FSBO / For Sale by Owner, Such a Hot Topic in The News That the National Association of REALTORS Comments
The original Jan. 3rd. NYTimes article on a for sale by owner website called FSBOMadison is still drawing lots of attention and appears to have added fuel to the fire. So much attention that it appears that even the NAR had to respond to the article. Here is the NAR's response.
So in reading the response of this letter there are some interesting items to take notice of. First Mr. Stevens states the advantages of selling using a REALTOR but fails to point out any specific benefits of actually using a agent, just the traditional canned response "makes up for the cost, not to mention the savings in time, effort and hassle" blah, blah, blah...
This would have been the perfect opportunity for the NAR to give a bullet point reasons as to why the public should use an agent and really drive home the benefits of using an agent since this has received so much attention. His quote "...failed to provide your readers an accurate picture of the advantages and disadvantages of going it alone", well from what I can tell his response fails on the same level.
The one fact that the NAR responds to with facts is the average sales fecthed by a FSBO is 16% less than homes sold by a REALTOR. A problem that I see with this fact is:
A) the stat is provided by the NAR itself, so it's rather difficult to know if this is true as Title companies (who record real estate transactions with the county recorders) cannot even provide an accurate number of these types of FSBO transactions.
B) Sure the number is going to be less... there is 5 million less transactions to factor into the average. Just a few multi-million dollar NYC condos will skew the number dramatically. Additionally, many FSBO's are family transactions so the family members are purposely discounting the price of their property for their son, daughter, mom, cousin, etc.
C) "...the percentage of homes sold by owners actually declined last year". Did it really? As far as I can tell a flat fee $299 listing is probably considered a FSBO by most (including the NAR who is pushing for miminum service laws to limit this practice) but yet the NAR will count these transactions as a "REALTOR transaction" because a member of the NAR had to place the listing on the MLS, so these "FSBO's" are probably being accounted for as a traditional real estate transaction. My guess (as no-one appears to have a real number of full service to flat fee transactions) is the number of "FSBO's" has actually increased and their average net proceeds is certainly higher that those using a full service traditional real estate agent at 6%.
As a top free nationwide For Sale by Owner listing site we are excited to see the FSBO movement in the news and for home sellers and buyers to begin understanding that there are more options available to them, be it FSBO, ala carte, flat fee or hourly rates.
I think it is important to understand that everyone is willing to pay for real estate services... maybe just not a full 6%. Additionally, a really good (experianced) agent can be worth every cent as they can help try to avoid problems before they arise. One thing is certain, the real estate model as we know it will change in the year to come.
Here are some active FSBO articles from today:
Baltimore Sun - Do-it-yourselfers, Web force Realtors to face a new reality
Channel 3000 - FSBO Madison Featured In New York Times
Herald Tribune - Listing isn't selling
CBS 11 - KTVA - FSBO: an option for homeowners looking to sell
Dear Editor:
Your article about a for-sale-by-owner web site in Madison, Wisconsin (January 3, 2006) failed to provide your readers an accurate picture of the advantages and disadvantages of going it alone when making the most important transaction of their lifetime.
The fact is that using a professional to sell your home more than makes up for the cost, not to mention the savings in time, effort and hassle. The average home sold with the help of a professional last year brought $230,000 while the average home sold by an owner went for only $198,200 a 16 percent difference. It's no wonder that the percentage of homes sold by owners actually declined last year despite the real estate boom in most areas of the country.
Sincerely,
Thomas M. Stevens
President
NATIONAL ASSOCIATION OF REALTORS®
So in reading the response of this letter there are some interesting items to take notice of. First Mr. Stevens states the advantages of selling using a REALTOR but fails to point out any specific benefits of actually using a agent, just the traditional canned response "makes up for the cost, not to mention the savings in time, effort and hassle" blah, blah, blah...
This would have been the perfect opportunity for the NAR to give a bullet point reasons as to why the public should use an agent and really drive home the benefits of using an agent since this has received so much attention. His quote "...failed to provide your readers an accurate picture of the advantages and disadvantages of going it alone", well from what I can tell his response fails on the same level.
The one fact that the NAR responds to with facts is the average sales fecthed by a FSBO is 16% less than homes sold by a REALTOR. A problem that I see with this fact is:
A) the stat is provided by the NAR itself, so it's rather difficult to know if this is true as Title companies (who record real estate transactions with the county recorders) cannot even provide an accurate number of these types of FSBO transactions.
B) Sure the number is going to be less... there is 5 million less transactions to factor into the average. Just a few multi-million dollar NYC condos will skew the number dramatically. Additionally, many FSBO's are family transactions so the family members are purposely discounting the price of their property for their son, daughter, mom, cousin, etc.
