An ancient irritant in the real estate industry is the homeowner who is convinced they can save money by selling their home without a real estate agent. The “For Sale By Owner” listing, affectionately known as a FSBO (pronounced fiz-bo) has been the subject o fongoing debate for years. Today there are a number of real estate companies that help homeowners sell their own house with promises of big savings.
When asked if a FSBO client can save money with the discounted FSBO model, traditional real estate professionals will emphatically say NO, claiming these properties take longer to sell and consumers leave money on the table. Of course, the For Sale By Owner companies claim just the opposite.
Insightt decided to shed a little light on this issue by looking at the data, which is our specialty, but more important is factual. We compared key sold data for FSBO sales vs. sold data from the Greater Toronto Area (GTA) MLS sale data for 2021.
The first metric we looked at was Days on Market, the number of days that it takes to sell a home, using the FSBO method vs. MLS.
Figure 1 below shows that FSBO freehold properties took approximately 2.5 times longer to sell than freehold properties listed on MLS with an agent.
Likewise, condominium properties in the GTA took longer to sell than condominium properties listed on MLS as demonstrated in Figure 2 below.
We then reviewed the sale price to list price for FSBO sold properties and the overall GTA market as illustrated in Figure 3.
As you can see, both freehold and condominium properties sold by FSBO companies had a lower sales to list ratio than the overall MLS market for the first two months of 2021. With a red hot freehold market combined with low inventory, FSBO sales to list ratios matched the GTA market in March of 2021. The same could not be said for Condominiums which were lower than the overall GTA market in the first quarter of 2021.
Putting it all Into Perspective:
If the average savings a FSBO customer realizes is 2.0% of the selling price through a lower listing commission, the selling price to list price for the GTA market shows that these savings may be offset by a lower selling price alone.
Of course, this is not a scientific “apple to apples” comparison because there maybe other unknown factors at play for this particular data sample.
Here re a few other observations we uncovered in this analysis:
1. The sample size of FSBO sold properties is small compared to the overall GTA MLS market sample. We estimated the FSBO market share to be 1% of total sales in the GTA, which is a small sample size and welcome news to the traditional real estate professional.
2. We also looked at a number of FSBO listings and it certainly felt that they had more than their fair share of complicated and challenging properties, which can also skew the results.
3. We are in a Sellers market with low inventory especially for freehold properties, which is forcing Realtors to find properties any way they can regardless of listing model.
While we are not able to pick a clear winner to end the debate, we have at least shared some Insights into this widely contested conversation. We believe that we can put this debate to bed when the market returns to a normal and Balanced Market. Insightt will be tracking the FSBO sales to GTA market on a monthly basis. Stay up to date with these latest trends by visiting www.insightt.ca.
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May 27, 2021
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