Realtors lose millions to FSBO site Matt 04 Jan 2006

47 comments Latest by Jacek

FsboMadison, a for sale by owner real estate site in Wisconsin, is starting to scare realtors. The site listed about 2,000 homes in 2005 and said that about 72 percent of its listings sell. If the average sale of those homes was $200,000, it would result in real estate commissions of $17.3 million (6 percent commission is standard for realtors). FsboMadison, which charges just $150 to list a home, collected about $300,000.

How did the site owners get the idea? Like others, they set out to solve an issue that was a personal hassle.

In 1997 Ms. Murphy and her husband bought a house together and she decided to sell her place without a real estate agent. But it was a bother. “You’d have to guess. Do we put a $120 ad in the paper this weekend?” Her husband suggested she start a Web site.

Interesting side note: They only accept payment by personal check so people don’t list their house on a whim.

47 comments so far (Jump to latest)

Dan Boland 04 Jan 06

BuyOwner says they receive 150 million hits a month (right in their banner). Wonder if that’s true. All I know is every time one of their dopey commercials comes on the TV, I can’t fight the urge to say “suck my buyowner.” Did I mention I’m secretly 12? =D

jason 04 Jan 06

selling strictly by owner can be a real hassle, especially since realtors won’t show your place if they don’t get paid for it. Kind of a racket, but it makes sense. As a buyer, having an agent is a real plus. As a seller, it no longer makes sense to use a realtor to sell.

We just sold our townhouse in a chicago burb and did a flat fee MLS listing for $450, but agreed to pay 2.2% to the buyer’s real estate agent. This saved us ~ $9000 or so, but also still kept the incentive there for a buyer’s agent to show the place. We sold in 48 hours thanks to that.

Our neighbors, with a really similar townhouse waited almost 90 days to find a good buyer when going strictly by owner.

Chris 04 Jan 06

RE: fuzzbo - when large text inputs jump the shark.

Brian Breslin 04 Jan 06

well in the us the threshold for becoming a real-estate agent is pretty low, and almost anyone can become one in a week or 2.
That being said, there is still VERY little innovation in the home listing/sales market.

What we need is a web2.0 home listing company (and yes, i too hate that term). This fsbo company would cross list homes into the MLS, bring in maps, full-page descriptions, photos, tags, local searches (i.e. other homes in this area you might be interested in). I think those features would work well (that and a simple fee like this example had). BTW I think someone should take these ideas and run with it.

The bubble bursting doesn’t mean people won’t sell their homes, it just means they won’t get as much as they were hoping. Homes will still be bought and sold, I mean people still need a place to live.

Eddie 04 Jan 06

RE: fuzzbo & text jumping the shark

It just plain looks bad when “enter email addre” is all you see in gigantic text. If your going to draw that much attention to the words, make sure they all fit!

Darrel 04 Jan 06

The MLS needs to die. It’s an antiquated, proprietary, pointless system in the age of the web.

Brian Breslin 04 Jan 06

someone should then just create an ols, or open listing service.

(what does the m stand for anyway?)

pwb 04 Jan 06

I’mno fan of middle men but going the FSBO route is generally not a prudent idea. First, a broker will typically sell your home for more than you could get on your own merely b ecause most buyers prefer buying from a licensed broker. In some cases, the increase can be dramatic. In most cases, it exceeds their fee. Further, there’s a significant amount of legal risk that you can off-load to the broker. For a multi-hundred thousand dollar sale, there’s really very little reason to expect that the average person can do it better than a professional.

The “m” stands for “multiple”. Originally, listing databases only had one entity’s listings. MLS systems for most regions are generally pretty good and most are free (e.g., sfarmls.com). With something like home sales where the data expires rapidly, I don’t see an “OLS” developing any time soon. MLS compares pretty favorably to Craigslist + AutoTrader for autos.

Darrel 04 Jan 06

Alas, I think a publicly available nicely done MLS like SF’s is the exception rather than the rule. ;o)

Chris 04 Jan 06

In Canada, MLS is pretty much nationwide, and all houses get listed on it (www.mls.ca). It’s an excellent source of information. Only problem is in the current hot market (here in Vancouver), houses sell within days or even hours of listing. By the time you see it on MLS, it’s gone.

But in a slow market, it’s great. House in Saskatchewan (http://tinyurl.com/75rgc), anyone?

Fashionista 04 Jan 06

Well Private Selling of property is the best job and it has a big income return.

Rabbit 04 Jan 06

Darrel’s right.

