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June 10, 2017 by Ryan Shaw Leave a Comment

Is selling your own house a financial death sentence?

If you’ve ever Googled any derivative of “selling your own house” (which you probably have because you found this article) you’ve come across a legion of real estate agents that tell you you are a total fool for even thinking about selling your own house.

Most of these agents reference a study done by the National Association of Realtors that says the typical FSBO property sold for $185K while the typical agent-assisted home sold for $240K.

If you take that number at face value, it seems like financial suicide to sell your own house–you could pay commission to realtors on both sides of transaction and come out way ahead of the game.

But when you dig a little deeper into the data, you’ll start to realize the flaw in the study that is leading to this disparity.

The FSBO number includes modular / manufactured / mobile homes and other alternative style homes that tend to sell for less.  These homes also tend to be much more likely to be sold directly from the owner to the buyer with no middle man.

The result?  A highly skewed number which makes the average “FSBO” sale price much lower than the other pool of houses that are represented by an agent.


This comment on a Zillow forum post gave me a good laugh

Ok so this study from NAR is flawed, but do we have another study that actually compares homes that are very similar (nearly identical) in features, size, location etc.  They removed ALL variables except for the one variable we care about:  selling a home with an agent and selling it FSBO.

A study done in the town of Madison, Wisconsin took a look at houses that were sold on the MLS, and houses that were sold on MadisonFSBO.com (a very popular FSBO site in the city).

They looked at only single family homes, and the data set was huge: over 15,000 homes!

It was also done over a 7 year period of time–whereas the NAR study was done over 12 months and included the entire United States (so many variables it will make your head spin).

While the NAR study controlled for no variables, the Madison study controlled for neighborhood location, and details about the house (size, bedrooms, everything).

The results of the Madison study were shocking.

Researchers found that there was 0% difference in sale price between the agent-assisted houses and the houses that were sold FSBO.

Of course, the FSBO sellers also got to keep the 6% commissions and put it in their pocket as well.

If you want to read the Madison study for yourself, you can check it out here: https://www.econstor.eu/bitstream/10419/38634/1/574941975.pdf

Real estate agent and former economist has a nice breakdown of the study and it’s ramifications here if you are looking for further reading.

The truth is, not everyone should be selling their house themselves–BUT a lot more than 8% probably can, and they could save themselves a lot of money in the process.

And you don’t have to give your house away to do it, either.  You just need to have to toolkit to be able to do it right.

If you have the time and the patience to learn a bit about the process, and you have the tools to fast track yourself, you can come out ahead of the game with more money in your pocket–but you have to be willing to put in the work to get the results.

While we are taking the time to debunk myths, here is another myth that needs debunking: “Real estate agents have access to superior marketing, and can get a house sold faster and for higher amounts because of it.”


What agents do have is access to the MLS. You can also get access to this by buying into a Flat Fee MLS service. You can get the same “marketing” that they have and get on the same websites that they can.

There is literally nothing stopping you from getting the same exact amount of online exposure they can get your house.  You’ll probably get even more than they could if you hustle posting the house up for sale on craigslist or using Facebook local ads to sell your house.

If the marketing is what is holding you back, just let go of that thought right now.

If it’s the paperwork holding you back, educate yourself about the exact laws in your state and get an idea of how complicated it is. 


Ask yourself if you have the time, or is it more economical for you to put that time into other ventures, or if a few hours per week is worth the extra money in your pocket.

While the NAR study isn’t very useful to compare FSBO vs. agent assisted sales, it does help give us an idea of the “profile” of the average FSBO seller and what they considered their biggest challenges when selling their own house.

Here is the data from the NAR study:

Another statistic that you’ll come across a ton on the internet is how fewer and fewer people are selling their own house in the past 10 years.

This is actually true.

FSBO sales peaked in the 80’s at 20% of all sales. Since then, we’ve seen a steady decline in FSBO sales, hitting 14% in 2004 and now sitting at 8-10% today.

This might seem counter-intuitive.  After all, we have so many social networks and FSBO websites to promote our house that we didn’t have 10-20 years ago.  Shouldn’t this number be going up?

It should, but a couple things have happened:

1) We had a major housing crisis in 2008 and

2) The main way people find a house is through realtor.com and zillow–which intentionally steer unknowing buyers to real estate agents with their sneaky “contact” forms.

As a result of some masterful marketing, Zillow is at the top of nearly every google search that begins with “houses for sale in ___”.  Realtor.com is right behind it, followed by some less well known names like homes.com.x

Thanks to some recent studies, we know that 90% of buyers start their home search online, so 90% of these buyers are almost all landing on one of these top 3 websites.

These websites certainly have houses for sale on them, but they make their money by selling YOUR information to a random third party real estate agent that has no affiliation to the house the buyer is trying to learn more about.

Check it out:


You can clearly see that the default check box for the contact form is not actually the seller, but is a random real estate agent.

If I sent this form out, I wouldn’t be hearing from anyone associated with the actual property I am interested in.  I would simply be another lead that this agent paid Zillow handsomely for.

Also notice how the actual homeowner is all the way at the bottom of the list.

A ton of people that were simply just looking at houses on their own are now being contacted and ultimately represented by random real estate agents that paid for that lead.  

That is the driving force behind why we are seeing fewer and fewer non agent-assisted transactions.  

For some reason, this point is rarely, if ever brought up in the forums.

It’s the dirty secret of the mass market real estate websites.

There are ways to combat this as a FSBO seller, but that topic will be for another post.  For now, just know that there are ways around this.

Conclusion

To sum things up, we know that the claim that real estate agents can sell your home for 15-20% more than you could on your own is not backed up by any reliable study, and by digging deeper into the data, we can theorize that it’s the main real estate websites that are causing the number of FSBOs to plunge in recent years–not because somehow it’s become harder to sell a house on your own.

Selling a house FSBO isn’t for everyone, but it’s not impossible and it’s NOT financial suicide.  It can be a very smart and lucrative decision if you are up for the challenge.  If you’ve gathered up the gusto to do your research and stumble upon this article, you may just be a prime candidate to give it a shot.

 

Filed Under: Sellers

About Ryan Shaw

Ryan Shaw is the original founder of The Real Estate Witch, a site dedicated to thoughtfully answering the questions of home buyers, sellers, and real estate investors.

Ryan's work has been cited in a number of real estate and personal finance publications, including Inman, Tech Bullion, MSN, and RealTrends.

Education: BA Political Science — University of Southern California

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