Sellers sometimes think the For Sale By Owner (FSBO) route saves money, but rarely does selling a home without professional guidance end up a profitable or stress-free endeavor. Dedicated real estate agents know what it takes to market properties – it’s our full-time job. Our primary goal is to help homeowners realize the largest return on investment (ROI) possible. Consequently, it’s not surprising that recent data supports the notion that commissions are typically offset by higher sales prices.
A new study from automated valuation model provider (AVM) Collateral Analytics reveals that agents tend to achieve higher sales prices for properties compared to FSBO listings. After analyzing more than 200,000 FSBO sales and one million MLS (agent-assisted) sales over the last two years, the firm found FSBOs sell for approximately 5.5 percent less than MLS listings. Home sellers in Chicago can expect to net .5 percent more when using an agent who charges a 5 percent commission, which is usually split in half with the buyer’s rep.
Chicago FSBOs who assume they can make more money by avoiding professional help will end up with less money in their pocket – and greyer hair – than sellers who hire an agent to facilitate their transaction. Consider the misconceptions and data-backed facts that accompany FSBO listings:
Chicago FSBO frequency
In 2016, 89 percent of all homeowners used a real estate agent to sell their homes. That number continues to rise despite technology allowing for self-service in other traditionally agent-assisted industries, such as travel. According to the National Association of Realtors (NAR) Profile of Home Buyers and Sellers, the frequency of FSBOs dipped to an all-time low last year at 8 percent of all residential real estate sales.
One of the most obvious things that set agent-listed homes apart from FSBOs is the MLS, or Multiple Listing Service. The MLS offers widespread exposure for your listing and is only accessible to licensed real estate agents. These agents receive a standard commission, discounted commission, or at the very least, a flat listing fee for placing your property on the MLS.
But there’s far more to selling a home than listing it on the MLS. The vast majority of sellers (83 percent) still opt for a full-service broker who manages most aspects involved in a home sale. A real estate transaction is the largest most make in a lifetime, and the complexities and potential complications reflect its financial significance and intricacy. Aside from putting your home on the MLS, full-service real estate agents who earn their commissions complete the following tasks:
- Analyze comparable sales, location value and property features to set an effective and competitive pricing strategy.
- Come prepared with staging tips or services alongside a full listing presentation with every detail about the sales process laid out in full.
- Provide professional photography or virtual tour software at no additional cost.
- Advertise your home across cost-effective digital marketing channels (MLS, broker website, social media, etc.) and syndicates captivating listings to the most popular real estate websites (Zillow, Trulia, Realtor.com) for mass market visibility.
- Utilizes traditional advertising methods such as word of mouth and print to ensure every relevant buyer is targeted and re-targeted.
- Schedules private showings and hosts open houses to attract qualified and serious buyers.
- Prepares the complicated and lengthy paperwork, including contracts, addendums, disclosures, and corresponding documents.
- Negotiates on your behalf to ensure you receive top dollar on beneficial terms.
- Maintains an open line of communication with clients from list date to closing, passing along vital information every step of the way. Ever offer, requested contingency and piece of feedback is given to the seller almost immediately.
- Works around the clock to thwart possible complications and smooth inevitable (albeit minor) setbacks to close in a timely and efficient manner.
The bottom line
Countless additional studies indicate MLS listings tend to sell faster for a premium compared to FSBOs. NAR’s national home price data shows the median FSBO sales price is $185,000 compared to a median sales price of $245,000 on homes represented by real estate agents.
Aside from amateur marketing, one suggested reason for the difference in sales price between MLS listings and FSBOs is assumed negotiating power in the buyer’s eyes. When working with a FSBO, buyers may think that since the seller isn’t on the hook for a listing commission, they should pay less. Many buyers end up offering what they deem as fair – the price that allows the seller to net the same amount as they would if they had paid broker fees. In the end, FSBOs are at risk of putting in a lot more work for the same dollar amount.
Sometimes, FSBOs sell successfully because they personally know their buyer, whether it be a family member, friend or work associate. On the open market, however, 18 percent of FSBOs are unable to sell within a practical and expected time frame (NAR).
Perhaps that’s because Chicago home buyers are constantly warned of potential FSBO scams where they lose thousands in earnest money with no recourse. Buyer’s agents are also hesitant, foreseeing the amount of additional work required to close the deal when working with a homeowner versus another real estate professional.
Finally, many sellers are unprepared for the emotional toll of selling a home – even if the right buyer comes along. Do you have what it takes to finalize a contract and take full legal and financial responsibility for any mishaps? Can you do this while balancing your own life’s responsibilities, family and personal career? Perhaps you can – but if you’re ending up with less money in the end, the better path is evident.
