Earlier this month, the National Association of Realtors (NAR) launched a new 11-month, $40 million ad campaign, aimed in part at the For Sale by Owner (FSBO) market. "Two-thirds of For Sale By Owners would use a Realtor® next time,” one of the print ads declares. “The other third swear to never, ever move again."
Is selling a home without an agent really that awful?
Not according to the NAR’s own 2006 Profile of Home Buyers and Sellers. The national survey found that only 20 percent of FSBO sellers would use an agent next time, while 33 percent would sell FSBO again and 47 percent weren’t sure. Clearly, FSBO sellers are happier than the NAR’s ad lets on.
An earlier NAR 2005 Profile also suggests that many FSBO sellers would try it again. Of all the sellers surveyed, those who sold their homes without an agent or broker expressed the highest level of satisfaction with the selling process, with 80 percent "very satisfied" and only 3 percent "very dissatisfied." Of sellers who sold their homes through a real estate agent or broker, only 65 percent were "very satisfied" while 5 percent were "very dissatisfied."
Undaunted, the NAR’s media department has offered a second argument against selling FSBO: “[s]ellers who use a real estate professional make 16 percent more on the sale of their home than do sellers who go it alone.”
This statistic seems to be based on data in the 2005 Profile, which found that the median 2005 sales price for a home that was sold by an agent was $230,000, about 16 percent more than the $198,200 median price for a FSBO home.
But it’s hardly fair to compare agent-assisted and FSBO sales prices. Many of those FSBO transactions (about 40 percent) were to buyers that the sellers knew, like family members, friends, and neighbors. One imagines that the sales prices in some of those transactions were set artificially low. The FSBO properties in the 2005 study also included a disproportionate share of manufactured and mobile homes, which surely dragged down the median price.
For much of the past year, though, the NAR has gloated over the 16 percent statistic, claiming that it’s “one reason the level of unrepresented sellers has declined steadily in recent years.”
Again, the NAR Profiles tell a more complicated story. The number of unrepresented sellers has indeed dropped, from 18 percent in 1997 to 12 percent in 2006. But the most likely reason for this is that many sellers are now able to pay flat-fee brokers a modest amount to get them on the Multiple Listing Service and Realtor.com. These sellers are counted in the statistics as being “represented” by agents even though they put up their own signs, host their own open houses, do their own marketing, and negotiate on their own with buyers.
The decrease in the number of unrepresented sellers, in other words, doesn’t reflect a decline in FSBO transactions so much as a decline in the ability of Realtors to keep FSBOs off the MLS. Until recently, Realtor associations were often able to block these kinds of listings, but the Federal Trade Commission has largely put a stop to the practice.
The thousands of ads that the NAR plans to air this year won’t just deal with FSBOs, of course. One TV ad, for example, talks about the importance of being protected by someone you can trust.
“Realtors adhere to a strict code of ethics,” declares the voiceover, “so you know you’ll be treated honestly.”
1. Concealing the property’s address
Buyers often drive by dozens of homes before coming up with a list of those they want to visit. If they can’t find your home, it may never get onto their short list.
2. Having an empty flyer box
Flyers lure buyers into your home, and help them remember its best features. They also keep buyers’ agents honest. In a slow market, some agents may be tempted to steer buyers towards their own listings—even though doing so violates the Realtor® code of ethics and some state laws. For example, an agent might discourage buyers from looking at homes listed by owners or other agents by saying that these homes have “problems” or that they’re overpriced. It’s harder for agents to do this if their clients have easy access to flyers.
3. Not getting on the Multiple Listing Service (MLS)
For a flat fee of just a few hundred dollars (with no commission for the listing agent), you can get a six-month listing on the MLS, Realtor.com®, and local MLS websites. It’s hard to imagine a more cost-effective way to market your home—Realtor.com® alone gets over 6 million visitors per month. As an added bonus, getting on the MLS will likely stop the flood of phone calls from listing agents who want your business. There’s one catch, though: to get an MLS listing you have to agree to “cooperate with” (i.e., pay a commission to) any agent or broker who finds you a buyer. But you should do this anyway. If you don't cooperate, you probably won't pocket all or even most of the commission savings. Buyers who make offers without the services of a buyer's agent usually expect a price discount.
4. Setting the cooperating broker’s commission too low
Unless your home is selling for at least $1 million, offer a 2.5 or 3% commission to buyers’ agents. Many agents are hard-pressed right now, so they’re paying close attention to commissions. As a result, homes offer higher commissions have a big edge over those that don’t.
5. Making it hard for buyers to contact you
Realtor® associations make it devilishly hard for buyers to find FSBOs and to get in touch with their owners. Realtor.com®, for example, won’t allow listings to be described as FSBOs, nor will it display a FSBO seller’s contact information on its public web pages. (Note: Though flat-fee MLS brokers are required to give their own contact information on Realtor.com® and other MLS websites, good ones will divert all buyer inquiries to sellers.)
All of this is frustrating for buyers who want to find FSBO homes on their own in order to capture the cooperating brokers’ commissions for themselves.
6. Letting a real estate agent host an open house
Allowing an agent to host your open house can entitle him or her to the cooperating agent’s commission if a visitor later makes an offer. For buyers hoping to capture the cooperating broker’s commission for themselves, having an agent at an open house can be a deal-breaker.
7. Setting the asking price too high
From 1991 to 1996, the median price of a home in California fell from $200,660 to $177,270—or by about 11.6%. Smart sellers were quick to lower their prices and many got out of the falling market early. A good rule of thumb in a slow market is to visit competing properties and price yours so that it’s one of the two or three best values in your area and price range.
8. Playing leapfrog with a desperate seller
Avoid getting lured into a price war if you’re competing with a desperate seller. If you win, you may get less for your house than it’s worth. If you lose, future buyers will likely learn of your rival’s sales price and use it when appraising your home. It’s sometimes better to let a desperate seller go first.
9. Taking your home off the market for the winter
If you wait until March to put your house on the market, you may find that prices have dropped over the winter and that your home gets lost in the surge of homes that come on the market in the spring.
10. Giving up and listing with a traditional agent
Listing agents normally charge 2.5-3% of the home’s sales price for their services. That comes to $15,000 to $18,000 for a $600,000 home. If you’re having trouble selling your home, you’ll likely get more bang for your buck if you use that money to either lower your price or boost the cooperating broker’s (buyer‘s agent’s) commission. In a slow market, buyers’ agents play a much larger role than listing agents in determining which houses sell.