Utah and Florida are among the hot markets for home sellers who don’t want to turn to a real-estate agent. But why is this practice popular in some areas and not others?

Today’s tough market provides a rationale for both the for-sale-by-owner set and those who swear by using a real-estate agent. On the one hand, an agent’s marketing prowess can move things along in a slow market. On the other, homeowners already faced with diminished profits can be reluctant to part with any more money by way of a commission.

Perhaps that’s part of the reason that, for now at least, active for-sale-by-owner markets are scattered across the U.S., with hotbeds of activity in Utah and Florida and a smattering across the Southeast. Based on the listing activity in ForSaleByOwner.com’s database for the first six months of this year and adjusting for population, Provo, Utah, leads the nation in independent sellers, followed by Wilmington, N.C.; Myrtle Beach, S.C.; Ogden, Utah; and Cape Coral, Fla. Indeed, Florida had five of the top 20 FSBO hot spots.

The Internet feeds these new markets, offering a platform for buyers and sellers to find each other and view what’s for sale. But the question remains why some communities embrace the phenomenon more readily than others — and whether doing so truly pays off.

Madison FSBOs: More profitable

Three economists recently tried to address the latter question by looking at the market in Madison, Wis.

The researchers, from Northwestern University and the University of Wisconsin-Madison, found that the FSBO market there is booming, thanks largely to the 1998 launch of FSBOMadison.com. By 2004, the site had a quarter of Madison’s real-estate listings.

The economists compared FSBOMadison.com’s sales with records from local governments and real-estate agents, concentrating on transactions between January 1998 and December 2004. They found that FSBO properties took longer to sell but earned roughly the same price as homes sold by agents, meaning more profit went into the pockets of the FSBO sellers after paying FSBOMadison’s $150 flat fee. (See more on the research.)

Compared with traditional agents’ fees of 5% to 6%, a seller stands to save most of the $13,734 (at 6%) fee on the sale of a median-priced home — $228,900 nationally.

“Our results are good news for buyers,” says François Ortalo-Magné, one of the researchers. “Whether the property is sold through FSBOMadison.com or a Realtor appears to make little difference in terms of purchase price.”

20 top FSBO towns

What makes FSBOs hot in one town and not in another? While the Madison study didn’t specifically investigate that issue, study co-author Aviv Nevo speculates that Madison’s high level of education and university-town skepticism of authority might play a role in that market.

Also, the job of showing and selling real estate isn’t for everyone, Nevo and his colleagues point out; maybe Madison’s FSBO sellers ended up with more profit because the independent market attracted individuals who were better than others at getting a good price. “Sellers in Madison appear to sort themselves as expected across platforms, the more patient and astute ones going to FSBO, and those who need more help or a quick transaction going to MLS,” says Ortalo-Magné.

To help unravel the mystery of what makes for a strong FSBO town, we asked Bert Sperling, founder of Sperling’s Best Places, to analyze the listings database of ForSaleByOwner.com, a leading national online FSBO marketplace. (Sperling’s Best Places rates and ranks cities for livability and other characteristics.)

Sperling noted that on a pure volume basis, ForSaleByOwner’s hottest markets were scattered around the country, with no region dominating. But when states’ FSBO listings were adjusted for population, Utah had almost twice the ForSaleByOwner.com activity as the next-most-active state, Florida. Similarly, Provo, Utah, had the largest number of any metro area, with almost twice that of the next area on the list, Wilmington, N.C.

One commonality that did emerge for at least some strong FSBO markets: a recent, relatively high run-up in real-estate prices.

“There is a strong — but by no means very strong — correlation,” Sperling says. Among the top 20 markets, for example, were four Florida cities where prices have run high, then dropped: Cape Coral, Fort Lauderdale, Panama City and Punta Gorda. (Strong FSBO markets that revolve primarily around local Web sites, like Madison’s, are not revealed in ForSaleByOwner’s data.)

