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Selling Your House on Your Own Could Cost You

 

 

In this extremely hot real estate market, some homeowners might consider selling their homes on their own which is known as a For Sale by Owner (FSBO). They rationalize that they don’t need a real estate agent and believe that they can save the fee for the services a real estate agent offers.

However, a study by Collateral Analytics reveals that FSBOs don’t actually save anything, and in some cases may be costing themselves more, by not listing with an agent.

In the study, they analyzed home sales in a variety of markets. The data showed that:

“FSBOs tend to sell for lower prices than comparable home sales, and in many cases below the average differential represented by the prevailing commission rate.” (emphasis added)

Why would FSBOs net less money than if they had used an agent?

The study makes several suggestions:

  • “There could be systematic bias on the buyer side as well. FSBO sales might attract more strategic buyers than MLS sales, particularly buyers who rationalize lower-priced bids with the logic that the seller is “saving” a traditional commission. Such buyers might specifically search for and target sellers who are not getting representational assistance from agents.” In other words, ‘bargain lookers’ might shop FSBOs more often.
  • “Experienced agents are experts at ‘staging’ homes for sale” which could bring more money for the home.
  • “Properties listed with a broker that is a member of the local MLS will be listed online with all other participating broker websites, marketing the home to a much larger buyer population. And those MLS properties generally offer compensation to agents who represent buyers, incentivizing them to show and sell the property and again potentially enlarging the buyer pool.” If more buyers see a home, the greater the chances are that there could be a bidding war for the property.

Conclusions from the study:

  1. FSBOs achieve prices significantly lower than those from similar properties sold by Realtors using the MLS.
  2. The data suggests the average price was near 6% lower for FSBO sales of similar properties.

Bottom Line

As Dave Ramsey, America’s trusted voice on money, explains:

“Research has shown that, between mistakes, lack of negotiating skills, pricing errors and general exposure on the market, you’ll cost yourself more than the real estate commission…You’ll come out slightly better and with a lot less hassle if you use a top-shelf agent.”

Blog by: www.simplifyingthemarket.com

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    Housing Market: Another Gigantic Difference Between 2008 and 2018

    First Time Home Buyers, For Buyers, For Sellers, Housing Market Updates, Move-Up Buyers

    Some are attempting to compare the current housing market to the market leading up to the “boom and bust” that we experienced a decade ago. They look at price appreciation and conclude that we are on a similar trajectory, speeding toward another housing crisis.

    However, there is a major difference between the two markets. Last decade, while demand was being artificially created by extremely loose lending standards, a tremendous amount of inventory was coming to the market to satisfy that demand. Below is a graph of the inventory of homes available for sale leading up to the 2008 crash.

    A normal market should have approximately 6 months supply of housing inventory. As we can see, that number jumped to over 11 months supply leading up to the housing crisis. When questionable mortgage practices ceased, and demand dried up, there was a glut of inventory on the market which caused prices to drop as there was too much supply and not enough demand.

    Today is radically different!

    There are those who believe that low mortgage rates have created an artificial demand in the current market. They fear that if mortgage rates continue to rise, some of the current demand will dry up (which is a possibility).

    However, if we look at supply again, we can see that the current supply of homes is well below the norm of 6 months.

    Bottom Line

    We will not have a glut of inventory like we did back in 2008 and home values won’t come tumbling down. Instead, if demand weakens, we will return to a normal market (approximately a 6-month supply) with historic levels of appreciation (3.6% annually).

    Blog by: www.simplifyingthemarket.com

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