Realtor Ads Target FSBOs

In early 2007, the National Association of Realtors (NAR) launched an 11-month, $40 million ad campaign, aimed in part at the For Sale by Owner (FSBO) market. "Two-thirds of For Sale By Owners would use a Realtor® next time,” one of the print ads declares. “The other third swear to never, ever move again."

Is selling a home without an agent really that awful?

Not according to the NAR’s own 2006 Profile of Home Buyers and Sellers. The national survey found that only 20 percent of FSBO sellers would use an agent next time, while 33 percent would sell FSBO again and 47 percent weren’t sure. Clearly, FSBO sellers are happier than the NAR’s ad lets on.

An earlier NAR 2005 Profile also suggests that many FSBO sellers would try it again. Of all the sellers surveyed, those who sold their homes without an agent or broker expressed the highest level of satisfaction with the selling process, with 80 percent "very satisfied" and only 3 percent "very dissatisfied." Of sellers who sold their homes through a real estate agent or broker, only 65 percent were "very satisfied" while 5 percent were "very dissatisfied."

Undaunted, the NAR’s media department has offered a second argument against selling FSBO: “[s]ellers who use a real estate professional make 16 percent more on the sale of their home than do sellers who go it alone.” This statistic seems to be based on data in the 2005 Profile, which found that the median 2005 sales price for a home that was sold by an agent was $230,000, about 16 percent more than the $198,200 median price for a FSBO home.

But it’s hardly fair to compare agent-assisted and FSBO sales prices. Many of those FSBO transactions (about 40 percent) were to buyers that the sellers knew, like family members, friends, and neighbors. One imagines that the sales prices in some of those transactions were set artificially low. The FSBO properties in the 2005 study also included a disproportionate share of manufactured and mobile homes, which surely dragged down the median price.

For much of the past year, though, the NAR has gloated over the 16 percent statistic, claiming that it’s “one reason the level of unrepresented sellers has declined steadily in recent years.”

Again, the NAR Profiles tell a more complicated story. The number of unrepresented sellers has indeed dropped, from 18 percent in 1997 to 12 percent in 2006. But the most likely reason for this is that many sellers are now able to pay flat-fee brokers a modest amount to get them on the Multiple Listing Service and Realtor.com. These sellers are counted in the statistics as being “represented” by agents even though they put up their own signs, host their own open houses, do their own marketing, and negotiate on their own with buyers.

The decrease in the number of unrepresented sellers, in other words, doesn’t reflect a decline in FSBO transactions so much as a decline in the ability of Realtors to keep FSBOs off the MLS. Until recently, Realtor associations were often able to block these kinds of listings, but the Federal Trade Commission has largely put a stop to the practice.

The thousands of ads that the NAR plans to air this year won’t just deal with FSBOs, of course. One TV ad, for example, talks about the importance of being protected by someone you can trust. “Realtors adhere to a strict code of ethics,” declares the voiceover, “so you know you’ll be treated honestly.”