C) "...the percentage of homes sold by owners actually declined last year". Did it really? As far as I can tell a flat fee $299 listing is probably considered a FSBO by most (including the NAR who is pushing for miminum service laws to limit this practice) but yet the NAR will count these transactions as a "REALTOR transaction" because a member of the NAR had to place the listing on the MLS, so these "FSBO's" are probably being accounted for as a traditional real estate transaction. My guess (as no-one appears to have a real number of full service to flat fee transactions) is the number of "FSBO's" has actually increased and their average net proceeds is certainly higher that those using a full service traditional real estate agent at 6%.
As a top free nationwide For Sale by Owner listing site we are excited to see the FSBO movement in the news and for home sellers and buyers to begin understanding that there are more options available to them, be it FSBO, ala carte, flat fee or hourly rates.
I think it is important to understand that everyone is willing to pay for real estate services... maybe just not a full 6%. Additionally, a really good (experianced) agent can be worth every cent as they can help try to avoid problems before they arise. One thing is certain, the real estate model as we know it will change in the year to come.
Here are some active FSBO articles from today:
Baltimore Sun - Do-it-yourselfers, Web force Realtors to face a new reality
Channel 3000 - FSBO Madison Featured In New York Times
Herald Tribune - Listing isn't selling
CBS 11 - KTVA - FSBO: an option for homeowners looking to sell
2 Comments:
I am a REALTOR. What is missing from your rant is that not everyone is capable of selling their own homes. They work and can't be home for showings (buyers want to view the property when they
can not at the owners convenience),
Sellers are not trained negotiators nor do they know how to structure the deal, are not experienced in dealing with engineers issues, are not experienced and trained in what to say and what the buyer may interpret that might come back at you later, sellers believe that the commission will be paid to them when they sell themselves, buyers who deal with sellers directly want to save that money and of course who is it that educates the buyers so that when they see your house they know what they are doing??? Most sellers are simply not good at this don't know marketing, advertising, negotiating,etc. Any body can sell a house but it takes a Realtor who is experienced to do it well and ensure that the seller gets the money he/she is entitled to.
Hello Mrs. Bernstein,
First, thank you for your post. Please note that I did state the following in my post: "everyone is willing to pay for real estate services... maybe just not a full 6%". Sure, “not everyone is capable of selling their own homes” but much in the same way that not all REALTORS are "capable" either (considering there are so many brand new agents). But anyway, let me address the issues you have pointed out in your post. Again, these are simple observations and not specifics, so don’t take it personally.
A) "They work and can't be home for showings (buyers want to view the property when they
can not at the owners convenience)" - one thing is for sure, technology allows prospective buyers to view homes inside and out without actually going to the property, through photos and virtual tours. Sites like http://www.forsalebyownercenter.com allow for multiple photos, while notice that many MLS listings / REALTOR.com listings lack photos of inside and out of the properties, which is the reason buyers have no choice but to make appointments with REALTORS.
Additionally, we provide satellite views of the neighborhood again, limiting the amount of needless appointments. Also, many (not all) REALTORS will drive buyers around to show them property just for the sake of showing property to try and develop a relationship while internet buyers tend to do more research on their own before making an appointment to view a home. Note that the 2004 NAR Home Buyers Profile report supports this fact that “internet buyers view less homes” before actually buying and buy a home in less time once they start actively viewing listings.
B) “Sellers are not trained negotiators” – well, as far as I know, a business “negotiation” class is not required when obtaining a real estate license. Additionally, most real estate companies do not offer “negotiation” classes, last I checked. An experienced REALTOR (what I consider one who has more than 2 years experience and has handled more than 30 transaction sides) will certainly be a decent negotiator but not from training… only from experience. Also, most “negotiations” of a real estate transaction is typically 10-20K price differences which is normally “negotiated” in 2-5K increments in 1-3 counter offers at most. It’s does not benefit the REALTOR to negotiate in petty items and small dollar amounts as they run the risk of killing the deal, so once they are close in price they typically “support” the buyer or seller’s decision in accepting an offer.
C) “nor do they know how to structure the deal” – I’m not sure what is meant by this comment but I will assume you are speaking of either the contingencies or closing costs credits. If it’s contingencies, once the buyer and seller have arrived at an agreed price, the contingencies will be partly address by the escrow / closing attorney’s when they draw up the instructions. If you are speaking of closing costs credits, then typically the mortgage lender will be involved in what is allowed as a credit from their lenders and assist in structuring / making changes to insure the credits don’t interfere with the closing. Let’s not forget that there will be more than one party in this transaction that knows what they are doing. There will be the mortgage broker, escrow or closing attorneys, appraisers all of which also want a closed transaction and will do what they can to help the transaction along. Most REALTORS act as a communication intermediary between the seller and all of these other parties. Again, I would need more information from you to properly address your comment.
