford University and National Bureau of Economic Research economists found likewise:

"We find no evidence that the use of a broker leads to higher average selling prices, or that it significantly alters average initial asking prices, However, those who use brokers sell their houses more quickly."

• A more recent Consumer Reports study, "How To Protect Yourself In Today's Rocky Real Estate Market," revealed that 82 percent of respondents who sold with the help of an agent received $5,000 less, on average, than their original asking price. Almost all of the only 17 percent who sold their homes without an agent said they received about what they originally asked.

The same survey revealed getting the real estate agent or broker to reduce the commission could provide the best of both worlds.

Consumer Reports said, "Paying an agent a lower commission rarely had any effect on the sales price. And readers who paid commissions of 3 percent or less were just as happy with their brokers' performance as those who paid 6 percent or more. People who paid extra, in fact, were more likely to say they had regrets about the selling process. The biggest regret? Nearly one-third said they should have been more assertive in negotiating their agent's fee."

The Internet has helped level the playing field for those who want to do the FSBO thing, if only from a marketing and educational standpoint.

However, selling a home also involves legal issues, financial acumen and negotiating skills you can't expect to glean from Internet browsing.

Bottom line?

Don't buy into real estate industry insistence that the only way to sell a home is with a real estate agent.

Don't buy into FSBO fans who frenetically focus on facts that don't tell the full story.

How you sell your home is a lot like when you choose to buy your home -- you get to make the decision based on what's best for you.

Make that your story…and stick to it.

• For FSBO news that really hits home, visit the FSBO News Center

© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also a National Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!

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