I just finished catching up on my feed reader... and I was WAY behind. Behind enough that I am just getting to the Housing Rumble on US News & World Report. Actually, I came to it from seeing Jay Thompson's posts on his PhoenixRealEstateGuy blog.
I think Jay is a great guy. And he is a fantastic real estate agent. But, there is a problem debating about FSBOs on most websites... no matter HOW good your case, there are so many people that just want to pile on and kick the agent that it is almost impossible to win. But, since I am a glutton for punishment, and have several posts to draw on that are right up this line, I'm going to stab at it.
I'd especially love to get comments from people that DON'T agree with my positions.
Now, the question was: Do you need a real estate agent to sell your home?
To start with, the answer is No.
The key to that is the word need... You should want an agent, because it makes good business sense, but not need....
So, the rest of this is going to disagree with the pro-FSBO position as outlined in this series from USN&WR.
Let's start with the numbers...
Take a look at this post for a little more on that. Here is the quick version...
- The "6% commission" referred to in the post is usually only 3%, since every FBSO with sense is offering to "protect" brokers that bring a buyer. So, the $18k he is talking about is now $9k...
- The company that Healy works for charges at least $699 for a package that includes MLS listing... which is a necessity if the seller actually wants to sell. Despite his talk of all of the hits on their site, the places that buyers are looking are places that have the most listings... and the most listings are coming from the MLS. So, now we have barely over $8k...
- Now, on the $899 package, you can get the video tour... ok, you can upload a video tour. But you still have to pay for it. And don't forget a virtual tour. Expect to drop between $300 and $800 for a GOOD virtual tour and video tour. Now having that agent is costing around $7500.
- Staging consultation? $300-500... $7000.
- And now you need to advertise. Expect to spend a couple hundred dollars a month on advertising and marketing. $5500.
Of course, if you want to go over the top and stand out from the crowd, you will spend more. And the money you spend ($3500 in this case) is gone. If the property doesn't sell in 6 months, you get to start over. That is the part that strikes home. Your agent is taking the risk. They are spending THEIR money and only make it back if they are successful. So, to say that Healy overstated his case would be pretty accurate...
Let's talk about those studies he quoted...
The studies that Healy is mentioning are from Northwestern University and Stanford. And frankly, while they do support Healy's points on their face, they don't hold up to a real examination. First we'll talk about NWU...
Please note that this study was given to the NY Times, but not to any peer reviewed journals. There are some very good reasons for that, and they are right in the study. Here is a quote from the study:
The FSBO (pronounced FIZZ-bo) sales results were adjusted for timing, for house and lot size and characteristics, and for neighborhoods to make them comparable with sales by agents. They were also adjusted for what the researchers came to believe is an extra bit of shrewdness that FSBO sellers possess. (emphasis added by me)
Exactly what is the adjustment for shrewdness? And then back up a little to adjust for neighborhood... think that was fudgable?
The final issue with the study is the reporting of the prices. In the case of the agent based sales, the data is from the MLS. Agents are required to report the sales price as well as any seller paid items such as closing costs or points, etc. For FSBOs, they self-reported. And as those of us in the business know, people (buyers and sellers) generally fail to remember the net price, and focus on "the big number." So, without independent verification of the prices, we don't really have an accurate picture.
Finally, this study was done in an area with a very popular FSBO market, and during a very strong market period. During strong markets, getting the word out about a property is easier, and selling isn't as much of a challenge.
What they didn't address in the study is how many of the FSBOs sold v. agent represented properties. They do mention that agent represented properties sold fast that unrepresented properties.
Now we should talk about Stanford's study...
That study focused on properties that are on the campus at Stanford. This is a pool of 800 homes that can only be purchased by faculty and senior staff. As such, even the brokered transactions aren't subject to or influenced by the MLS. In fact, the homes sell for almost whatever is asked, as there is a waiting list. Because of these facts, and the fact that the seller is much more likely to be able to find a buyer on his or her own, there is no advantage to using an agent...
So, dispensing with those studies is easy enough...
What else should we know?
Well, the largest chunk of FSBOs that close are sold to family, friends and neighbors. Did you catch that... the seller and the buyer already know each other. And usually, by the time the seller gets around to calling the agent they have already exhausted those options. And the last study that I saw (sorry, don't have it handy) was showing that only about 14% of FSBOs sold before being listed with an agent. At the same time, 60% of agent represented homes were selling (hot market...). So, FSBOs only had about a 1 in 4 chance of selling their home, and likely to someone they already knew.
Kind of sucks the wind out of his sails, no?
And finally, remember that the FSBO marketers get paid whether the home sells or not. In fact, they know that 86% of the homes aren't going to sell after they cash the check... but that is ok.
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