Flat Fee MLS Listing - The 85:15 ratio is changing.
In 1981 the National Association of Realtors began tracking what percentage of homes sold by owner. The number has fluctuated from a low of 13% in 1997¹ and a high of 20% in 2005¹ but the number seems to hover around a mean of 15%; hence the 85:15 ratio (Realtor Sold:Owner Sold).
The most interesting part about these figures is that there was no internet in 1981. The Internet did not even play a role in real estate until the late 90s and when it did, the numbers did not change much. In a seller’s market, the percentage of For Sale By Owner (FSBO) sales continued to rise and in a buyer’s market it fell. This would tend to indicate that it’s not the medium of communication that affects the percentage of FSBOs but instead the market itself. In other words, sellers might be more apt to try FSBO because it’s easier but not because the web makes it easier to upload a digital photo and a description but instead because the market is hot and more apt to respond to any type of posting by a seller.
What motivates a FSBO seller to be willing to try to sell without a Realtor is far more inate, however. FSBO sellers have what one might call the do-it-yourself gene. FSBO sellers like home projects; not just selling the home but fixing and improving the home. It would seem that FSBO sellers are the type of people that like to shop at Lowes and Home Depot and take on projects on their own.
Years ago, the local plumbing or electrical supply house had signs….contractors only; this is their livelihood. That was until Home Depot and Lowes began selling all the same products for less money to anyone. A FSBO website is similar to MLS but it’s like a knock off of the real trade product. It does not have the acceptance that MLS does because it does not reach the same people as the MLS. This is because 85% of buyers are still going to brokers or broker websites to buy their home. Besides the fact that 85% of the people want service, to the buyer, the perception is that the services of a buyer’s agent is free and that the service is paid for by the seller. Buyers do not see the cost as coming off the top of the deal. So FSBO websites have never been the real trade product and never will be.
So the system remained imperfect with the advent of the internet because the FSBO seller had no ability to buy the real trade product. That was until Flat Fee MLS brokers began springing up around the country. Suddenly there were brokers who would sell the formerly wholesale product, retail to the public. Flat Fee MLS was essentially an unbundling of the materials from the labor provided by professional.
Flat Fee MLS has turned the 85:15 ratio into an 70:20:10 ratio (Traditional Realtor Sold:Flat Fee Realtor Sold:Owner Sold). A new service level was carved out of the decades old ratio. It’s just a sign that Real Estate is changing and will continue to change.
Staff Writer
¹Source: Home Buyer & Seller Survey Shows Rising Use of Internet, Reliance on Agents
January 16, 2006, The National Association of Realtors
http://www.realtor.org/press_room/news_releases/2006/hmbuyersellersurvey06