FSBO vs. Real Estate Agent Market Trends

Home Selling

FSBO vs. Real Estate Agent Market Trends

March 29, 2018 | by Ben Mizes

FSBO vs. Real Estate Agent Market Trends

With the traditionally high commission fees selling through an agent or broker, FSBO may seem like an attractive alternative that saves money. FSBO, which stands for “for sale by owner,” transactions are when homeowners avoid paying commission by not using a real estate agent. While FSBO may sound simple enough, the statistics show the opposite.

FSBO Listings are on the Decrease

According to the National Association of Realtors (NAR) 2018 Home Buyers and Sellers Generational Trends report, FSBO sales are at a record low. In 2004, FSBO transactions peaked at a decade high of 14% and have been on the decline ever since. Today, just 8% of homes were listed as for sale by owner.

In stark comparison, agent-assisted sales are at record highs. In 2017, over 89% of sellers and 87% of buyers reported working with a real estate agent or broker, a consistent figure across most age groups. Particularly, 90% of both buyers and sellers under the age of 37 transacted through an agent or broker, showing no sign that the use of agents is diminishing.

What are FSBO sellers finding difficult?

NAR’s data cites the top 3 things FSBO sellers are finding difficult are:

1. Pricing the home right: 15%

2. Paperwork-related tasks: 12%

3. Selling within the planned time length: 13%

According to the National Association of Realtor®’s 2016 data, they found the average FSBO sold for $59,000 less ($249,000 vs. $190,000) than agent-assisted sales. That’s a difference of 23% - a much higher number than the traditional 6% agent commission!

Who are the sellers still opting for FSBO?

According to the data, the use of real estate agents increases when the home buyer’s age decreases. This means that the younger the person is, the higher the likelihood they have to hire an agent to help sell their home. In fact, the age 72-92 demographic was the group most likely to sell using FSBO, signaling a generational decline in FSBO sales.

Outside of age, another important association is the number of sales where both parties previously knew each other. Of the 6% of all home sales that were sold directly from the previous owner, approximately half of the buyers knew the seller before the transaction. NAR noted that “if the buyer and seller know each other, the sale can be either an arms-length transaction consistent with local market conditions or it may involve considerations that would not be relevant in the absence of a prior relationship.”


Why are FSBO sellers now choosing to work with agents?

If you’ve sold a home before, you’ll know there are multiple benefits that come with the help of a professional and experienced real estate agent. Most buyers specify that understanding the purchase process was a key benefit of using an agent - a sentiment shared particularly by buyers age 37 and younger. Why is this so important? Because real estate transactions are complex. The agents’ ability to dissect the information available to them and utilize his/her expertise can help buyers and sellers alike navigate the complexities of the housing market.

Across all generations, it appears that the trend is in favor of using real estate agents over FSBO. Whilst there is a cost associated with selling or buying a home through an agent, the benefits far outweigh the cost, evidenced by the high level of satisfaction as well as the average house sales price. In these conditions, it seems unlikely that FSBO will buckle the trend toward extinction.

The rise of the flat-fee real estate model

Now that we know FSBO doesn’t work in most cases, real estate agents are invaluable, and the traditional 6% commission is much too high, what can we conclude? The agents that offer high-quality service at reasonable rates will be where consumers turn, and, as it turns out, a number of firms are headed in this direction.

This is the problem we set out to solve in a nationwide way here at Clever. By creating technology and systems to help our agents become more efficient, we’ve been able to reduce costs significantly to sellers. We’re making it possible for homeowners to receive great service at cost-effective rates seldom seen in the past.

Contact Clever today to find a local, full-service, flat-fee agent that will sell your home for $3,000 or 1% on homes over $350,000.

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