My mom is a real estate agent, and her website has been my most difficult and longest running project to date.

PWB said: First, a broker will typically sell your home for more than you could get on your own merely b ecause most buyers prefer buying from a licensed broker. In some cases, the increase can be dramatic. In most cases, it exceeds their fee. Further, there’s a significant amount of legal risk that you can off-load to the broker. For a multi-hundred thousand dollar sale, there’s really very little reason to expect that the average person can do it better than a professional.

See, when you start talking all that mumbo jumbo bullshit I cringe. It’s no wonder why most real estate websites suck - real estate sucks.

I’ve learned that in programming, if the thing you’re modeling is fucked up, your code will be fucked up, too.

As I understand it, in real estate, there are too many rules and regulations surrounding what whom is allowed to do and when.

Everyone’s so busy with getting their piece of the pie they fail to see what *could be* (and ought to be!) the larger picture.

Today at work one of the other programmers was explaining to an “affiliate” (how I loathe the term) why his earnings were changed.

Now, I know nothing about our affiliate program, but it sounded confusing as hell.

PLEASE HIRE ME 37S! =D

Chris 05 Jan 06

RE: fuzzbo & text jumping the shark

got to agree with eddie there… big is all well and good but that’s *so* big that it doesn’t even look like an input field.

pwb 05 Jan 06

Mumbo jumbo BS?

Rabbit 06 Jan 06

Yes. Mumbo jumbo.

I’ll admit - the paragraph I quoted was a weak example. But still, what’s a broker? What happened to the real estate agent? I don’t see any mention of one of those. Don’t you work with them to buy or sell a house?

Regardless of the example, real estate is confusing and broken.

Mary-Ann 06 Jan 06

Sounds like it’s hellish complicated in the US. Why are there two realtors to deal with? For our house the seller hired the estate agent (realtor) and paid her and we didn’t pay anything.

pwb 06 Jan 06

Broker, agent…whatever. The terminology is not that important.

I’m doubt it’s much more complicated in the US than it is wherever you are. There are two agents involved, one for the seller and one for the buyer (one agent doing both strikes me as a bad idea). The seller pays his agent who splits with buyer’s agent. The buyer typically doesn’t compensate his agent directly.

Sean Milstead 07 Jan 06

I wonder if smaller ventures such as FSBOMadison will be able to continue to flourish in a world where Google Base exists.

a guy 08 Jan 06

Alas, I think a publicly available nicely done MLS like SF’s is the exception rather than the rule.

Whoa, surely you are joking. I worked for the company that did that MLS, and I can tell you, it is not nicely done. Unfortunately, this is mostly becuase of politics and not crappy designing.

I agree, the MLS needs to die. But it never will. As long as there are local board of Realtors, there will always be crufty, bloated, unreliable MLSs

paradox 12 Jan 06

Is there an accepted figure showing the trend of MLS -vs- private sale (FSBO) listings? I believe FSBO is ramping up while MLS is going down. This data however seems very closely guarded.

Issy 19 Jan 06

I had my house with every realtor in the state and they couldnt make it go away then my son in law put it on www.fsbo.com. It sold itself for $75.00, I wonder if my son in law thought about his 6% commission. To bad for him, Ha,Ha

Pat 19 Jan 06

I have sold 2 homes FSBO and bought 3 without a realtor.
My last home I ended up selling and paying the 6% because I was flat out told no realtor in my area would show my home since I had FSBOed 3 times successfully in their back yard so to speak.
The 2 houses I sold I got more than any agent told me to my face I would and the property I just bought I paid $250,000. less since I bought “as is” and required H/O to do nothing but show up at settlement and move out.We split all inspections, settlemant fees, and transfer tax, I saved her a bundle on realtor commisions, cleaning up and making place curb attractive and no hassles with showings.. I also was able able to put less down up front and keep my money “in the bank” so to speak until settlememt. That being said with using a realtor it was a constant hassle, they used unflattering pictures of my home,I had no say in MLS ad wording and they flat out refused to change the ad at my direct request. The short notice showings were a bother, the Open house agent had only had his lisense for a short time and was unable to close a deal, he called me more than once to come help at open houses when he was swamped. We wanted ads in a neighboring state that draws to the area they did not and that was where the customer ended up coming from as a “drive by” buyer. The realtor was of no help and failed to show up for inspections was late for settlemant and no help there either. I did all my own leg work and had to push all the time for stuff to be done. Then to pay out $28,000. and this was a high powered national firm. Never again its FSBO for me and will buy my MLS which is so bogus anyway.
I have a realestate lawyer for settlements and to help with situtations that need finese and do title work. I get all y forms on-line and be absolutely scrupioslt honest to a fault about every detail to avoid back lash. Realtors come on like your best high school friend until you sign that contract then its thier sand box and their way or no way.
Never again!! FSBO to the rescue

