FSBO Myths, Debunked
We’ve all come across stories in the paper and on the internet that we know instantly are simply not true. Kim Kardashian has three alien babies. Golden Eagle snatches baby in park. Samsung pays Apple $1 billion in nickels.
But what about the information we believe is accurate because it comes from a reliable or authoritative source? Many of us accept something at face value without hesitation when a prestigious medical organization heading up a scientific research project led by experts in the field concludes that eating too many eggs causes high cholesterol and leads to heart disease? Consider the consequences to our health or economic well-being or the sustainability of our planet when our lawmakers pass bills and craft economic policy based on information that is later determined to be deliberately false or misleading? It took years for authorities to, finally, concur that smoking is a deadly health hazard.
One of the larger fact fabricators in the real estate industry is the NAR, the National Association of Realtors, cited as the second largest lobbying spender in 2013 by OpenSecrets.org. The New York Times once quipped, “You have to wonder sometimes what they’re smoking over there at the National Association of Realtors.”
Here are four of the biggest Myths the real estate industry would like you to believe, countered by the facts:
- Fib # 1: Homes that are sold with a real estate agent sell for more money.
- Fact #1: Two independent studies show the complete opposite. Stanford and Northwestern University concluded from their studies that homes sold without an agent sold for an average of 4-11% higher when no agent was involved. The only study that shows this is the one funded by the National Association of Realtors (100% funded by realtors!!)
- Fib #2: Everyone uses a real estate agent and pays a commission.
- Fact #2: According to NAR’s Profile of Buyers and Sellers, the number of full-service commissions fell from 24 percent in 2011 to 21 percent in 2012. The NAR wised up and eliminated the question in 2013, but independent reports show 1 in 5 homes are now sold direct.
- Fib #3: The commission is built into the price of the house. The buyer ultimately does pay a commission.
- Fact #3: No explanation needed.
- Fib #4: The agent’s commission is only 5-6% of the home.
- Fact #4: This 5-6% is misleading. Comparing the percentage of the agent’s commission to your home’s equity is a more accurate way of showing costs. The commission you pay your agent can represent as much as 40-60% of your equity. According to the NAR, Americans don’t earn 6% equity in their home until they’ve owned it for 8 to10 years.
A study conducted by the Georgia Institute of Technology showed that it takes 2 to 5 years to recoup even a 4% loss.