--- Do NAR Statistics of â€œFor Sale by Ownerâ€ Sales Mislead People...???
Oh, not much.....
Youâ€™ve heard it quoted hundreds of timesâ€¦"The median home price for sellers who use an agent is 16.0 percent higher than a home sold directly by an owner; $230,000 vs. $198,200;â€
This figure comes from the NAR 2005 Buyer and Seller Profile. This figure is quoted religiously by the real estate and the media.
"Don't Try This At Home", targets unrepresented sellers (the FSBO market). The commercial features a hard-hitting message: REALTORSÂ® have the experience to price your home effectively, so it can sell for up to 16% more than selling it yourself.
--- This is a pretty bold claim. 16% is a big number so letâ€™s analyze this a little more using different figures. Here is what a home buyer would be led to believe hearing this statistic.
FSBO $300,000 / REALTOR $348,000 â€“ 16% would be $48,000 more
FSBO $400,000 / REALTOR $464,000 â€“ 16% would be $64,000 more
FSBO $500,000 / REALTOR $575,000 â€“ 16% would be $75,000 more.
These numbers would make everyone consider selling with an agentâ€¦ but how true are they.??
-- What is interesting to me is that the data set used to make this claim is not available anywhere. I have looked for it and cannot find it. If you have it great, letâ€™s make it public so we can see how the NAR arrived at this statisic.
--- Everyone seems to believe this number and no one seems to want to question it? At the same time no one appears to understand what it really means. Could it be a fairly creative use of a statistic created to try to protect millions in real estate commissions?
Here is why. The report states that the â€œmedianâ€ price is 16% higher not the â€œaverageâ€ (or mean) price. Most people donâ€™t understand the difference between a â€œmedianâ€ and â€œmeanâ€. Here it is:
*Median - the middle number in a sorted list.
*Mean - The value obtained by dividing the sum of a set of quantities by the number of quantities in the set. Also called average.
The difference between median and mean can be significant.
Here is two random data sets of 5 numbers to demonstrate the difference of median and mean why itâ€™s important for the NAR to release the data set used to calculate this statistic. These are grouped by FSBO and REALTOR.
FSBO - 129,000, 156,000, 198,200, 297,000, 345,000
REALTOR â€“ 121,000, 154,000, 230,000, 290,000, 330,000
So letâ€™s view the â€œmedianâ€ value of each of these data sets. Remember â€œmedianâ€ is the middle number in a sorted list. Therefore the â€œmedianâ€ numbers would be the third numbers in the above data sets.
FSBO median = $198,2000
REALTOR median = $230,000
(Itâ€™s no coincidence that there is a 16% difference between the two and these are the same numbers quoted by the NAR for display purposes)
So all the other numbers in the data set donâ€™t matter, just whatever the â€œmiddleâ€ number of the data list is. Does this seem to give an accurate estimate?
--- ***(Itâ€™s no coincidence that there is a 16% difference between the two and these are the same numbers quoted by the NAR for display purposes)***
--- Possibly, look at Federal Trade Commission Act, Section 5 that pertains to interest of all consumers to prevent deceptive and unfair acts or practices. The Commission has determined that a representation, omission or practice is deceptive if it is likely to:
- mislead consumers and
- affect consumers' behavior or decisions about the product or service.
In addition, an act or practice is unfair if the injury it causes, or is likely to cause, is:
- not outweighed by other benefits and
- not reasonably avoidable
Now you be the judge if this fits under the billâ€¦
A) Does the 16% mislead consumers?
B) Does it affect the consumers decision to sell using an agent?
C) Is the cost substantial?
***Letâ€™s see how common this statistic really is. If you actually know of a property that sold FSBO for 16% less then other REALTOR listed properties, please send the address and date sold?***