Jinger 31 Jan 06

My husband and I just sold FSBO and it was a great experience. I would highly recommend it. We paid a buyer’s agent 2.5% and hired a real estate attorney just for some advice. We figured we would have to clean the house and prepare it for showings anyways, why not be at arms reach if anyone had any questions or concerns. We had multiple offers our third week up and as far as qualified buyers goes, just because a realtor brings you a buyer does not mean the buyer has done their homework when it comes to finances. The big thing that helped us was getting listed on the MLS through a flat-fee service, but if there was a popular, fsbo service in our area I’m sure we would have used that. Cheers to fizzboos!

Theresa 18 Feb 06

Selling by owner certainly lowers the commission but on average costs the home seller much more. USA today , printed an article / (research project) - and noted that FSBO’s save on the commission but lose on the “markdown” according to the article- on average they sell for 21% less than the professional Real Estate Agent. Of course the NAR does their own research and was just a little more kind to FSBO - and their research came up with a number of about 15% less than a Realtor’s average sales price. So they may well be selling ,as the statistics point out, but they are likely selling for a good bit less than a professionally listed and marketed property. In addition 88% of the FSBO utilize the services of a real estate agent prior to the sale. There is a great myth about the commission. It is usually earned and brings the seller (net to the seller more money) a higher net price. So you have to look at price vs. cost. On average real esate agents have higher prices but FSBO and the discounters cost more. These are statistical facts even with the influx of fsbo internet sites.. I have found when the seller of a home understands this they usually serve their own best interest and get with a competent, professional Realtor.


Happy Selling..

Babs 15 Mar 06

The recent article Theresa quoted, if it was the same article I read that quoted the same sham survey, did not compare apples to apples. Their example of FSBO’s were sellers who did not use advertising, marketing or the internet (whether it be through some web site or a flat-fee MLS service), so the survey is suspect and very biased. I don’t think flat-fee MLS listing was even mentioned, like the NAR didn’t want to play that hand and give anyone ideas ::rolling eyes:: The whole thing is a crock - housing prices go up but commissions stay the same? People are paying more for houses in general because the price is padded in the first place for the realtor(s) fee? On the whole, from my own personal experience and from my friends, realtors don’t do much to warrant their cost.

Brad 11 Apr 06

You give me a set of raw statistics and I will skew them however you want.
But then I would be just as unethical as most RE agents.

Milan Cole 23 Apr 06

It would be great if there was an fsbo site with as much penetration as fsbo madison in every market, but unfortunately that is not the case. I think we’re going to see more and more hybrid services such as flat fee mls listings that allow fsbo owners to get the marketing of the mls without paying a selling agent comission.

Josh 01 May 06

While FSBO Madison has captured a fair share of home listings in the Madison Metro area, it still lacks the capability of offering a more true full service package (MLS) for home sales with the “FSBO” model. FSBOWisconsin.com has been doing this for years and in my opinion offers more affordability, greater reach, more user friendly features and can actaully get your home into the MLS for only $350 in the Madison area and most of Wisconsin. We tried it and had great success as did our 3 other friends in the area. Check them out at www.fsbowisconsin.com

Mott Marvin Kornicki 04 May 06

As a Broker/Owner/Realtor of Waterway Realty in South Florida, I have seen an influx of “Discount Brokerages” and “MLS only” entities pop-up in recent years. I joined the bandwagon a few years ago by offering a Hybrid MLS System, it saves the seller 3% off the typical broker/seller arrangement.

Realtors Hybrid MLS 04 May 06

This is a site that was designed to help sellers and buyers avoid the typical 6% listing fee usually charged to sellers. By “selling out” the listing commission for a fee of $250.00 the buyer will generally save thousands in addition costs tacked onto the selling price. www.HybridMLS.com is where the plan and details can be found and submitted.

Realtor 28 May 06

LOL. I am a realtor and care for every damn client I work with. There are bad ones like in every profession. You just need to do a little homework. There are some people that have too much time on their hands to sell thier own home and energy to do so. I can tell you they are very few. 80% relist with a realtor at the end. I know that fact is real I see it every week and represent handsfuls.

A friend of mine went without a REA and when I pulled comps 2 weeks after contracts she lost $18000 after commission.

