2006 National Association of REALTORS Home Buyer and Seller Survey For Sale by Owner Data Misleading?
According to the new 2006 National Association of REALTORS (NAR) Home Buyer and Seller Survey there is a downtrend in For Sale by Owner transactions…. but is this an accurate statement?
It’s important to note that the NAR represents their paying REALTOR members not the general public. Much like a labor union fights for increases in the income and benefits the employee’s which costs their employers millions, the NAR looks to create a benefit for it’s REALTORS not the public.
The NAR’s primary goal is to try and protect the billions of dollars in real estate commissions it’s fee-paying members earn under current real estate practices.
First let’s look at some of the facts presented by the report that will be preached by hundreds of thousands of REALTORS all around the country to scare those thinking of selling for sale by owner.
For Sale by Owner Transactions Facts
- 12% of real estate transactions were FSBO in 2006
- 13% in 2005.
- The record high was 20% in 1987
- the cyclical peak of 18% in 1997.
The NAR survey stated the following: “A downtrend in the number of for-sale-by-owner transactions is clear”… but is it really? Lets look at these statements from another point of view.
Instead of looking at the percentage of FSBO transactions let’s look at the actual number of for sale by owner transactions:
1987 Total Existing Home Sales = 3,526,000 x 20% = 705,200
1997 Total Existing Home Sales = 4,382,000 x 18% = 788,760
2005 Total Existing Home Sales = 7,075,000 x 13% = 919,750
2006 Total Existing Home Sales = 6,180,000 x 12% = 741,600*
Interesting that the actual number of successful FSBO transactions has actually increased not decreased. What is not indicated within these statistics is how many people actually try to sell their home FSBO?
Traditional Real Estate Model Acutally Losing Ground... only 71% Market Share.
I suggest that the number of successful FSBO is actually up both as a percentage and in total transactions. Why? If you read the report it indicates that 8% used minimal “MLS only” listings. This “MLS” only option did not really exist just five years ago. This is actually a FSBO who is aggressively marketing his property and paying a small fee to an agent to list the property on the MLS but the NAR appears to be counting this as a REALTOR transaction… I don’t think so.
My guess as to the “real” number of FSBO’s for 2006 is 20%, which is the 12%, stated by NAR plus the 8% “MLS only” power FSBO. This would mean that the actual number of FSBO transactions is closer to: 1,236,000 or 20%.
Could it be higher?
Additionally, another 9% used a limited service agent, possibly an “ala carte” type service where they paid 2 or 3% commission or just a flat fee for a particular service like negotiation or anything that is beyond the flat fee mls entry only. There is a very good chance that the people that used these types of companies where originally FSBO.
If you consider the traditional FSBO and these alternative / power FSBO’s then means that FSBO type transactions actually amounted to 29% of total homes sold for 2006… which is: 1,792,220 and was probably higher in 2005.
Proof is in the report.
- 12% FSBO only
- 8% MLS only
- 9% Alternative / Discount
Total = 29% Market Share is alternative / discount / mls only and FSBO
Why is the NAR trying to scare For Sale by Owners?
Real estate commissions. Remember the NAR is the REALTORS union and they represent the real estate community NOT the consumer. They are fighting for the agents to make more money… just like the local labor unions try to get employers to pay employees more.
If we use current median home sale data from the NAR currently at $225,600 this means that the real estate agent community may have lost some significant money to the for sale by owner movement.
12% pure FSBO 741,600 x 225,600 median x 6% = $10,038,297,600
20% power FSBO 1,236,000 x 225,600 median x 6% = $16,718,136,000
… yes that’s billions.
No wonder the NAR spent 25 million in anti-FSBO commercials this year.
Keep in mind; this is not to beat up all REALTORS. Many REALTORS are true professionals at what they do and many home sellers who are not very prepared should use the services of a REALTOR vs. selling by owner. What I don’t like is the spin that is presented by the NAR to consumers to encourage the use of agents as the only viable option.
So the question is this. If we look at the NAR data regarding the number of for sale by owner transactions will they stay the same in the coming years?
Will they continue to go down as the general market slows down and it becomes harder to sell a home?
Will they rise in numbers because home sellers may have no other choice but to sell FSBO because they don’t have enough equity?
It’s important to note that the NAR represents their paying REALTOR members not the general public. Much like a labor union fights for increases in the income and benefits the employee’s which costs their employers millions, the NAR looks to create a benefit for it’s REALTORS not the public.
The NAR’s primary goal is to try and protect the billions of dollars in real estate commissions it’s fee-paying members earn under current real estate practices.
First let’s look at some of the facts presented by the report that will be preached by hundreds of thousands of REALTORS all around the country to scare those thinking of selling for sale by owner.
For Sale by Owner Transactions Facts
- 12% of real estate transactions were FSBO in 2006
- 13% in 2005.
- The record high was 20% in 1987
- the cyclical peak of 18% in 1997.
The NAR survey stated the following: “A downtrend in the number of for-sale-by-owner transactions is clear”… but is it really? Lets look at these statements from another point of view.
Instead of looking at the percentage of FSBO transactions let’s look at the actual number of for sale by owner transactions:
1987 Total Existing Home Sales = 3,526,000 x 20% = 705,200
1997 Total Existing Home Sales = 4,382,000 x 18% = 788,760
2005 Total Existing Home Sales = 7,075,000 x 13% = 919,750
2006 Total Existing Home Sales = 6,180,000 x 12% = 741,600*
Interesting that the actual number of successful FSBO transactions has actually increased not decreased. What is not indicated within these statistics is how many people actually try to sell their home FSBO?
