Record 103 Million Home Sold... FSBO

According to an article in USA Today, a 40 acre Hamptons, NY ocean view property has been sold "For Sale by Owner", saving the owners well over 5 million in real estate commissions*.

The buyer of the property was Mr. Ron Baron of the Baron Funds investments and the seller was Adelaide de Menil, heiress to the Schlumberger oil fortune.

Of course, this is not your typical home buyer & seller but it does show that "for sale by owner" sales happen in every price range, every day.

Last year, the NAR reported in its 2006 Home buyers & Home sellers Survey that 12% of all homes sold last year were "FSBO" while another 8% were sold as FSBO with an MLS-only (often called "flat-fee mls only" posting).

These "for sale by owner" transactions represents over 20% of all 6.478 million** homes or about 1.29 million homes with a median price of $221K*** for a estimated total equity savings of $17,105,540,000,000!

Real estate commissions are based on the sales price of a home but what most home sellers don't look at is the actual cost of the real estate commission based on their homes actual equity.

Since many homeowners have purchased or recently cashed-out refinanced their homes to high loan to values, they will often see that more of their equity is spent on real estate agent commissions then they will earn from actually owning and selling their home!

Here is a real estate commission calculator that can help determine your net cost of selling a home with a real estate agent or if you should be selling FSBO.


View USA Today article

* Assumes a reported average 5.1% real estate commission.
**Exisiting Home Sales Data
*** Median Price data

NAR Report shows that 46% of Successfull FSBO's would Sell Home by Owner Again

Many real estate agents would lead consumers to believe that they should attempt to sell a home FSBO and those that do will use a real estate agent the next time.

According to the 2006 NAR Profile of Home Buyers and Sellers, FSBO's where asked if they would sell by owner the next time. Here are the results if they did not know their buyer personally.

- Yes, will go FSBO again: 46%
- Not sure: 44%
- No, will use an agent next time: 10%

Surprised... 46% of for sale by owners, indicated they would do it again!

The other 44% was "not sure" but obiviously the experiance / savings were good enough for most to consider going FSBO again.

That is 90% of FSBO's will or may do it again.

Sure, only 10% indicated that they would use a real estate agent the next time but this does not support the horror stories that the real estate community shares regarding FSBO wishing they had used an agent.

What was interesting is that if the FSBO seller sold it to someone they knew, the stats reflected a total of 64% will or may sell FSBO again, while 35% would use an agent.

I would guess that if they did use an agent it would be at a discount, considering they did find the ready and willing buyer.

As techngology and websites like For Sale by Owner Center makes the FSBO transaction easier, we feel that the FSBO market will continue to grow in the future and that the FSBO / MLS only / Discount models will continue to build on their current 29% market share and probably reach critical mass of 50% within the next 4 years.

Especially since most successful FSBO home sellers are already willing to do it again and reap the rewards of significant real estate commissions savings and equity protection.

43% of Real Estate Agents Do Less Than 10 Transactions a Year and More Interesting Agent Statistics

Everyone is still talking about Redfin on 60 minutes, with many agents claiming how much more professional and experience a the "traditional agent" is.... really?

The NAR just released the 2007 REALTOR Technology Survey which has some interesting points but the most telling is probably this from page 7.

- 47% of agents did less than 10 transactions "sides" last year.
- 28% did less than 20 transactions last year.

So lets see, 75% of the NAR members who responded to the survey did less than 1.6 transactions a month with a majority of these doing less than one transaction per month.

This clearly represents the majority of real estate agents, the same ones who claim that they are significantly more professional and experienced than the redfin agents. I fairly certain that the redfin agent do more than 1.6 transactions a month. More transactions... equals more experience at handling problems.

Another interesting statistic was from page 20. If you read agent blogs you will hear that all agents say they deliver great service which gets them referral business but yet the report indicates the following:

- 43% of agents reported that less than 25% of their business came from referrals.

Again, if traditional agents do such a great job and deliver the exceptional service that most seem to claim, why are they only getting 25% referral business?

How about this. According to the 2006 the NAR reported that 71% of buyers searched for homes on the internet but look at these statistics from the report:

- 78% agents advertised on REALTOR.com
- 75% advertised on the local MLS - isn't that why you use / pay the agent?
Another common argument from agents is the amount of documents the agents need to review to close a transaction but on page: 40 of the report.

- 75% reported that there is less than 20 documents needed.

Thats not a whole lot of documents or work. In California, the purchase contract alone is 10 pages. Not a whole lot of time needed to sign and review 20 documents.

This is from page 45 of the report.

- Only 43% of agents enter and manage transaction information.
What kind of work are the agents actually doing?

With real statistics like this, consumers will really begin to question the value proposition of their agents and the cost of their services. This is the reason we created our real estate agent hourly rate calculator.

We also feel that due to information like this the adoption rate from the general public to sell FSBO or use a flat-fee MLS, or discount real estate model like redfin, Coldwell Banker blue edge or Century 21 clickit will only continue to raise from the 29% market share currently reported by the 2006 NAR Buyers & Sellers Report.

Download the 2007 NAR REALTORS & Technology Report.

REALTORS Actually Losing Ground to FSBO and Alternative Real Estate Models

The NAR is often quoted as stating the FSBO's are going down and losing market share but the reality, is that they (we) are really gaining a huge market share.

Don't believe me?

I know many (REALTORS) will quote the 2006 National Association of REALTORS (NAR) Home Buyer and Seller Survey there is a downtrend in For Sale by Owner transactions but you must actually read the report to quote it properly.

Here are the favorite facts of the NAR report:

"We find that the level of for-sale-by-owners is on a sustained decline and is now at a record low..."

- 12% of real estate transactions were FSBO in 2006 (down 1% from previous year)

- 13% in 2005.

- The record high was 20% in 1987

- the cyclical peak of 18% in 1997.

What interesting about the NAR and the report is that unless your purchase it for $125 to read the entire report this important facts are left out. Unfortunately I cannot post the entire report I purchased for you to read as the NAR would come after me but here are these important additional facts:

- 12% sellers successfully completed FSBO transactions - (proudly made public)

- 8% sellers successfully used minimal "MLS only" listing (this is really just a FSBO who paid $300 to get it on the MLS) - not shown in press release.

- 9% of sellers used a "limited service agent" i.e. alternative, discount, ala carte... call it what you want, it's not a traditional agent and not a traditional commission. - not shown in press release.

So when you do the math, that is 29% of the estimated 6,180,000 real estate transactions where NOT completed by a full service 6% agent.

Lets see...

- 29% of 6,180,000 is 1,792,200 transactions.

Now to me that seems like a SIGNIFICANT increase alternative / fsbo real estate transactions from the often quoted 20% high of 1987 when only a total of 3,526,000 transactions were done.

- 20% "all time high" of 3,526,000 is 705,200 "FSBO / alternative" transactions.

Maybe it's just me but 1 million MORE transactions seem like an increase?