She bought FSBO property. LOved it, thought it was great untill the inspection missed a roof issue along with other legal issues that where handled poorly. After a month in she had to pay $6000. I would have caught all this and had this repaired. She also paid almost 21,000 over MV . She also got suckered for points on the morgage and almost had a complete mental breakdown during the whole process. She tells me shes very happy but I just don’t say much. This is one of many I come across weekly. Telling her would just upset her.

REA’a are there to protect your interests. A legal Agent representing you in the entire process. People seem to forget the amount of dirtbags that sell homes out their that take avantage of the less knowlegable. Thats where we come in. We work to protect your intrests and help to avoid all the headaches along the way. if you only knew what we go through in the backround to protect our clients some of the opinions here may change. That’s our career. These are things you should not have to think about so 90% of the time you don’t hear them from your realtor. Most people who got royaly screwed on a deal aren’t calling all their friends to say so or posting on the internet sites telling the world. Only some whom had a good experience.

ALSO, many FSBO’s are pre-forclosure sales. They can’t afford a commission or they would not close out their lien(s). Others are due to no equity in the property because of interest only loans the last 5 years. Reverse annuities are another big one. They have zero equity and must sell at inflated rates to pay off the loan trying to LOOSE the least possible. No room for comission let alone good lawyers, apprasiers ect. Maybe a corralation here since this year the US reports a 20% increase in forclosures then last year??? Humm.

What do people do when shopping for a used car? They call the macanic or gear head guy they know to check it out and set a nice price and protect their money before they buy. Same thing but on a MUCH larger more complicated scale.

I say if you don’t want to use a realtor don’t. but don’t paint a nice rosey picture of the market and how nice it is. It can be for a very few but remember to consider yourself lucky. Future REA maybe ;)

Take care.

Realtor from Austin 28 May 06

Amen! People (including myself) dont realize how tough being a good realtor really is until they try to do it. Most think its just walking around in a fancy suit BSing with people.

BTW, here in Austin I see so many idiots trying to sell their house themselves by pricing it very low in order to attract attention. They basically pass on the realtor commission savings to the buyer and in the end get even less themselves. Whats the point?

Anonymous Coward 02 Jun 06

I’ve run a nationwide FSBO marketing service for 10 years now. Our clients have a better than 85% success rate. And I have heard so many agent horror stories from them I’ve lost count.

NAR provides meaningless statistics and lots of agents believe them. For example “The median price of FSBO sales in 2004 was $163,800 compared with $189,000 for agent-assisted sales.” is used on their website to ‘prove’ that “Sellers make more money when they use a real estate professional”.

That statistic proves no such thing, however, as it doesn’t include the appraised median value of the homes. If I’ve got a $160,000 home that sells for $163,800 while the realtor sells my $195,000 home for $189,000, who did the better job? There simply isn’t enough information provided by NAR to draw any conclusions.

As in all things, there will be smart FSBO (those who do the due diligence to set an appropriate asking price *AND* who don’t get greedy) and those who aren’t. There will be those who don’t understand that, except in a hot market, it takes an average of 3-4 months to sell a home when using a real estate agent, and most FSBOs give up after 6-8 weeks.

I have known great realtors and terrible ones, including one whose license I helped get revoked. I would never use a realtor to sell because it’s simply too easy.

By the way, thinking of selling FSBO? Your local bank is a great resource - just talk to a mortgage banker. They are a treasure trove of information.

acorn 02 Jun 06

I’ve run a nationwide FSBO marketing service for 10 years now. Our clients have a better than 85% success rate. And I have heard so many agent horror stories from them I’ve lost count.

NAR provides meaningless statistics and lots of agents believe them. For example “The median price of FSBO sales in 2004 was $163,800 compared with $189,000 for agent-assisted sales.” is used on their website to ‘prove’ that “Sellers make more money when they use a real estate professional”.

That statistic proves no such thing, however, as it doesn’t include the appraised median value of the homes. If I’ve got a $160,000 home that sells for $163,800 while the realtor sells my $195,000 home for $189,000, who did the better job? There simply isn’t enough information provided by NAR to draw any conclusions.

As in all things, there will be smart FSBO (those who do the due diligence to set an appropriate asking price *AND* who don’t get greedy) and those who aren’t. There will be those who don’t understand that, except in a hot market, it takes an average of 3-4 months to sell a home when using a real estate agent, and most FSBOs give up after 6-8 weeks.

