“A la carte” real estate services have blurred once-clear lines between ‘by owner’ and full-service agent-supported sales.
What does it really mean to sell a house ‘by owner?’
How ‘by owner’ sellers define themselves is not how the National Association of Realtors defines them – and therein lies a major discrepancy in the NAR’s statistical analysis.
Services such as ForSaleByOwner.com offer a full menu of tools and services, ranging from access to mainstream agent-supported listing sites like Realtor.com to ruggedly independent. Yet, the recently corrected statistics announcement from the National Association of Realtors does not reflect these innovations and ‘by owner’ sales are still inaccurately reflected.
In fact, the NAR’s own 2011 Profile of Home Buyers & Sellers proves that alternative agencies are making significant inroads:
- 25% of sellers list with agents that “list the home on the MLS and perform few is any additional services” — precisely the model offered by ForSaleByOwner.com
- 30% of sellers list with limited-service agents
- 24% of sellers list with full-service, traditional agents
Yet, the NAR counts all of these agency models equally when it comes to determining the ‘by owner’ market. For example, ForSaleByOwner.com strongly encourages ‘by owner’ sellers to list on their local multiple listing services and at Realtor.com, with the help of a cooperating local agent who posts the listings for a small, flat fee.
Owners create and publish their own listings through ForSaleByOwner.com, do the marketing, show their own houses, negotiate with buyers, and thus keep more equity from commission-free sales. But these ‘by owner’ sellers certainly would be surprised to find themselves mislabeled by the NAR as conducting their sales only with the assistance of an agent. For more about the NAR’s methodology and the full spectrum of ‘by owner’ sales, please see the appendix below.
What do home sellers need to know going forward?
• Local MLS data is still correct. As always, ForSaleByOwner.com encourages homeowners to track home values from several sources, including public records and reports from the local multiple listing service. The NAR’s statistical correction was based on an audit of local MLS data, and the local MLS data was determined to be accurate.
• The most accurate and defensible estimate of home value is still a formal appraisal, not MLS-based “comparative market analyses’ offered by agents as a sales tool. Only an appraisal is accepted by a lender. Getting an appraisal early in the home sale process will arm a seller with the most powerful proof of home value, for setting an asking price and for negotiating.
• As an advocate for real estate agents and their traditional, commission-based business model, it is not in the NAR’s interest to acknowledge the power of selling by owner. As progressive ‘by owner’ companies offer more ‘a la carte’ real estate services, the NAR’s definition of a ‘by owner’ sale will become increasingly irrelevant.
The NAR’s statistical corrections have other implications for ‘by owner’ customers, as well.
While local data for each local MLS was not revised, the NAR had been double-counting sales at overlapping MLS systems, which dramatically underestimated the depth of the housing crash by 14%, according to the NAR. That means that consumers who benchmarked the strength of their own markets compared to the national norm were using data that underplayed the depth of the market’s distress, as many industry analysts have pointed out.
The NAR revised:
• 2007 estimated national home sales down 11%
• 2008 sales, down 16%
• 2009 sales, down 16%
• 2010 sales, down 15%
• From 2007 to 2010, the NAR’s estimates averaged 14% below the actual sales, according to its corrected estimates.
The NAR counts any listing that appears on its member multiple listing services as an agent-assisted sale. That means that ForSaleByOwner.com customers, who create their own listings, manage the sales, and decide if and how they will involve agents in the transaction, are counted as agents’ clients if they merely channel their listings onto the multiple listing service.
Here’s the excerpt from the NAR’s December 21, 2011 report that explains that it counts every MLS listing as an agent-assisted sale:
“The ACS estimate captures For Sale by Owner (FSBO) properties. By comparison, the sample of multiple listing services (MLSs) does not capture FSBO properties. As the proportion of FSBO sales relative to agent-assisted sales changes overtime, the MLS sample will reflect that change in addition to any change in the number of home sales. Data from NAR’s survey of Home Buyers and Sellers shows that FSBO sellers have ranged from 14 to 9 percent of reported sellers in the last decade while agent-assisted sellers have increased from 79 to 88 percent of reported sellers.”