The New York Times Asks, Agent or No Agent?
By Bill Primavera
The Home Guru
“Agent or No Agent?” was the headline of the lead article in last week’s Real Estate section of The New York Times, followed by the blurb, “The conventional way of selling a home, through a broker, is up against ever more Internet tools. Younger people, in particular, appear to be warming to the idea of cutting out the middleman.”
The reader might assume that I, as a licensed real estate agent, would have a biased point of view in response to this article. But, I believe that I can write objectively, having worked both sides of the street and having access to research done on the subject.
If I find any fault with the Times’ article, it is the naivete of its approach, presenting the pros and cons of the issue as though they were equally balanced as a simple either/or decision, when the process of buying or selling a home can be extremely complex. It’s not the same as purchasing a vacuum cleaner online with the simple click of the mouse.
My personal experience comes from my wife and I having purchased two homes that were For Sale by Owner (normally abbreviated to FSBO and pronounced “fisbo”) and having sold one in the same manner. One of those transactions, when we were on the buyer side, was totally pleasant and quick because the seller was one of our best friends who was eager to unload his house. FSBO sales frequently take place between people who already know each other.
When we sold that same house as a FSBO, however, it was to a stranger and the transaction turned out to be our worst nightmare at every turn. By the time we were preparing to go to the closing, we hated the buyer so much that our only satisfaction was to remove all the toilet paper from the house (well, we very young and immature at the time). And the next FSBO we purchased was fraught with frightening consequences as the result of defects not disclosed to us and problems encountered from the first day we took possession. I know now that the professional experience and guidance of a broker could have helped us avoid these problems, or at least, be compensated for them.
It was those two very bad FSBO experiences that originally got me interested in learning more about real estate and the possibility of becoming an agent myself, although it was a long time between events.
The basic ammunition of the Times’ article in questioning whether the agent will go the way of the dodo bird are the tools provided by the Internet, and this would refer primarily to the many FSBO sites that have sprung up as a new industry within an industry. Such sites as www.forsalebyowner.com and www.fisbo.com promise to save the seller a lot of money by avoiding the broker’s fee and paying only a flat fee to them. But right off the bat, near the bottom of its home page, fisbo.com advises its subscribers that they will have to offer a fee to the buyer’s broker, automatically eliminating half of the savings.
A recent survey by the National Association of Realtors (NAR) found that FSBOs remain on the market for a longer period of time and sell for 16 percent less than those homes represented by a realtor. Other surveys have shown that the median price of homes sold by FSBOs are as much as 23 percent below those sold through realty companies. So if the seller pays, let’s say, a 6 percent broker’s fee (half of which goes to the buyer’s broker), he still ends up with 10 percent more in his pocket. Why would there be any argument beyond that?
Why do FSBOs sell for less? Consider the psychology of buyers who search for FSBOs. They would approach it from one of two positions: The first is, if the seller is going through all the trouble to get his house sold on his own -- and trust me, it can be a full time job -- he must be desperate and will accept less. Also, the buyer assumes that the amount of the broker’s fee should come right off the top of the asking price. Hence, FSBOs are known for receiving very low-ball offers.
Partly because of this, about 80 percent of all FSBOs are eventually sold by a broker. Another reason for the switch is the frustration and costs the seller can encounter with all the do-it-yourself responsibilities, from marketing the property and complying with federal, state and local laws, to dealing with qualifying a buyer and hardcore negotiations. It is a big job for a professional, much less someone who does something else for a living.
There is another consideration which I hesitate to mention here and never point out to FSBO sellers because, while it should be an obvious point, it may sound as though a realtor is preying on a basic fear. But my wife insists that it be included here, because it was one of her fears when we sold on our own: FSBO sellers welcome total strangers into their homes, normally without benefit of the pre-screening process that realtors conduct with buyer clients. My wife always insisted that I be home with her when we showed our FSBO home to prospective buyers.
But weighing most heavily on the con side of a FSBO is the work itself. If you review the checklist of seller responsibilities listed by www.forsalebyowner.com, you may be tired out by the time you read through them, much less perform them. The worst advice the same website gives is “you are your own home’s best salesman.” The truth is that most homeowners want some distance from a prospective buyer, and vice versa. The reasons range from not wanting to get emotional involved in the process to being mentally mangled by buyers in the negotiation process.
The Times article is correct in stating that the Internet has changed the rules of the game in real estate. But rather than considering this a threat, realtors embrace the tools that the Internet provides them and welcome dealing with more educated consumers.
No one is saying that the FSBO is going away, although in today’s market, it doesn’t work as well as in the boom days of the market. However, FSBO sellers just must steel themselves to the work – and the risks – involved.
If you’re the empirical type, as am I, take note of the next property where you see a For Sale by Owner sign. Keep your eye on that sign and see how long it remains on the property. Then, take notice if it eventually is traded for a realtor’s sign. You can know there’s a good reason for it.
Bill Primavera is a licensed Realtor® (www.PrimaveraHomes.com), affiliated with Coldwell Banker, and a marketing practitioner (www.PrimaveraPR.com). He can be emailed at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or reached directly at 914-522-2076.
Follow him on Twitter for housing market updates at www.Twitter/HomeGuruNY.