Professional Real Estate Agents vs FSBO and Online Brokerages
Study: FSBOs Net ‘Significantly’ Lower Profits
ShareAugust 18, 2017
For-sale-by-owners tend to sell their homes for lower prices than homes sold through traditional agents via the MLS, and in many cases below the average differential represented by the prevailing commission rate, according to a new study by Collateral Analytics.
The study examined the price differences between homes sold through traditional agents versus those sold by FSBOs from 2016 to the first half of 2017.
Some homeowners may be tempted to try to avoid commission costs to a broker and try to sell the home on their own. But that can backfire and turn into a much lower sales price, the study found.
Even successful FSBO sellers achieve prices “significantly below” those from similar properties sold more traditionally via REALTORS®, the study found.
The authors found that the differential in selling prices for FSBOs when compared to MLS sales is “remarkably close to average commission rates.” A FSBO sale, on average, nets nearly a 6 percent lower price than an MLS sale for a similar property.
“Assuming that both buyers and sellers pay the commission, one might have expected something less than this average,” the researchers note. “It appears that many sellers are avoiding commissions while netting home prices less than they would with an agent-represented MLS sale. They are avoiding commissions at any price, even one that exceeds a commission rate.”
Source: “Saving Real Estate Commissions at Any Price,” Collateral Analytics Research (Aug. 16, 2017)
What Is A Discount Broker?
As you can imagine, a discount broker offers a discount on their services. These brokers charge less than full commission, such as 3.5% or 4%. They don’t do it just out of the goodness of their heart, though.
When you pay less than full price for a discount broker, you get fewer services than what a full-service broker would offer. Some discount brokers offer different limited marketing packages that you can choose from. Others offer services like an À la carte menu, where you get to pick and choose which services you want to pay for. For example, you may want online marketing but no newspaper ads.
Which Should You Choose?
If you want to play it safe, you should definitely go with a full-service broker. It’s not easy to come across a discount broker with an outstanding sales record. Selling your home is very serious business and Realtors® that work with full-service brokerages are more capable of selling your home for top dollar.
That’s not to say that no one has ever had a successful home sale with a discount broker. Maybe you are really good at marketing and you only want to pay an agent from a discount broker to handle the paperwork. That’s certainly a possible situation that could go well, but most people aren’t as skilled in real estate marketing as a real estate professional.