Have you considered selling your own home so you can save money on an expensive agent commission? Then it might be time you considered all of the facts. A new study from Collateral Analytics suggests that homeowners will net roughly the same proceeds whether they sell through a real estate agent or decide to sell on their own and take the FSBO (for-sale-by-owner) route.
Why is that? It’s because agents are more likely to achieve a higher sales prices for properties than comparable FSBO listings — enough to offset their commission fee. The study looked at more than 200,000 FSBO sales and one million MLS sales in 2016 and 2017. They defined a FSBO listing as a non-MLS listing.
“Overall it is clear that FSBOs have a low probability of selling, and if they do they will likely net the same or less after closing issues, plus they are more likely to screw up on disclosures which may lead to lawsuits after the fact, when buyers discover material facts not disclosed,” according to Norman Miller, real estate professor at the University of San Diego who produced the study with Michael Sklarz, the CEO of Collateral Analytics.
On average, FSBO listings sold for about 5.5% less than comparable listings based on size, location and property attributes sold through the MLS, with FSBO listings tending to sell for a little less than their automated valuations and MLS listings tending to sell for a little more. The valuations used were generated by Collateral Analytics’ software.
The 5.5% differential “is remarkably close to average commission rates,” the authors noted. On average, listing agents receive a 2.5 – 3% commission on the sale of your home. It’s also important to keep in mind that a real estate agent’s commission is 100% negotiable so what you pay your agent, is entirely up to you.
Reasons why agents can produce a price premium
The study also offered several potential reasons why agents get top dollar for listings vs. sellers who decide to DIY their home sale.
- Marketing Expertise. With knowledge of how to stage a home, popular repairs, and intimate familiarity with neighborhoods, agents know what buyers are looking for, and paying top dollar for in a home. Agents are out there on the market daily and their marketing expertise shows through their sales.
- Listing Syndication. MLS listings are syndicated to broker websites. For example, First Team Real Estate syndicates all of our listings to literally hundreds of property websites online, where a much larger pool of buyers can view your home. This includes syndication to international websites as well so buyers in China see your Irvine home for sale, for example.
- They take care of buyer’s brokers. MLS listings attract more showings and bids because they offer compensation to buyer’s brokers for bringing a buyer to a sale — whereas FSBO listings often do not. When you avoid paying commissions at any price, you may be avoiding one that exceeds the commission rate of an agent.
When it comes time to sell you home, make sure you understand all of the facts. Selling your own home could help you save money, but it could also leave you at a disadvantage and cost you a top dollar bid for your home. If you’re still on the fence about how to proceed with your real estate goals, sit down a First Team agent and learn more about our strategy for selling homes and never leaving money on the table.