Does this recent tweet below from the National Association of Realtors seem at all believable to you?
FSBO (pronounced, “fizbo”) is real estate agent lingo for “For Sale By Owner.” FSBOs are home sellers who sell their homes directly to buyers without using real estate agents. Those sellers often put signs in their front yards that say, “For Sale By Owner,” and thus the name.
If you ever want to get into a lively conversation with any real estate agent, just ask them what they think of “For Sale By Owners.” I can’t think of a subject that gets real estate agents more riled up.
Many will dive into a story about a FSBO house that sold for far less than fair market value. It may have happened many years ago but their memory of it is likely to be as fresh as yesterday.
That’s why a tweet like the one above is so popular with real estate agents.
Does That Sound Plausible?
If you’re not a real estate agent, however, does that tweet sound at all plausible to you?
I could believe that real estate agents sell homes for a few percentage points more than home sellers who don’t use agents but 32% seems crazy.
If real estate agents really sold homes for 32% more, wouldn’t every home buyer in the country just go around real estate agents and buy their homes directly from “For Sale By Owner” sellers?
The National Association of Realtors is usually a good source of statistics but they’ve gone off the rails with this factoid.
It’s not that homeowners who sell their homes themselves sell them for less money, it’s that homeowners who sell less expensive homes (mobile homes, manufactured homes, condos and single-family homes in rural areas) are more likely to choose to sell their homes themselves, “For Sale By Owner.”
If you’re selling a mobile home that costs as much as a used car, for example, you’re very likely to sell it the way you would sell a used car, directly from you to the buyer with no broker in between. Mobile and manufactured homes are six times more common among FSBO home sales than among agent-assisted home sales.
In addition, condos are less expensive than single-family homes and they’re sold directly from seller to buyer more often than single-family homes.
The same with rural and small-town homes. They’re less expensive and tend to be sold FSBO more often than homes in metro areas.
As a real estate agent and a member of the National Association of Realtors, I don’t think they need to be so misleading. They have the data. The National Association of Realtors could easily compare single-family homes in metro areas sold with and without the help of real estate agents to see what the difference in price is.
Fortunately, some academics did just that. They only looked at single family homes sold in Madison, Wisconsin and they corrected for differences in the location, square footage and other factors between the homes. They were able to compare the prices of FSBO and non-FSBO sales of similar homes in similar neighborhoods. They had 15,606 home sales in their multi-year dataset. The dataset in the NAR study had less than 7,866 observations to cover the entire United States and for all types of homes.
The Wisconsin study found a 0% price difference between homes sold directly from sellers to buyers without real estate agents (FSBOs), and homes sold with the help of real estate agents.
I agree the vast majority of people are far better off using a real estate agent to help them sell their homes.
But real estate agents should be able to convince home sellers of all the advantages without resorting to scare tactics like in the tweet.
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An earlier version of this article appeared in Forbes.com.