4 of the Real Estate Industry’s Biggest FSBO Myths, Countered by Facts

The real estate industry, particularly the National Association of Realtors (NAR), has earned a reputation for fact fabricating when it comes to the for sale by owner (FSBO) market. Here’s what that’s about.

We’re all familiar with the statement “Don’t believe everything you read.” We all come across articles in newspapers and on the internet that we know simply aren’t true, with titles like “Kim Kardashian has Three Alien Babies,” “Golden Eagle Snatches Baby in Park,” or “Samsung pays Apple $1 billion in Nickels.” A simple Google search can easily disprove these claims, and yet many people don’t bother to fact check. Instead, they opt to buy stories hook, line and sinker.

Fake news is not always so easy to decipher. Information coming from organizations that we believe to be authoritative and reliable can often fool even the sharpest minds, since many of us accept their messages at face value without hesitation. Consider the consequences to our health, economic well being, or the sustainability of our planet when lawmakers pass bills and craft economic policy based on information that is later determined to be deliberately falsified or misleading. After all, it took years for governmental authorities to finally concur that smoking is a deadly health hazard.

One of the larger fact fabricators in the real estate industry is the National Association of Realtors (NAR), cited by OpenSecrets.org as the second largest lobbying spender in 2013. The New York Times once quipped, “You have to wonder sometimes what they’re smoking over there at the National Association of Realtors.”

Yes, the NAR has cornered the market on real estate myth making, and below we offer four of the biggest tall tales invented by the real estate industry, countered by the facts:

Myth #1: Homes that are sold with a real estate agent sell for more money.

Fact: Two independent studies prove the complete opposite. Studies led by Stanford University and Northwestern University conclude that homes sold for “sale by owner” (FSBO)-style without an agent sold for an average of 4 – 11 percent more when no agent was involved. The only study that backs the NAR’s claim is one funded 100 percent by Realtors, released by the NAR itself!

Myth #2: All home sellers use a real estate agent and pay a commission.
Fact: 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 claim in 2013, but independent reports show 1 in 5 homes is now sold direct.

Myth #3: The real estate agent commission is built into the price of a house. The buyer ultimately does pay a commission.

Fact: No explanation needed. 

Myth $4: The agent’s commission is only 5 – 6 percent of the home’s value.

Fact: This 5 – 6 percent claim is misleading. Comparing the percentage of the agent’s commission to your home’s equity is a more accurate way of determining costs. The commission you pay your agent can represent as much as 40 – 60 percent of your equity. According to the NAR, Americans don’t earn 6 percent equity in their home until they’ve owned it for 8 – 10 years. A study conducted by the Georgia Institute of Technology found that it takes 2 – 5 years to recoup even a 4 percent loss.

The NAR has been called one of the largest fact fabricators in the real estate industry. For those homeowners looking for facts when deciding whether to go the FSBO route and sell their own homes or hire an agent, a bit of delving into claims can go a long way in making an educated decision.


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