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FSBOs Beat Real Estate Agents: NAR Survey Challenged

Published by Joseph Ferrara June 15th, 2007 in Sellsius Real Estate Blog.

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A new study by economists at Northwestern University, The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadison.com, showed for-sale-by-owner (FSBO) sales, on average, netted owners more money than sales using a real estate agent and the local MLS, even with the commission factored in. However, the study also showed the FSBO homes took longer to sell (duh). The study covered actual transactions from 1998 to 2004 in Madison, Wisconsin, coincidentally the home of FSBO heaven website FSBOMadison.com, which has the news on its home page. The real estate sales data was taken from the MLS and the city assessor’s database of closed sales.

This evidence flies in the face of the much ballyhooed NAR Home Buyer & Seller Survey from 2005 that claimed sellers who used a real estate agent netted 16% higher sales prices than those that sold without an agent. Now which is the truth—-study or survey? Does it have anything to do with Madison, Wisconsin and FSBOMadison.com? You decide. Then tell us.

Other interesting findings and implications:

  • 20% of the overall market was FSBO
  • moving from FSBO to MLS adds 68 days on market
  • houses initially listed on MLS sell faster
  • less exposure of FSBO houses to buyer pool was a factor in the delay in sale
  • patient sellers with liquid, easy to sell, properties favor the FSBO platform (impatient ones prefer MLS)
  • patient sellers try to connect with smaller buyer pool in FSBO platform before moving to MLS and larger pool of buyers
  • FSBO platform provides a cheaper way to explore a subset of buyers for an offer
  • 87% of FSBO properties eventually sold, 95% on the FBSO platform
  • Rarely did a MLS go FSBO
  • FSBO success varied by neighborhood
  • the premium to FSBOs after statistical adjustments was 4%, on average
  • FSBOs that switched to MLS commanded a significant premium & were more likely to sell
  • FSBO listings were less likely to sell between 60-90 days
  • FSBOs who are real estate agents get higher prices
  • there was no statistical difference when the time frame was 180 days
  • authors of study admit to findings limited to the market studied

Source: New York Times, June 8, 2007 (article by Jeff Bailey)

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  • Darren Kittleson
    I live and work in the Madison, Wisconsin market. I blogged (http://activerain.com/blogsview/119287/Just-Whe...) about this on activerain last Friday. I question the newsworthiness of a study from 1999-2004 when we're now in 2007.

    FSBO is strong part of this market. It was even more so during the boom years of this "study". In spite of that, there were still many Seller's who hired real estate agents to handle the sale of their property.

    I believe FSBO has and alway will be a viable part of the market. The NY Times fascination with fsbomadison.com still baffles me. This is the 2nd feature written about this business model in the past 3 years by the Times.
  • It's interesting that FSBO's who are real estate agents get higher prices but can't seem to get the same higher prices for the owners they represent.
  • I never discourage someone from selling fsbo. A fsbo seller earns the money he saves and deserves every penny. Just like someone who remodels their own home. You need to have the DIY mentality, time, and patience to FSBO. There will always be those who want to hire the service to be done and so as long as I provide good service I will have work.
  • This is America afterall and we have freedom of choice.
  • If 20% of the market is FSBO, how many end up turning to a real estate agent to sell their home?

    I just know their are a lot of people who try and go the FSBO rought but can't sell their home on their own. 20% just seems like a high number, or maybe I am way off here.
  • Very interesting! Although I think that Madison is one of the very quirky markets where FSBO really got traction in the late 90's.
  • 20% in Madison Wisconsin. It is high.
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