Admit it. The last time you signed a hefty cheque to cover an estate agent’s fee for selling your home you quietly asked yourself: “Could I have done this myself for free?”
Yet the For Sale By Owner phenomenon, long-established in parts of the world and made easier by the launch of self-advertise websites, has had little impact on professional estate agents, with no more than 12 per cent of sales handled this way in any national market.
Even in countries where agents have sharply reduced in number recently – Spain’s total is down 40 per cent since 2006, for example – the cause is the sharp fall in transactions, not because sellers are rushing to do the job themselves. This runs contrary to the expectation that the downturn would push sellers into using FSBO websites, through which they could save tens of thousands of pounds in fees.
Estate agents’ percentage commissions – usually based on the sum paid by the eventual buyer – have stayed about the same for more than 20 years, although sale prices have risen steeply. Commissions vary within each country but are typically 2 to 3 per cent in the UK and the Republic of Ireland, 4 per cent in Scandinavia and Australia, 6 per cent in the US, Canada, Spain and France, and up to 10 per cent in Switzerland.
The home of FSBO is North America, where the concept has existed for half a century or more but has not grown significantly in the past five years. PropertyGuys.com is Canada’s largest FSBO service with 106 franchise operations employing staff to promote FSBO in 600 mainly urban locations. Sellers buy different packages to list their property online, costing from C$350 (£220) upwards: the cheapest deals list property details and basic photographs on a website.
The service carries advertisements for about 10,000 homes on sale. It markets itself, as with most FSBO operators, by criticising allegedly outdated traditional agents and by being a one-stop shop for sellers. “We’re not lawyers but we connect everyone with legal paperwork. We’re not home inspectors but we know a bunch. We’re not mortgage brokers but we know a bunch. We’re basically the traffic cop for homeowners,” says Ken LeBlanc, president and chief executive of PropertyGuys.
Some Canadians like the principle: although no formal figures are kept, it is believed by agents that about 12 per cent of the country’s homes are sold through FSBO although, again, the trend has not accelerated significantly in recent years.
In the US, FSBO has plateaued at about 10 per cent of all sales, according to the country’s National Association of Realtors. The country has many websites offering low-price self-advertised sales, of which the newest is usrealty.com, launched by property entrepreneur Colby Sambrotto. It gives sellers free-of-charge online advertising, but if that is not considered proactive enough in today’s difficult market it also offers old-style estate agent support – printed sales material and possibly accompanied viewings – in return for a 3 per cent fee, roughly half the US norm.
“The old way of selling a home and paying 6 per cent commission is no longer relevant,” says Sambrotto. “The market is distressed and many owners under water [in negative equity]. When many homes are worth less than their purchase price, tacking on a full 6 per cent commission can further erode a seller’s profit or, worse, compound losses.”
Predictably enough, North American estate agents dispute the effectiveness of FSBO and claim their corporate marketing clout and expertise are good value at 6 per cent. “We have 3,000 unique visitors looking at 10,000 pages of real estate, day in day out,” explains Tim Harris, executive director of Tradewinds Realty in Canada. “We have a weekly email newsletter sent to 6,000 subscribers. We are affiliated or members of several global groups. FSBO sites and FSBO marketers can’t even join these marketing groups.”
Furthermore, says Patricia Tan of the Chicago-based US National Association of Realtors: “Realtors have access to in-depth market statistics not necessarily available to owners. Pricing a property requires not just information on what sold recently but whether it was a short sale or foreclosure, and how that affects the price of a non-distressed property.”
While realtors have effectively prevented FSBO growing above pre-recession levels in that region, in Europe the concept of private sales struggles to even get off the ground.
Several websites in the UK have offered completely free listings, with vendors uploading their own photographs and details and then handling their own viewings and negotiations. The result has often been amateur-looking, with too few entries for any one location to offer buyers a representative sample of homes on sale.
One of the relatively few Europeans to use FSBO was Nadia Jordan. More than a decade ago she sold her cottage in Dorset, 150 miles west of London, for £400,000 after paying for a small advertisement in a UK national newspaper. Jordan exchanged photographs with a keen prospective buyer who spotted the ad. “The process could not have been simpler. We never got as far as printing details. The whole deal was personal and friendly,” she says.
Jordan then moved to France and after “three wasted days with estate agents and nothing to show for it, save disappointment”, her daughter spotted an ideal home for sale, privately, on the internet. It cost €350,000 (£282,000). “The French owners – a doctor and an occupational therapist – couldn’t have been more helpful. Everything fell into place,” she says.
Jordan – who had no previous experience in the property industry – then decided to set up her own buying agency called Foothills of France, assisting foreign purchasers in the Midi-Pyrénées region. She says if any European location sees FSBO take off, it will be France. “There have for years been private advertisements in local newspapers and now there are websites such as www.entreparticuliers.com and www.seloger.com with thousands if not hundreds of thousands of private house sales,” she says.
For now, however, FSBO remains a rarity in Europe and a minority activity in the spiritual home of free enterprise, North America. In Australia it struggles and in Asia there are only a handful of websites offering the service. In every housing market, professional realtors continue to dominate.
Estate agents may be derided by some who see them as low-skilled high-earners but the broader public appears reluctant to avoid them completely – at least when they appear to offer a chance to sell homes for the highest possible figure to the widest possible market.
Case study: for sale by owner (FSBO) success
Gisella and Ricardo Benitez are candid about why they sold their four-bedroom home in Pasadena, California, through private sales website Owners.com – it was down to money.
“The house was on the market for $1.399m. We paid $80 to upload images and a description to the website and another $800 for it to be featured on a multi-listings service, which gives much greater marketing exposure. We sold for $1.358m, about 3 per cent below the advertised price, within a week of putting our house on the site. And it was all for under $1,000 of our money,” explains housewife Gisella.
If they had used a traditional realtor, charging the local norm of between 3 and 5 per cent commission, they would have paid $40,000 to $68,000.
“My husband’s an attorney, not in real estate, so he read through all the documents,” says Gisella. “I visited similar homes nearby to calculate an asking price, then prepared a description, handled email enquiries and arranged viewings after the house appeared on the site. Our buyer is from Chicago and initially he sent his realtor to view on his behalf and then the buyer arrived in person a few days later.”
The couple, who have children aged 12 and eight, rejected the buyer’s first offer but went into emailed negotiations until the eventual sale price was agreed. They are now renting while searching for a home to buy.
Gisella urges all sellers to try FSBO and says her success has had an unexpected side effect: “Friends selling their homes now want me to do the negotiations for them.”