DOUG AZARIAN
‘More exposure’
Before the housing downturn, a growing number of Bay State homeowners who wanted to save money on a broker’s commission tried selling their home on their own.
Now, with sluggish home sales and sinking prices, has for-sale-by-owner activity waned? It depends on who you ask.
Realtors say home sellers are utilizing the expertise of real estate professionals now more than ever, particularly since more homes are on the market and competition is fierce.
But others say that sellers want to save every penny they can because prices have dipped and they’re frustrated by agents who haven’t been able to move their homes. They say FSBO activity hasn’t dwindled.
“In a traditional buyers’ market, people go to FSBOs more because they understand that’s when they’re going to save money, because agents’ commissions don’t go down at that time. Nothing adjusts to help them,” said Elizabeth Provo, founder and owner of Easthampton-based Massachusetts 4 Sale By Owner, which operates the Web site www.ma4salebyowner.com.
FSBO activity in Massachusetts has climbed in the last few years. A 2006 survey by the state’s Realtor association found that 18 percent of owners who sold between July 2005 and June 2006 didn’t use an agent. A similar survey in 2004 showed that only 5.9 percent of sellers went the FSBO route.
‘A Real Good Gamble’
Doug Azarian, a Cape Cod broker and president of the Massachusetts Association of Realtors, said the 2006 survey reflects activity that occurred during a strong market, when sales were more brisk and there was little inventory.
Now, FSBO activity has dipped, according to Azarian. “When things slow down, and it switches to a buyers’ market, sellers feel they need more exposure and they need brokers,” he said. “We see many less FSBOs as listings than we did a year-and-a-half ago.”
On a national level, FSBO activity has remained the same during the last two years. According to the National Association of Realtors, 12 percent of transactions in 2007 were FSBO, unchanged from last year. The association said that 5 percent of the FSBOs in 2007 happened between family and friends, and 7 percent were on the open market.
David Friedberg, who manages the Brookline office of Coldwell Banker Residential Brokerage, refers to FSBOs as “false savings by owner.”
“I believe sincerely we can net [homeowners] more, even after a commission, because of all the tools we have,” he said.
According to the 2006 survey of sellers and buyers in Massachusetts, the median selling price for FSBO homes was $312,000, compared with $385,000 for an agent-assisted home sale.
Friedberg noted that Realtors can provide greater marketing exposure beyond just putting the home on the local multiple listing service that brokers use. And agents know how to price a property and negotiate, he said, adding that they also understand what disclosures must be made.
New York-based ForSaleByOwner.com, however, is hoping that the growing average commission paid on home sales, coupled with the popularity of home searches over the Internet, will be enough to draw more sellers into the FSBO market.
Using data from the National Association of Realtors, the company projects that Realtors nationwide will rake in $55 billion in commissions this year, with an average per-home commission of $13,900. Those figures, based on a 5.18 commission rate, are up from $36 billion and a $9,700 average commission in 2000.
In Massachusetts, the median price for homes sold through November of this year was $311,705, according to data from The Warren Group, Banker & Tradesman’s parent company. A 5.18 percent commission on a home that sold at the median price would have generated a $16,146 commission.
Real estate commissions generally range between 5 percent and 7 percent, but those fees are negotiable. The commissions are usually split between the buyer’s and seller’s agents.
“The FSBO market has, over the last several years, held steady at around 20 [percent] to 22 percent,” said Eric Mangan, spokesman for ForSaleByOwner.com, which charges sellers fees ranging $89 to $899. “Actually, it’s grown since the late 1990s.”
Ed Williams, chief executive officer of Beverly-based ZeroBrokerFees.com, said FSBO Web sites are seeing a lot of activity. He said user registration on his site, which features home listings from throughout the country, is up about 25 percent from a year ago.
ZeroBrokerFees.com allows homeowners to advertise their properties for free but charges a flat $49 fee for enhanced listings with photos. Many frustrated sellers are using both an agent who charges a flat fee to place their listings on a multiple listing service and doing other types of advertising on their own, according to Williams.
“People will do anything now to get exposure. For $49, they’re going to roll the dice and take the gamble,” he said. “To a homeowner who is desperate, it’s a real good gamble to take the extra step to get extra exposure.”
Williams said a few sellers who advertise on his site have had their homes on the market for as long as two years but refuse to use a broker. When he calls to ask them if the home is still available and whether they want to continue advertising on the site, they tell him yes.
“A lot of people are just anti-broker. They don’t want to pay a $30,000 commission,” he said.
But sites that charge sellers more than $49 may be seeing a decline in advertising.
Provo estimated that advertising on her site, www.ma4salebyowner.com, which specializes in home listings in western Massachusetts, is down about 20 percent from a year earlier.
But she doesn’t think that sellers are turning to agents; she said they’re likely waiting until the market improves.
“People have to pay upfront when they advertise on their own. If they think that they won’t be able to find a buyer they’re less likely to dip into their own pocket and pay up-front,” she said. “When they use a real estate agent, they think they’re not paying until they close and then they pay big-time.”
Provo said her company has saved consumers over $7.8 million in commissions from 2002 to 2006.
In the early fall, Provo said, advertising on her site picked up. “[Sellers] were dumping real estate agents and striking out on their own,” she noted.
And she predicted advertising on her site will increase in January, when the holidays are over and people can focus more on selling.
