An Argument Against FSBO

18 Sep An Argument Against FSBO

Homes for sale by owner, or FSBO, transactions are commonly seen in Boulder & Denver seller’s markets or whenever homeowners want to maximize their profits by not having to pay commission. However, A RECENT STUDY found that on average, FSBO sellers who successfully sell their homes do so at a sales price 5.5% below what would have been achievable with a real estate agent. Here is the conclusion:

Using three different sorts of the data and methodologies, we find that the differential in selling prices for FSBOs when compared to MLS sales is remarkably close to average commission rates. Here we find an average difference of about 5.5% lower prices achieved for FSBO sales compared to MLS sales for similar property, using the most accurate method ever used to control for property differences. Our aggregate analysis for the data during 2017 suggested even larger differentials. In some markets, the differences based on regression models are slightly higher or lower and while they seem to vary over time, the average was near 6% lower for FSBO sales. Prior studies often focused on one metro, much smaller samples, and used fewer controls for property attribute differences.

Assuming that both buyers and sellers pay the commission, one might have expected something less than this average -5.5% result. It appears that many sellers are avoiding commissions while netting home prices less than they would with an agent-represented MLS sale. They are avoiding commissions at any price, even one that exceeds the commission rate. Perhaps buyers do make low-ball offers to FSBO sellers deducting the entire commission, not just the seller’s portion, in their offers? That would explain the results observed here.

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