There is a 3 word answer to this question, starting with the letter N and ending with the letter Y. The very fact that the National Association of Realtors claims this to be the case is an outrageous embarrassment to the entire real estate profession.
I’ve actually addressed this issue a long time ago but in light of a recent NAR blog post claiming that FSBOs (For Sale By Owner) sell for 28% less than realtor marketed homes I think the truth bears repeating.
The NAR blog post starts by accusing the ForSaleByOwner Web site of giving people the facts, but not all the facts regarding FSBO sales and then goes on to provide their own set of facts, but not all the facts, and throws in a math error to boot:
In 2010 for an arms-length sale, the median sale price through a Realtor® was $200,000 for new and existing homes combined, according to NAR’s Profile of Home Buyers and Sellers 2010. The comparable FSBO price was $ 155,700. Avoiding the commission results in a sales price that is 28 percent lower—not a very smart idea.
Uhh….first of all get your calculator out. $155,700 is not 28% lower than $200,000. It is 22% lower. However, $200,000 is in fact 28% higher than $155,700. A simple error? Maybe. Or maybe 28% sounds better than 22%.
But the bigger issue is that the NAR is incorrectly extrapolating pricing information from median price data. As I’ve pointed out on numerous occasions, median prices are heavily influenced by mix. For example, people in a low income community are probably more likely to buy cheaper cuts of meat than people in a high income community, resulting in a significantly lower median price/ pound. Would you conclude from median meat price data that meat is cheaper in a lower income community?
What is more likely to be going on here is that people who choose to sell their homes themselves tend to live in less expensive homes. Maybe it’s tougher for them to swallow a 6% commission than someone who makes more money and lives in a more expensive home. Maybe their time is worth less to them than someone who lives in a more expensive home. Or maybe they realize that lower priced homes sell faster.
In reality it’s almost impossible to determine whether or not realtors get more money for homes. To really do that you would have to sell a group of homes twice – once with a realtor and once FSBO. If Zillow was any good we could compare the selling price of homes to their Zillow values for two sets of homes but, as I’ve recently demonstrated, Zillow is pretty bad. So we’ll never know.
There are actually a lot of reasons for using a realtor to sell your home but a 28% higher price is not one of them:
- It’s like changing your oil. You could do it yourself but is that really how you want to spend your time?
- A realtor has access to a lot of marketing vehicles that you won’t and can present your home in the best possible light.
- Realtors have seen so many weird situations that if your transaction hits a snag they will likely be much better suited to handle it than you.
- Realtors can bring a much more objective perspective to the entire transaction.
Do I think realtors can get you more money for you home? Yes, because FSBOs feel like they are saving on the commission so they routinely give up those savings at some point during the transaction. And better realtor marketing translates to better exposure, which should get you a higher price. But I’m talking a few % here, nowhere near 28%. No one in their right mind would believe such a ridiculous claim and by making such a claim the NAR loses what little credibility they have left. Do you have any idea what would happen if FSBOs routinely underpriced homes by 22%? Those homes would be flying off the shelf in 24 hours. I don’t think that’s happening.
Oh…one more thing I forgot to mention. The author of the blog post is the Managing Director of Quantitative Research for the NAR. George Orwell would be proud. Feel free to click over to the NAR blog post and let him know what you think of his shenanigans.