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The Vanishing FSBO

By Robert Freedman, Senior Editor, REALTOR® Magazine

Sales might be down for many of you but so is the competition from FSBOs.  An analysis of buyer and seller data that NAR collects annually shows a fairly dramatic drop in for-sale-by-owner transactions over the last two decades.

In 1991, 19 percent of sellers, or almost one in five, sold their home as a FSBO, and 77 percent retained the help of an agent. In 2010, fewer than 10 percent sold as a FSBO and 88 percent, or almost nine in 10 sellers, worked with an agent. That’s a 14 percent increase in favor of agents over that 19-year period.

You might expect FSBOs to go down since the tough market began several years ago, but the trendlines have been heading south for far longer than the downturn, suggesting other factors at work.

One shift we’re seeing is that FSBOs are increasingly private transactions. In 2003, the first year NAR started looking at the question, a little more than a third of FSBOs, or 36 percent, knew who their buyers were upfront. By last year, that number had increased to 50 percent. That’s a 38 percent shift.  That suggests FSBOs are increasingly hesitant to go it alone unless they have their buyer lined up before they take the plunge.

On prices, the data suggests deals involving agents fetch quite a bit more: $199,300 typically versus $140,000. That kind of differential has long been the case. But as with any statistic about pricing, deeper analyses are needed to know whether that differential is caused by agents’ ability to more accurately price listings or whether FSBOs tend to congregate at lower price points or in lower-cost markets. It could be a combination of these factors.

The data comes from NAR’s 2010 Profile of Home Buyers and Sellers, which NAR released  in November 2010. Since release of the report, NAR Research has been going back into the data to examine bits and pieces of it. This latest look at FSBOs is one of those targeted examinations of the data. A short summary of the FSBO findings, with some tables, is posted at the NAR Research page on Facebook.

Robert Freedman

Robert Freedman is manager of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at rfreedman@realtors.org.

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Comments
  1. Smart move by homeowners. I’ll start by saying I’m a licensed Realtor in Las Vegas, so you may think I’m biased, but let me share with you my FSBO experience. Most buyers that buy a FSBO are specifically looking for one so they can “cut out” the Realtor commissions. Other sellers are more than happy to negotiate off the price the Realtor fee as well. So this means sellers would net (put the same amount in their pocket) as if they had the professional help of an agent. However, I’m willing to say they could get more with a Realtor. Even when the market was super hot and I heard stories of buyers waiting in Home Depot to find someone that came to buy FSBO sign. I believe this person could have put a lot more money in their pocket had they put the home on the market and created a bidding war. Even in today’s market, utilize all the tools that are available to a home seller, especially the MLS is one of the fastest ways to get the most for your home. Remember, an agent will also guide you through the many terms of a deal, due diligence negotiations, state required disclosures (yes, even for FSBO’s), closing and more.

  2. I dont blame people at all for wanting to get top dollar for their home….but what most fail to consider is “why are potential buyers looking at FSBOS?”. My research says that most are doing it to get a deal…so if the FSBO is going to have to discount the house to get it sold, it seems to negate the reason for selling it that way to begin with.

  3. We think one of the new successful models going forward will be a hybrid of the traditional MLS service and the fsbo strategy. As we know, most fsbo’s fail because they fail to reach the right buyer (exposure).

    If however, local buyers are cataloged and aggregated on a local level (some 70% of buyers, buy within 10 miles of their current residence – please correct me if the stat is off a bit) – then a business that connects sellers to those buyers in the dynamic database would certainly bring the cost of transaction down – one of the main purposes of “going it alone”.

    Thanks,

    Brian Hickey
    teardowns.com

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