D) “not experienced in dealing with engineers issues” – I assume that most real estate transactions don’t involve “engineering” issues. If they do, then the licensed “engineer” will provide a report as to what needs to be done to correct the problem. A REALTOR will simply relay this information to the seller to make the final decision as to move forward or kill the transaction. Also, I would assume the most REALTORS are not knowledgeable in “engineering” issues nor should they pretend to “consult” in a field that they are not licensed in as in the medical field this would be “mal practice”.
E) “not experienced and trained in what to say and what the buyer may interpret that might come back at you later” – A REALTOR is supposed to disclose known facts of the property when asked, if not there is a bigger problem at hand. If a buyer asks a question, they are supposed to get an honest answer. The REALTOR must complete the disclosures with the seller. As far as coming back at them, if the REALTOR does not disclose an issue, it’s not coming back to them anyway because the listing / purchase agreements force everyone to “mediation” before going to court. This is also why in a real estate transaction everything must be written and disclosed to be enforceable.
F) “sellers believe that the commission will be paid to them” – I think you mean that they are saving the commission because they are not paying it. This is the obvious reason why they are attempting to sell themselves.
G) “buyers who deal with sellers directly want to save that money” – this is true. In fact, many savvy buyers tend to call the listing REALTOR directly (which agents love) to try and negotiate a price discount of 2-3% because they agent will double-end the deal, so they try a save some of that money themselves. So this can happen be it selling with a REALTOR deal or a FSBO deal.
H) “of course who is it that educates the buyers so that when they see your house they know what they are doing?” – most home buyers are smart enough to understand that they should be pre-qualified for a mortgage before looking a home. This means that a mortgage lender (who is very familiar with real estate transactions and in California are even hold the same license) can assist them on what to do next. Don’t forget the internet, where many people go to get non-biased information and also their own support group of friends and family who may have prior experience. In fact, since there is over 1 million REALTORS in the US (which is 1 of every 300 people is a REALTOR) they probably have a friend who is a REALTOR that will point them in the right direction.
I) “Most sellers are simply not good at this don't know marketing, advertising, negotiating, etc” – I won’t touch the first part of this but let’s just say that it’s a very big “assumption” made by REALTORS just like most home owners make an “assumption” about REALTORS. Marketing and advertising a home is one in the same. There are plenty of sources on the internet that provide this resource… in fact, according to the NAR, the internet is where you need to advertise because that is were 71% of buyers look to find homes. All one has to do is log onto the Google and type “List my home on realtor.com” and they will get plenty of “flat fee MLS” listings which will post their home on REALTOR.com for $499 or place a free FSBO ad on a highly visited site like “ForSalebyOwnerCenter.com”.
J) “Any body can sell a house but it takes a Realtor who is experienced to do it well and ensure that the seller gets the money he/she is entitled to.” – again the key word is “experienced” which is what I stated in my post. It’s just there a thousand’s of agents that are not “experienced” but yet they EXPECT to be paid the same as a seasoned REALTOR. Most FSBO’s who do their home work to sell their home FSBO figure that they should not pay for a REALTOR to get this experience while selling their home.
One common argument by REALTORS, which you left out, is the “pricing of a home accurately”. So let me address this upfront. The price information is available everywhere. They can go to REALTOR.com, Homepages, local newspapers, etc and get the current active listing and even past sold prices. They can request a CMA from local REALTORS whom will price the home for them.
Note that many REALTORS will get upset at this as they feel that they are being used but this is their opportunity to “earn” the business of the seller and demonstrate their market knowledge.
The one thing that successful FSBO’s do, is price their property at a slight discount 1-2% below other agent listed properties to create a win/win for both them and the buyer. In a hot market, this can cause a bidding war which will raise the sales price thereby netting the seller more money and in a cold market, the seller will be the lowest priced listing, providing them a better chance of actually selling closer to asking price.
Also keep in mind, many REALTORS take over-priced listings just to lock in clients for the listing period and come back 1 month later and urge a price reduction to the real price.
In closing, as I stated before, everyone is willing to pay for “real estate services” just not 6%. I am not trying to over simplify a real estate transaction but it's also not rocket science. What it is is coordinating with alot of people for it to come together and it only takes one to drop the ball for a deal to get sticky or delayed. Sometimes the person who drops the ball is the buyer, seller, mortgage broker, title company, appraiser, or REALTOR but the only thing a REALTOR can do is try and communicate with everyone to avoid these problems but they cannot control other peoples actions. If a FSBO understands this fact and likes to asks alot of questions, is organized and detailed, they will successfully sell their home.
A good REALTOR is worth every cent, much like a good car mechanic, attorney, etc. The difference is most other types of careers they don’t feel that they DESERVE to be paid top dollar just because they were licensed yesterday and they are now a professional. Good agents will continue to earn their respective fees but there is going to be a lot more price competition in the real estate business.
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