Does For-sale-by-owner Work?

By Richard Montgomery

July 27, 2021 5 min read

Dear Monty: I recently read an article that lambasted homeowners for even thinking about selling on their own. We recently sold our home without an agent. The article did not depict how the marketplace works today, based on my recent experience. I saw it as a hit piece written by a real estate-related company that makes their living using real estate agents. The article did not disclose their conflict of interest. You often write about for-sale-by-owners. Does FSBO work?

Monty's Answer: Much of what is written about real estate today is by journalists who gather their material from real estate agents. Here is an excerpt from an earlier Dear Monty article on this subject: "Here is a link to an article  about the home search process published by The National Association of Realtors. Here is a column  from a 1993 New York Times that advises skepticism about surveys. Since this article was published, we have seen the advent of fake news, native advertising and biased survey questions designed to influence opinions. This statement is not to imply that the NAR survey is not accurate, but only that a reader should consider a trade organization authored the NAR survey above."

Full disclosure: The author has an ownership interest in a start-up company currently under development that works with home sellers, including FSBOs.

Does FSBO Work?

Of course it does. Our research suggests over 10% of annual single-family home sales in the United States do not involve a real estate agent. If FSBOs were a real estate company, it would be twice the size of Realogy, which is the largest real estate company in the U.S. The bulk of successful FSBOs find the buyer on their own. The internet has changed the landscape. Anecdotally, 90% of home buyers find their homes online. Today, Search Engine Optimization can target interested homebuyers directly. This technology reduces the need for the MLS. It gives buyers direct access to sellers whose homes interest them.

Nine Reasons an Agent Believes They Add Value

No. 1: They can price your home correctly. However, in a typical MLS market, 25% to 30% of initial listings expire unsold.

No. 2: You have no out-of-pocket costs for MLS and promotion; MLS is obsolete and very expensive.

No. 3: The agent deals with legal and disclosure laws; agents fill in the blanks, but cannot give legal advice.

No. 4: The agent can be 100% objective about your house; no agent knows your home as well as you do.

No. 5: The agent will save you many spent hours. However, this is anecdotal with no independent verification.

No. 6: They eliminate your interaction with a buyer; two parties negotiating directly is superior to filtered negotiations through agents.

No. 7: They eliminate the risk of agents steering buyers away from FSBOs; agents do bring buyers.

No. 8: They are seasoned negotiators; transparent data available to both parties dilutes the need to bargain.

No. 9: They can get more for your home. However, Freakonomics's article titled "Real Estate Agents, Revisited" says otherwise.

What Will the Future Bring?

The for-sale-by-owner movement is gaining momentum every year. Contrary to what the industry publishes, the real estate transaction itself is relatively simple. The real estate industry and the accompanying regulation have made it complex. It will be interesting to watch an antiquated, 120-year-old system compete with developing models. These models simplify the process, filter data and deliver it real-time to the sellers and buyers of residential real estate.

Richard Montgomery is the author of "House Money: An Insider's Secrets to Saving Thousands When You Buy or Sell a Home." He advocates industry reform and offers readers unbiased real estate advice. Follow him on Twitter at @dearmonty or at Email him at [email protected]

Photo credit: Peggychoucair at Pixabay

Like it? Share it!

  • 0

Dear Monty
About Richard Montgomery
Read More | RSS | Subscribe