Collateral Analytics, a leading provider of comprehensive automated valuation solutions and real estate analytic products for large lenders and the financial services industry, revealed its research team’s new study showing that homeowners who sell their own homes (For-Sale-By-Owners, or FSBO) generally give up about a 5-to-7 percent discount compared with sellers who use a broker.
Accordingly, in a market with brokerage commissions between 4-to-6 percent, homeowners who sell on their own net less than those who utilize the services of a broker, the company announced in a release.
The paper authored by Dr. Michael Sklarz and Dr. Norman Miller of Collateral Analytics, titled “Saving Real Estate Commissions at Any Price,” examines more than 1.3 million home sales over the past two years in 13 counties within 11 different states, representing 454 municipalities and more than 1,000 ZIP Codes.
“The challenge in these kinds of studies is ensuring that you get a fair pricing comparison between FSBO sales and broker sales,” said Sklarz, president and CEO of Collateral Analytics, in the release. “The flaw in prior studies of this type is that they compared raw average prices, which can be skewed if certain types of sellers or property types are overrepresented in the samples. We solved this problem in several ways including the use of the Collateral Analytics Automated Valuation Model (CA Value AVM). The advantage of this approach is that the AVM controls for a number of property specific factors such as living area, number of bedrooms, age, etc.”
Sklarz and Miller measured the actual price for each FSBO and broker sale against the sale price predicted by the CA Value AVM. They measured more than 200,000 FSBO sales among the 1.3 million sales overall, judging them by how close they were to the AVM values. The results showed that FSBO sellers got a lower expected price compared to the AVM, with FSBO sales prices on average being about 5.5 percent lower than broker sales prices, the release said.