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Economic analysis of FSBOs vs. agents in Madison

marvelousmarvin
16 years ago

There's a really interesting economic paper about the real estate market in Madison, Wisconsin by two northwestern econ profs that disputes the NAR's contention that real estate agents are able to sell homes at a 16% premium over FSBOs. In fact, according to the study, once you account for the commission, the FSBOs actually come out financially ahead (assuming you don't place a value on the time that the FSBO puts in).

But, there's a couple of important points to remember in this paper:

1) Madison has probably the biggest FSBO market in the nation, in terms of percentage. Instead of trying to crack the NAR, they have their own heavily trafficed, alternative listing site which has captured around 20% of the Dane County residential listings.

2) The study still found that FSBOs take longer to sell, and so you need to pay additional mortage, taxes, etc..

Comments (17)

  • dianemargaret
    16 years ago

    Fizz-bo

    At least now I know how to pronounce it

    Here is a link that might be useful: NYT article

  • marvelousmarvin
    Original Author
    16 years ago

    I think the reason FSBOs nationally don't have the same success as in Madison is because the FSBO numbers aren't large enough to reach that tipping point where a potential buyer will automatically turn to a FSBO site as do to the MSL. Right now, there are too many FSBO sites that are fragmenting the FSBO market. The key to Madison is that you have one FSBO site that dominates the FSBO market, and today has about 27% of the listings in that market. Even then, according to the paper, FSBOMadison doesn't reach as wide a audience of potential sellers as the MSL.

    In a couple of years, I would expect somebody like Microsoft or Google to eventually come up with their own alternative national listing to rival the MSL.

  • marys1000
    16 years ago

    Right now, there are too many FSBO sites that are fragmenting the FSBO market.

    Yes, it makes it very hard to look. Plus some of the sites now have foreclosure listsings that have zero information, just a listing so the sites are becoming harder to weed through.

  • berniek
    16 years ago

    The latest about the MLS.

    Here is a link that might be useful: What's next for the MLS

  • berniek
    16 years ago

    Sorry, the previous was "the latest" for last year, this is the latest for this year.

    Here is a link that might be useful: 2007 NAR Midyear Meeting & National MLS

  • C Marlin
    16 years ago

    Right now, there are too many FSBO sites that are fragmenting the FSBO market.
    I agree, this is a major problem for FSBO, when one big site takes the market, you will see many more FSBO's. If a seller knows they can get the exposure, they will try it. Most sellers (not me) are willing to do the legwork for the huge savings. There are few FSBO's in my market.

  • sweet_tea
    16 years ago

    cmarlin20:

    For the above post, that should be FSBOs, not FSBO's.

    Sorry to go OT.

    Correct grammer is:
    There are many FSBOs in my area. (plural)
    What is the FSBO's asking price. (ownership)

    Please don't attack me for being the grammer police. I mean well.

  • sweet_tea
    16 years ago

    LOL..And to correct my typo...the last one should be

    What is the FSBO's asking price?

  • solie
    16 years ago

    grammar

  • marvelousmarvin
    Original Author
    16 years ago

    And, its not just the fragmentation of the national FSBO market, but the overall size of it that's an issue. Nationally, even if all those sites were rolled into one, that would still only capture about 13% of that market whereas that FSBO site in Madison had around 27% of that market. I'd think a national FSBO site would need to capture a higher percentage to reach that tipping point. Or, you'd need more FSBOs willing to sell at a lower price, sharing the saved commission with the buyer.

  • chisue
    16 years ago

    Yes, solie, my old Grammer always spelled it with an "a", too. (I'm spelling Gramma the way it was pronounced in New England.)

  • terezosa / terriks
    16 years ago

    If there was only one FSBO site then it would be easier to search for FSBOs, making FSBOing more effective, thus increasing the number of FSBOs. And Sweet Tea, I totally agree with you on the apostrophe thing - it drives me crazy also. The thread titled Way's to Market and how much they cost was a much more egregious example.

  • marys1000
    16 years ago

    Yea well, that was my thread and I'm not great a grammer.
    Pick it apart. Doesn't bother me. Neither do typo's(I actually can spell but not necessarily type). Or is that typos? (Don't answer I don't really care)

  • dianemargaret
    16 years ago

    I agree, this is a major problem for FSBO, when one big site takes the market, you will see many more FSBO's. If a seller knows they can get the exposure, they will try it. Most sellers (not me) are willing to do the legwork for the huge savings. There are few FSBO's in my market.

    I'm no expert but I am going to have to disagree with sweat tea. To me fsbo is a very abbreviated form and should logically read, "I agree, this is a major problem for FSBO, when one big site takes the market, you will see many more FSBO's [houses on the market]. So owner's houses should be right.

  • Sully6
    16 years ago

    I usually try to stay away from grammar spats, but dianemargaret is right: It's perfectly OK (although not completely accepted) to use "'s" to form the plural of an acronym or initialism. In fact, the New York Times does it.

  • Nancy in Mich
    16 years ago

    These days, it is easier to be right if you always refrain from the impulse to add an apostrophe! It started about 30 years ago, the adding of the little high comma where it did not belong. It is one of my pet peeves, but I try not to correct people because I know I make a lot of errors myself. It does grind, though! Marys, knowing one of my Internet friends has medical reasons for occasional poor grammar really helps me be forgiving of everybody's errors. It is what you say, not how you type it, that counts in the end. Oh- I highly recommend getting the Google toolbar. It has a spellchecker that works well on our posts here.

  • carriem25
    16 years ago

    I live just outside of Edmonton, Alberta, Canada. There is a very successful FSBO company in this area - they have a huge number of listings, and a good website. I'm not sure how it was that it became so successful in this market - it is not as big in two other major markets in this province - but it has. We sold out previous house this way, and were very happy with it.

    Carrie

    Here is a link that might be useful: Comfree - a

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