Saturday, July 21, 2007

For Sale By Owner (FSBO) Study in Wisconsin

As I watched TV recently, I noticed a commercial for a very popular "By Owner" company. There were a string of people giving testimonials about how much money they saved using this company's services.

Then, earlier today I saw that there was an article in the NY Times about how unrepresented sellers (FSBOs) in one city, Madison, WI, when studied between 1998 and 2004, sold their homes for about the same price as represented sellers.

Interesting. I already am familiar with data from the National Association of REALTORS that shows that the median price of MLS listed homes is 16% higher than non-listed, FSBO homes. I also know there are a couple of holes in the NAR data that are big enough to drive a truck through. The glaring issue that I have with the NAR findings is that there is no comparison of homes to see what similar homes might do. It would be a VERY difficult study, since real estate values can be quite finicky. Pegging whether something is selling above, at, or below market value is purely subjective. Finding two similar homes in the same area that sell at the same time is pretty elusive.

BTW, here is the link to the story.

It does require a free membership to view. Of the first things I noticed were that the agent represented homes sold more quickly. There was a 25% chance of selling in 60 days, vs. a 16% chance for FSBO homes. On the average, the FSBO homes took 125 days to sell, and the agent represented homes took 105 days. The next thing I picked up on was that they were always touting the 6% difference, but then mention that the vast majority of people selling themselves offered 3% to agents that bring a buyer. Finally, the FBSO reported prices were just that, prices reported by FSBOs, and there is no mention of concessions. The agent represented home's prices were based on data in the MLS. (We are required to report the final price of the house, as well as any concessions paid by the seller).

One other thing I did notice is that they adjusted prices based on: "timing, for house and lot size and characteristics, and for neighborhoods to make them comparable with sales by agents. They were also adjusted for what the researchers came to believe is an extra bit of shrewdness that FSBO sellers possess."

I noticed that this study has not been submitted to any peer reviewed journal.

I'll cover a little more in a future blog entry.

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