Choose wisely: FSBO vs Hiring a Realtor | Forum

George Lyons Jul 14 '15

As more people become comfortable using the Internet for large purchases, including buying new cars, booking vacations, even pursuing college degrees, fewer people have been selling properties on their own. Large annual datasets are difficult to source, but according to the National Association of REALTORS®, FSBO share of the overall residential market was:

1987 — 20%

1997 — 18%

2008 — 13%

2009 — 11%

2013 — 9%

Sourced from:

A recent trend that is not captured in the decline above occurs when a seller utilizes a flat-fee MLS listing. These are excluded from the FSBO percentages because a real estate brokerage gets credit for the sale of property even though that brokerage does not host an open house or do any other service. From a financial standpoint, I think they should be excluded from the FSBO group because these properties are listed through the MLS and the seller is agreeing to pay 3% to a buyer’s agent. As a result, most of these sales go through a buyer’s agent.

I've been reviewing the overall process for completing a transaction, including the transaction cost, and have found very little has improved operationally for the home seller in the last 20 years. Overall fees paid to brokers have increased because fewer sales are true FSBO.

Comparing this to all other industries shows a stark contrast.

It’s much easier now to sell a car, hire a lawyer, buy insurance, or even start a business than it was 10 or 20 years ago. The process has been become more automated and less personal, which can be frustrating at times, but the cost to perform research and make the purchase you want has come down. In the last few years, dozens of new companies have been formed to help consumers reduce costs and increase productive services including:

ZocDoc — finding a doctor in your plan, getting real reviews, making an appointment

Seamless — ordering food online without having to call anyone

LegalZoom — standardized legal documents provided by a lawyer at a fraction of the cost of hiring a lawyer on your own

Groupon — saving money on purchases/services

Uber — Reducing costs of transportation

Netflix — New way to watch what used to be only on cable/DVD

Ebay — Opening a yard sale to the entire world to find the best buyer

All of these companies have at least a dozen competitors which has forced each company to further improve their services and continues to bring down costs. Some companies have had tremendous success while others have failed, but overall, significant progress was made in making a transaction easier and more affordable for the buyer (and seller in Ebay’s case).

I've looked at the progress made in the real estate market, and while there are some new big names, not much has changed the structure of the transaction process or the transaction costs. The best improvement has been the increase in accurate on-line listings and transaction history. This provides useful data points for buyers and sellers to assist with agreeing upon a fair price for a property, but nothing has actually helped the buyer or seller agree to a price or reduce the overall costs paid by each party.

As I mentioned earlier, the flat-fee MLS listing is a relatively new service that claims to help reduce the costs, but I feel it is very misleading. Only a licensed real estate brokerage can post to the MLS database, and a requirement for all MLS listings is that a buyer’s broker fee will be paid by the seller. This means that in a flat-fee MLS listing, the owner cleans, stages, hosts the open house, and negotiates the price, all for a fee of 3% to the buyer’s broker plus the flat fee. This is lower than 6%, but is still very substantial since the only benefit to the seller is to get on the MLS listing.

The only alternative a seller has is to post on Zillow, along with other widely used local real estate listing sites for total fees that probably amount to less than 0.5%, to achieve a similar exposure as the MLS listing. This is time consuming and can cause property listings to become out of sync if the open house or price is changed on one site and not on all of the others. Worse, managing the communications from buyers on different sites can mean messages are missed or not responded to correctly.

Once I realized about all of these problems, I started to research if people would be interested in a service to help have the property listing posted to multiple sites along with having a secure and organized system for managing the offers. Nearly every article I read or person I spoke to showed that people seriously consider FSBO before using an agent. No one I spoke to could understand why a service like this does not exist. Well that’s not the case anymore.

I recently launched Cross My Place as an alternative to selling a home with a real estate salesperson. The goal is to cross a seller’s home directly with the best buyer instead of simply selling it. The service will post the property on sites that the seller chooses, pre-screen all buyers so that the seller does not need to verify the buyer’s ability to pay, and includes a proprietary system for managing the offers and counter offers to streamline negotiations.

I think its time for a new service that falls somewhere in the middle of FSBO vs Hiring a Realtor. How about FSBO vs Crossing vs Hiring a Realtor? Tweet@CrossMyPlace for any comments/questions.