Annually, the National Association of REALTORS® (NAR) does a massive survey of people that purchased and sold a home in the prior year to gather information about them and their transaction. This is done using a 125 question survey that was sent to nearly 160,000 people, in randomly sampled geographic areas, that purchased or sold a home in the prior year. The results are published by NAR in their “Profile of Home Buyers and Sellers“. From this publication, some great information is obtained (in my humble opinion, the best and most accurate information available) about home buyers and sellers as well as the process they went through, the homes they bought or sold as well as about their agent if they used one.
Sellers’ appetite for selling their own homes remains at a near-record low…
As the chart below, which covers the time period from 2001 to 2019, illustrates, the percentage of homes sold using a real estate agent or broker (the blue bars) has increased from 79% in 2001 to 89% in this year’s survey. Meanwhile, the percentage of sellers that sold their own homes “For Sale By Owner” (FSBO) declined from 13% in 2001 to 8% in this year’s survey.
Why the decline in FSBO’s?
While one might think that, given the explosive growth of the internet since 2001 as well as the growth of Zillow® and other websites making it easy for FSBO’s to market their homes, a greater percentage of homeowners would have opted to sell their homes themselves, not a lesser percentage. However, just as technology has made it easier for a FSBO to market their home, it has also made it much easier for real estate agents to continually increase their “value-added” proposition to the seller without increasing the cost to the seller and, in many instances, actually at a lower cost than years before. For example, agents now have:
- Sophisticated electronic lockboxes that provide easy showing access to a home while still protecting the security of the home
- Digital contracts with electronic signing capability making offer negotiations, and ultimately a contract, quicker and more efficient
- Technologically advanced means and methods of digital marketing for listings, including use of websites, social media etc which, when coupled with live chat, call capture, registration, etc provide powerful marketing and lead capture methods for agents on their listings
- Databases (sometimes massive) of potential buyers that can easily be filtered to find potential buyers for a specific listing to which the agent can market that listing to.
- Access to the most comprehensive and complete database of home sale and price information (the MLS) giving agents access to the best comparable data to enable them to determine the right pricing for a home
Combine with all the above the fact that, on a regular basis, the home sale transaction itself becomes somewhat more complicated by being subject to more disclosure requirement, laws and regulations such as:
- Many municipalities throughout the St Louis MSA have ordinances that regulate for sale signs (including FSBO), open house signs, directional arrows, etc in terms of size, number and placement
- There are federal and state-mandated disclosures required to be made at the time of sale by property owners (including FSBO) with regard to hazards or defects present in the property that, if not made, can result in significant fines or liability on the part of the property owner.
- For condominiums, there are state laws that require disclosure of specific things related to the condominium association to the buyer and, by law, give the buyer the right to back out at any time until they have received the info and then for a period of time afterward as well, unless the condominium is one that meets the exclusions in the statute.
- Federal fair housing laws that restrict how a property can be advertised and marketed and have severe penalties for violations.
- Local ordinances that expand upon the Federal Fair Housing laws making them broader and more inclusive, again with penalties for non-compliance
- RESPA is another Federal Regulation that regulates the closing of a home sale and can easily be violated by a well-meaning homeowner that isn’t aware of the regulations and simply makes a “side deal” with the buyer to handle some aspect of the transaction outside of the closing.
After taking all of this into account, I think it is easy to see why the percentage of homeowners selling FSBO has decreased over time, and will probably continue to. I think homeowners realize that the cost of commission is a small price to pay to insure that they have a professional representing them that will insure they obtain the maximum value for their home, as well as will comply with the myriad of laws and regulations surrounding the transaction.
Method Used to Sell Home, 2001-2019 – National Association of REALTORS®
Source: National Association of REALTORS®-2019 PROFILE OF HOME BUYERS AND SELLERS