I have known great realtors and terrible ones, including one whose license I helped get revoked. I would never use a realtor to sell because it’s simply too easy.

By the way, thinking of selling FSBO? Your local bank is a great resource - just talk to a mortgage banker. They are a treasure trove of information.

acorn 02 Jun 06

Sorry for the double post. I clicked the Post button before filling in my contact info.

Ed 29 Jul 06

All realtors should be tarred and feathered and run out of the country on a rail. They are predators. They are all dishonest. They victimized my 84 year old mother and stole her house. All for a little bit of money. They’ll crawl over someone’s dead body just to pick his pocket.

DON’T USE THEM. YOU DON’T NEED THEM. Get a lawyer, write your own contract on your own terms. If the buyer agrees you’re cool, if not: NEXT! Write out all provisions for specific performance. Make the buyer waive that. It’s nothing more than legal blackmail and it’s sucks as bad as eminant domain. It’s just a legal way to steal peoples’ homes.

Remember that REALTORS SUCK. The Department of Interior should declare an open season on them.

Blake 16 Sep 06

Don’t waste your money on a realtor. Their number one “marketing” tactic to sell your house fast: LOWER YOUR PRICE. I don’t need a realtor to do that. In fact, if I don’t hire the realtor I can lower my price and make more money! I’m tired of hearing how we need realtors to “protect our interests.” Remember, the realtor only gets paid for closing a sale! His interest and your interest are not alligned! I can’t tell you how many times I got screwed by realtors. When I had a contract on one and the inspector said the roof was shot MY realtor advised me to get a new inspector to give a second opinion! For what, I asked, to assure me the roof is not shot so I will close the deal and you can get your commission? I negotiated a new roof instead. Another realtor on a sale I made assured me there was no radon in the area, so don’t worry about the fact that he forgot to request a radon inpection in the contract. I bet you can guess what we discovered after closing! High levels of radon. Another realtor said don’t worry about testing for lead paint, it is all painted over. I insisted on lead paint inpections and the mexican tile was full of lead! These are three different realtors. When I went to sell my house last year my realtor didn’t prevent the pre-qualified buyer from claiming she didn’t have a downpayment, cancelling and getting her earnest money back. Remember the line about how realtors can protect you sellers from those kinds of buyers? Right. Save your self some money and a headach and protect your own interests and safety! Buy yourself a book if you have half a brain, learn what you need to know and represent yourself.

Jacek 16 Sep 06

What I see from this discussion everybody point of wiev is mostly based on personal experience and (Soory to say) limited knowledge about the subject. I think FSBO or not buyer obviously is going use the easiest to use option witch in this case is MLS and real estate agent who is paying every year a few hundered to have this tool (MLS) avilable.
When i am trying to look for a house myself hundreds of FSBO web pages listing one house in this state and five in another is not really serious way to shop for a property. With real estate agent (good agent) the choices are almost unlimited. There is not 5 or 50 houses to see but about 50,000 in Chicago area alone.
When comes to the seller. I just passed exam and I am new licenseed agent in state of Illinois. As real estate agent I am starting to receive spam offering list of FSBO sellers I should be able to convert to use my services as real estate agent. !!! There is no question that both ways FSBO and MLS are going exist togheter. The only question is what is going be the market share.
FSBO and thousand sites offering few houses here and there are not match for MLS listing database containing all kinds of Residential and commercial property.
Serious buyer is not going waste time searching FSBO web pages to check if there is a house or two in area he intend to buy.
Good FSBO service has a chance but I hink only if they are going focus on certain small area like MadisonFSBO.
No FSBO is able to give certain service performed by any good Real estate agent. For example I have two clients looking for Multifamily property. With Chicago area prices this is not easy task. Taking in account down payment and their Mortgage rate amount of rents and taxes I am able to come out with income producing properties. From 400 properties I checked this weekend with prices up to $500k 100k down payment and %6.75 client mortgage rate there is just few producing income . How much time would you spend driving around to come out with the few having positive cash flow?
Lifetime.
With MLS access I am able to notify my clients when certain attractive property shows on the market (very ofen just for days before is sold) MLS is like bank system allowing to sell property fast. Of course less expensive sell faster - homes as well as any other merchandise.
Lets now scrap completly the MLS and lets the free market rein.
What a mess it would be.
With current slow market /(9/2006) you see more and more of special higher commisions hard pressed sellers are willing to pay.
I had myself bad experience with Real estate agent before, same (this time very bad) with laweyr.
Everything depends who we are dealing with, and what we can do ourselves.

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