Published 16 February 2020
Not long ago, a Realtor I know had the opportunity to show a listing to a pair of prospective homebuyers who responded to an advertisement. At the conclusion of the showing, the broker inquired about the couple’s current housing situation and buying plans. The duo indicated that they were planning to sell their home in the country and move closer to town. When asked whether they intended to sell their present home or keep it as an investment, the buyers revealed that they did indeed intend to sell their home – by owner.
When the broker inquired as to why they were contemplating selling on their own instead of using the services of a professional, the couple replied with the answer Realtors most often hear: “to save the commission.” But what if selling on one’s own isn’t synonymous with putting more money in one’s pocket? In fact, it’s not.
According to the experts at the National Association of Realtors, “Sellers make more money when they use a real estate professional.” Think of it in these terms: Realtors don’t get paid until the job is done. If selling one’s own home would regularly produce a better result than that produced by a real estate professional, there would simply be no need for sellers to hire Realtors.
An article published in Realtor Magazine drives the point home. The overview cites a study conducted by Collateral Analytics (https://www.collateralanalytics.com/) in which the authors found that “For Sale by Owners tend to sell for lower prices than comparable home sales, and in many cases below the average differential represented by the prevailing commission rate.” In a nutshell, FSBOs put fewer dollars in their pockets than do owners who enlist the services of a Realtor.
According to the National Association of Realtors 2019 Profile of Home Buyers and Sellers, which surveyed in excess of 6,000 buyers and sellers who closed real estate transactions during the year, “Only eight percent of recent home sales were FSBO sales again this year. For the third year, this is the lowest share recorded since this report started in 1981.”
Several factors appear to account for the decline. First, the increased complexities of the transaction process, with more disclosures and legal requirements than ever before; and second, security concerns about the motivation of strangers who walk around at will looking in rooms, closets, nooks and crannies.
Getting the price right is one of the hardest tasks for sellers to accomplish. According to NAR, “FSBOs typically sell for less than the selling price of other homes; FSBO homes sold at a median of $190,000 last year (up from $185,000 the year prior), and significantly lower than the median of agent-assisted homes at $250,000.” The main reasons behind the disparity are that most sellers do a poor job of pricing their homes and have difficulty negotiating a market-rate sales price.
In the end, the survey makes it abundantly clear that sellers who go it alone are not only declining in numbers, they’re putting fewer dollars in their pockets than their agent-assisted neighbors.
See you at closing.
Gary Sandler is a full-time Realtor and president of Gary Sandler Inc., Realtors in Las Cruces. He loves to answer questions and can be reached at (575) 642-2292 or Gary@GarySandler.com.