Realtor vs. FSBO

The New York Times has a very interesting article entitled "One City’s Home Sellers Do Better on Their Own" which reports on a study done by two economists regarding whether people who use a real estate agent to sell their home end up making more money than those who sell their own home. The study was restricted to Madison, WI, but the results were still pretty interesting:

"The conclusion, in a study to be released today based on home-sales data from 1998 to 2004 in Madison, Wis., is that people in that city who sold their homes through real estate agents typically did not get a higher sale price than people who sold their homes themselves. When the agent’s commission is factored in, the for-sale-by-owner people came out ahead financially.

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"Madison is home to one of the biggest for-sale-by-owner Web sites in the country. The economists pitted that site against the local multiple listing service operated by real estate agents.

"There are asterisks. The authors cautioned that they did not know whether the results from Madison applied to the country as a whole; certainly, selling a house without a real estate agent would be harder in a city without a heavily trafficked for-sale-by-owner Web site. The authors are also analyzing Madison data from 2005 and 2006, when the housing market cooled after a long run-up, to see how their findings might have changed.

"Some aspects tilted in agents’ favor. The researchers found that homes on the multiple listing service sold somewhat faster than houses on the for-sale-by-owner site. The study also did not place a value on other services provided by agents in selling a home.

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"The findings fly in the face of studies by the National Association of Realtors. The group has said that houses sold via its members’ local multiple listing services get a 16 percent premium over homes sold by their owners.

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"Homes sold on FSBOMadison.com, the for-sale-by-owner Web site, fetched an average price of $175,068 during the years examined. Those sold on the multiple listing service brought an average price of $173,205, roughly equal when taking into account the study’s margin of error.

"The FSBO (pronounced FIZZ-bo) sales results were adjusted for 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.

"'Greater patience, greater bargaining leverage,' said Francois Ortalo-Magne, an associate professor of real estate and urban land economics at the University of Wisconsin in Madison and one of the three authors of the study.

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"The National Association of Realtors has been defending its fees. In a 2005 survey of home buyers, it reported that FSBO houses sold for a median price of $198,200 and those sold through an agent went for a median price of $230,000, or 16 percent more.

"Two-fifths of those FSBO sellers were selling to a friend, relative or neighbor, and that might have led to lower prices, but agent-assisted sellers still enjoyed a huge premium, the association said.

Read the entire article for more interesting information.