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FSBOs market offers ripe opportunities for Realtors

The National Association of Realtors research department produces some outstanding publications for use by real estate professionals. One of the more recent ones is entitled “Targeting Prospective Homebuyers and Homesellers.”
This report, which is based on extensive survey work with home buyers and sellers throughout the United States, provides insight into what the general public expects from the real estate industry and its practitioners.
The findings present an interesting look at, among other things, the FSBOs market.
For-sale-by-owner properties–otherwise known as FSBOs–represent a segment of the home-selling population that has always been of interest to real estate professionals, mainly because it represents potential listings. The latest survey results show that only 15 percent of all homes are sold by the owner of the home, and that the proportion of people selling their own homes has been declining steadily over the years.
But why didn’t these people use a real estate agent in the first place? Studies show that this segment of repeat buyers feels strongly about paying a commission fee to have someone else sell their home. The largest proportion of private sellers put ads in the local newspaper (28 percent) in order to find potential home buyers. A quarter used yard signs and another quarter or so sold their home directly to someone they know (friend, neighbor or relative), so there was no need to list the house with an agent.
By understanding motivations and problems that occur, real estate agents will be able to generate listings simply by promoting the services that FSBOs find difficult. Arranging for appraisers and inspectors was the worst problem an FSBO faced. Past studies have shown that the paperwork involved with selling any home is another major problem area. Both create business opportunities for the real estate professional who can be enterprising in promoting his or her experience in these areas.
Although a small percentage of home sellers decided not to use a real estate professional to sell their home, a significant proportion of those same people employed the help of an agent to purchase a home.
Some 66 percent of all private sellers used a real estate agent to buy a home, while 19 percent bought directly from the owner and 15 percent from a builder. Of all FSBOs who used a real estate professional to purchase their home, 32 percent had a buyer’s-broker arrangement. Usually, a written agreement was used and the agent was compensated by the seller.
When sellers choose to list their home with a real estate professional, the house is typically on the market for eight weeks. On average, the number of weeks a house is on the market declined from 15 weeks in 1993 to 12 weeks in 1995. Buying and selling a home last year was more affordable due to stable market conditions and continued low interest rates. Improved housing-market conditions translated into a decrease in the time it takes to sell a single-family home and increased the confidence in the real estate professional selected by consumers. Typically, the longer a house is on the market, the more likely consumers will use more than one firm.
The latest survey results show that a three-bedroom, two-bathroom detached single-family house was the hottest type of home to buy in 1995. The proportion of previous home owners selling single-family homes has reached a record level of 86 percent– up two percentage points from the 1993 study. This type of home typically sold within six weeks, half the time it took to sell a townhouse or condo/co-op. The median sale price of a home sold is up 5 percent from its level in 1993 to $119,000 in 1995.
The longer the selling time of a home, the greater the difference between the asking and selling price. Homes that have been on the market for up to three weeks typically sell for barely 1 percent below the asking price. Homes on the market more than 24 weeks, however, usually sell for 10 percent less than the listing price.
An established network of home owners can be crucial to a real estate agent’s success. Friends, neighbors and relatives continue to be a significant source of business. One in four home owners chose their particular agent because they had received excellent services from them before.
Real estate agents continue to play a key role in the home-selling process. In 1995, more than eight out of every 10 sellers surveyed employed the assistance of a real estate professional to sell their home. The ultimate test of how well a real estate professional served his or her clients is whether or not the seller would use that agent again. The latest survey results show that almost seven out of every 10 home sellers would use their real estate agent the next time they sell their home.
(Roz Gerbracht is 1996 president of the Greater Rochester Association of Realtors Inc.)

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