Traditional Real Estate Model Acutally Losing Ground... only 71% Market Share.
I suggest that the number of successful FSBO is actually up both as a percentage and in total transactions. Why? If you read the report it indicates that 8% used minimal “MLS only” listings. This “MLS” only option did not really exist just five years ago. This is actually a FSBO who is aggressively marketing his property and paying a small fee to an agent to list the property on the MLS but the NAR appears to be counting this as a REALTOR transaction… I don’t think so.
My guess as to the “real” number of FSBO’s for 2006 is 20%, which is the 12%, stated by NAR plus the 8% “MLS only” power FSBO. This would mean that the actual number of FSBO transactions is closer to: 1,236,000 or 20%.
Could it be higher?
Additionally, another 9% used a limited service agent, possibly an “ala carte” type service where they paid 2 or 3% commission or just a flat fee for a particular service like negotiation or anything that is beyond the flat fee mls entry only. There is a very good chance that the people that used these types of companies where originally FSBO.
If you consider the traditional FSBO and these alternative / power FSBO’s then means that FSBO type transactions actually amounted to 29% of total homes sold for 2006… which is: 1,792,220 and was probably higher in 2005.
Proof is in the report.
- 12% FSBO only
- 8% MLS only
- 9% Alternative / Discount
Total = 29% Market Share is alternative / discount / mls only and FSBO
Why is the NAR trying to scare For Sale by Owners?
Real estate commissions. Remember the NAR is the REALTORS union and they represent the real estate community NOT the consumer. They are fighting for the agents to make more money… just like the local labor unions try to get employers to pay employees more.
If we use current median home sale data from the NAR currently at $225,600 this means that the real estate agent community may have lost some significant money to the for sale by owner movement.
12% pure FSBO 741,600 x 225,600 median x 6% = $10,038,297,600
20% power FSBO 1,236,000 x 225,600 median x 6% = $16,718,136,000
… yes that’s billions.
No wonder the NAR spent 25 million in anti-FSBO commercials this year.
Keep in mind; this is not to beat up all REALTORS. Many REALTORS are true professionals at what they do and many home sellers who are not very prepared should use the services of a REALTOR vs. selling by owner. What I don’t like is the spin that is presented by the NAR to consumers to encourage the use of agents as the only viable option.
So the question is this. If we look at the NAR data regarding the number of for sale by owner transactions will they stay the same in the coming years?
Will they continue to go down as the general market slows down and it becomes harder to sell a home?
Will they rise in numbers because home sellers may have no other choice but to sell FSBO because they don’t have enough equity?
5 Comments:
I find that arguing over statistics is pointless. The truth is much larger than any combination of data points.
The market of buyers and sellers will breakdown to a predictable distribution of those who want discount services and those that choose somthing resembling full service. Choice is not bad. In fact, it creates an opportunity for Realtors to differentiate themselves and articulate a compelling value proposition. And yes, there is one that can be crafted that is based on true value - not the illusion of it. Like all disciplines, there will be fallout... especially for those poor folks that don't deliver a valuable service - as defined by those who consume that service.
Interestingly enough, I think that the services of skilled Realtors will be in greater demand, not less in the near future. The VAST majority of sellers do not know the first thing about demand generation activities, or product differentiation, or customer segmentation. In a buyer's market, all these things are paramount.
You omit that in 5% of the stated 12% of FSBO transactions the buyer and seller already knew each other. Leaving just 7% of all transactions as "FSBO" in terms of using one of the many options in the FSBO industry.
I am a REALTOR, and what you are stating about NAR is not true. Get your facts straight.. Then, state what you will.
Let's see, I quote a report that is put out by the NAR and you are telling me it's not correct and get my facts right?
Why don't you pay the $125, buy the report, read it for yourself.
I don't see you stating your case or coming up with facts? I'm I supposed to agree with you because of your school-ground like argument... "because I'm a REALTOR"?
As for the omitting the 5% of the stated 12% transacions are FSBO... note that the NAR also does not disclose what percentage of transactions REALTORS did where the people already knew each other either? How many thousands of buyers and sellers paid a full 6% commission to agents even if there was no-marketing done, no mls inclusion, etc because they innocently called an agent they knew to help them open escrow, find a lender and order an appraisal?
Write about FSBO's if you will--that is your right.
But I don't see this becoming some kind of new avenue that the majority of sellers in America will venture into.
Obviously, like agents, you are going to present every argument possible for FSBO because you have a vested interest in it.
I have spoken to several FSBO people and while they are adamant about doing it their self--yet they are ready to pay between 3-4% to me if I will bring someone to them.
One FSBO I spoke with had no clue about what he needed in his paperwork, his earnest money and other matters.
He had priced his home high so he could have some "wiggle room" to negotiate.
I wondered how he arrived at his start number to begin with? Was it too inflated or was he actually below the range he needed to list his home for?
How do you arrive at your numbers for FSBO apart from merely taking the NAR's numbers and doing your work from there?
WHere can I go and look at verifiable numbers for the FSBO market?
Where can we learn about the FSBO's who have had some trouble with their ventures--as agents do with their clients up to, and including, lawsuits?
Hey, I respect your right to do what you are doing--but let us ALL be willing to put forth our source for our numbers and reasoning behind our positions.
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