For-Sale-By-Owner Gets Better Price Than Using Realtor

Wednesday, November 3, 2010, 1:10 PM | 3 Comments

The newly established “no-service” platform For-Sale-By-Owner (FSBO) websites gets a better price than if the home seller uses the services of a Realtor and the Multiple Listing Service (MLS).

FSBO does the service better and will put more money in your pocket when you list and sell your house on the website.

Over the years, the thinking has been that the Realtor can get more money for the home seller. But three academics who researched years of home sales say that this assumption is false.

The Realtor charges a typical 6% commission. You could be saving big chunk of your selling expenses by going with For-Sale-By-Owner.

Eye-opening finding…

One of the researchers, Aviv Nevo, Professor of Economics and Marketing at the Kellogg School of Management, offers this main eye-opening conclusion:

“Our key finding is that the Realtor does not offset the cost of the commission. They do not get you a higher price.”

A typical home seller not only saved more money in commission but also got better selling price using FSBO platform.

  • Advantages of For-Sale-By-Owner…

    According to the researchers, people willing to skip the Realtor and sell their own homes are probably better sellers. They have:

    • More knowledge of the market
    • More patience
    • Tougher negotiating skills
    • Do-It-Yourself aptitude
  • Advantages of a Realtor…

    A large proportion of housing transactions are carried out with the help of a Realtor. Advantages to go the route of a Realtor:

    • The Realtor can provide expertise on pricing and make your house more presentable for sale.

    • The Realtor does bargaining and is a big convenience by showing the house, advertising, holding open houses and helping with the paperwork.

    • The Realtor has access to the Multiple Listing Service (MLS), a database that compiles information on all the properties listed by local Realtors.

  • World Wide Web plays a big role…

    The good but no so old World Wide Web is playing a big part on the side of the owner seller. The advent of the internet has affected many markets, mostly for the better. The real estate market is no exception. The internet offers a cheaper and potentially more affective platform.

Using FSBO platform, sellers can put detailed information – photos as well as virtual tours. The platform For-Sale-By-Owner websites provide an alternative platform that competes directly with the MLS network. The actual cost of MLS transactions is the commission minus the price premium an MLS transaction might generate and the financial savings from a faster sale.

The [mis]conception is price premium may largely offset, or even more than make up for, the commission. However, the researchers found that considering that Realtor charges a 6% commission versus $150 for FSBO, the For-Sale-By-Owner seller comes ahead financially.

In a Nutshell
Professor Nevo says “One idea is that people who use this for-sale-by-owner platform are the ones who are more patient.” If you are not in a hurry to sell your house and have the patience to wait for the best offer you can get, then FSBO is the route for you.

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  1. 3 Responses to “For-Sale-By-Owner Gets Better Price Than Using Realtor”

  2. By Li Noftsger on Dec 6, 2010, 4:49 am | Reply

    I’d be inclined to comply with you on this. Which is not something I usually do! I love reading a post that will make people think. Also, thanks for allowing me to speak my mind!

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  4. By Abel Hetjonk on Dec 8, 2010, 3:49 pm | Reply

    Thank you for publishing this here

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