But when searching for correlations between FSBO activity and a host of demographic factors — age, income, education, house prices, political affiliation, commute times, church attendance and population density — Sperling didn’t turn up much. Some have plenty of churchgoers, others mostly avoid religion. Some vote Republican, others Democratic. Some towns are affluent; others are on the lower economic end of the market.

20 hot FSBO towns

Metro area	FSBO listings per 100,000 population*
Provo-Orem, Utah	72.15
Wilmington, N.C.	63.28
Myrtle Beach-Conway-North Myrtle Beach, S.C.	58.38
Ogden-Clearfield, Utah	56.19
CapeCoral-Fort Myers, Fla.	43.22
Warner Robins, Ga.	43.10
Fort Lauderdale-Pompano Beach-Deerfield, Fla.	43.02
Panama City-Lynn Haven, Fla.	42.39
Nassau-Suffolk, N.Y.	41.15
Hartford-West Hartford-East Hartford, Conn.	40.01
Lake County-Kenosha County, Wis.	39.44
Punta Gorda, Fla.	38.73
Edison, N.J.	37.14
Logan, Utah	37.06
Auburn-Opelika, Ala.	34.51
Chicago-Naperville-Joliet, Ill.	34.17
Port St. Lucie-Fort Pierce, Fla.	34.08
Asheville, N.C.	33.51
Virginia Beach-Norfolk-Newport News, Va.	33.07
Valdosta, Ga.	32.27

Source: ForSaleByOwner.com listings database, January-June 2007; analysis by Sperling’s Best Places

Plenty of theories

There probably are several factors driving the strong FSBO activity in particular markets, says Colby Sambrotto, founder of ForSaleByOwner.com. In places such as Detroit and some Florida cities where prices are dropping, homeowners “just can’t accept paying a commission after lowering their asking price as much as they have had to,” he theorizes.

The FSBO model also works well in regions with high Internet use, such as the Northwest, Sambrotto says. “Our sellers are people who understand the power of the Internet. … They have gone through the sale process once before, whether it was through an agent or not. That demystifies it for them.”

And FSBOs don’t appeal just to the lowest end of the market. Sambrotto notes that the average asking price on ForSaleByOwner.com listings is $270,000 to $280,000, in line with the national average.
KEY: Dark red: 12.3 to 44.2 listings/100K population. Light red: 8 to 12.2 listings/100K pop. White: 1.5 to 7.9 listings/100K pop.

A Mormon way of life?

The Utah connection is no mystery to Kylene Anne Jones, who lives in Provo. “It’s because of our Mormon culture,” she says. “Mormons don’t tend to have a lot of money, but we have a lot of ingenuity. Instead of hiring somebody to fix something in our homes, we tend to do it ourselves.” The same principle applies, she says, when selling a house.

Jones’ theory remains unproven, but on the surface the data seem to support it: Ogden-Clearfield, Utah, was the fourth-ranked metro area (with 56.2 listings per 100,000 population) and Logan, Utah, was 14th (with 37 listings per 100,000). Salt Lake City ranked 26th (28.5 listings per 100,000), and St. George, Utah, with 27 listings per 100,000, was 28th in Sperling’s analysis.

Jones is in the midst of her family’s third independent house sale. When she and her husband, Jonathan, merged their families after divorces, she sold his previous home, in six weeks in 2000, and hers, after four months in 2001.

For the $28,800 she figures it would cost to have an agent list, show and sell their eight-bedroom, four-bath home, she and Jonathan could support three of their four grown children on Mormon missions this year. It would be nice to let someone else do the work of showing the house, Jones says, but experience has taught her that it’s not really difficult.

In the final analysis, the FSBO market is made up of thousands of individual lives and personal economic decisions, choices made by people like John, in Wilmington, N.C., who gave only his first name because he didn’t want his boss to know he’s hoping to move. John couldn’t say what makes FSBOs so popular in Wilmington. All he knew was that, when he listed his home on ForSaleByOwner.com at $389,000, it made sense to try to avoid a big commission. “If you are looking at 6% of that, it’s $21,000,” he says. “And that’s hard to swallow.”

source

Thank you for reading this post. You can now Leave A Comment (0) or Leave A Trackback.