Focus on the Seller

Selling a home is one of the most challenging transactions many homeowners will face. And this is where the expertise of a REALTOR® is invaluable. But what do sellers look for in their real estate professional? Why do some of them decide to try to sell it themselves? The recently released 2006 NAR Profile of Home Buyers and Sellers provides some insights.

Characteristics of Home Sellers

The typical home seller is older than the typical home buyer. The median age was 46 among home sellers in 2006, compared to 41 for buyers. Because they are older, home sellers tend to have higher incomes than home buyers. The median household income of home sellers was $83,200 in 2005, compared to $71,800 for buyers.

Seller households are slightly more likely than buyer households to have no children under 18 living in their home. They are also more likely to be a married-couple household. The typical seller household has owned its home for six years -- this length of tenure has changed little over the past several years. Recent home sellers have owned a median of three homes, a number that has also varied little during the past several years. Most recent sellers were not selling their first home. Similar to results from the 2005 profile, just 13 percent were first-time sellers.

Why and What They Sold

There are many reasons why homeowners decide to sell their current home. They may want a larger home because of a growing family or to accommodate aging relatives. Others decide to move closer to friends or family as they age. Still others need to relocate to a new neighborhood, city or state because of a new job or a job transfer.

While roughly half of all sellers "traded up" to a larger home, only 19 percent of sellers indicated that they sold their current home because it was too small. The choice of whether to trade up or trade down is often related to the age of the home seller. Downsizing one?s residence was the primary reason for selling among 19 percent of sellers 65 years or older. Home sellers 44 years old or younger were more likely to cite "wanting a larger home" as the primary reason to sell.

Over three quarters of homes sold were detached single-family homes, a share that has varied between 74 percent and 86 percent in recent years. Nine percent of seller households sold a townhouse or row house. Eight percent of homes sold were either apartment/condos in a multifamily structure (5 or more units) or a duplex/apartment or condoin a 2-4 unit building. Fifty-three percent of the homes sold were in a suburb.

Most homes sold at or slightly less than the listing price. The median sales price was 98 percent of the listing price nationwide. For a comparison, in 2005 the median sales price was 99 percent of listing price. The one-percent decrease is likely a reflection of the slowing housing market in 2006. The typical home was on the market for six weeks -- a two-week longer duration than that cited in the 2005 profile and perhaps proof of the shift from a seller's to a buyer's market. Even so, more than 30 percent of homes sold in one to two weeks.

The Role of Real Estate Professionals

Selling a home involves a long list of tasks: determining the list price, developing a marketing plan, preparing for settlement, among many. Home sellers overwhelmingly depend on real estate professionals to assist them in a successful home sale. Eighty-four percent of sellers used a real estate agent in their recent sales transaction, compared to less than 80 percent in the late 1990s.

Similar to home buyers, when searching for an agent, sellers most often seek out referrals from friends or relatives or use the same agent they worked with in an earlier home sales transaction. Well more than two fifths of sellers (44 percent) chose agents based on a referral by a friend, neighbor or relative and 30 percent relied on their previous experience with that agent.

What's the most important factor influencing the choice of real estate professional? Thirty-five percent of sellers said reputation was the most important factor in selecting an agent, followed by the agent's honesty and trustworthiness (21 percent). Other important factors included whether the seller knew the agent (as a friend or family member) and the agent's knowledge of the neighborhood.

Expectation and Satisfaction

Like home buyers, home sellers have many expectations of their real estate agent. As reported in the 2006 Profile, one quarter of sellers most wanted their agent to sell their home within a specific time frame, while 22 percent wanted their agent to find a buyer for their home. Sixteen percent of sellers wanted help pricing their home competitively.

Most sellers preferred using an agent with a full-service brokerage firm -- where professionals handle all aspects of the transaction process from listing to closing. More than four fifths of sellers -- 83 percent -- reported their real estate professional provided a broad range of services and managed most aspects of their home sale.

Sellers -- satisfaction with their agent was high. Half of sellers also used the same agent for their home purchase. In addition, 82 percent of sellers indicated they were likely to use the same agent again or recommend their agent to others.

Methods of Marketing

Real estate agents use many methods to market a home. The Internet has become one of the most-used marketing tools by real estate agents. It outranks all other methods in popularity. Yard signs and open houses were used in more than half of recent sales transactions, and newspaper advertisements were also used in slightly less than half of home sales.

The local multiple listing service (MLS) allows home sellers to increase the exposure of their properties among hundreds, and sometimes thousands, of real estate agents assisting home buyers in their home search. Among recent sellers, 88 percent reported that their home was listed on a MLS.

FSBOs

Some sellers choose to sell their home without the assistance of a real estate professional. Many of these for-sale-by-owner (FSBO) transactions occur between buyers and sellers who know each other prior to the transaction.

Twelve percent of recent home sales were completed by the sellers themselves. Of those FSBO transactions, 40 percent of sellers knew the buyer. Sellers in small towns and rural areas are more likely to sell without the assistance of a real estate agent than are those in urban, resort or suburban locations.

The most frequently cited reason given by FSBO sellers (51 percent) was that they did not want to pay the real estate agent?s commission. A significant share (22 percent) did not use an agent because they sold their home to a friend or relative. Among sellers who sold their home without ever using an agent, 22 percent noted that the main reason for selling as FSBO was that they sold it to someone they knew.

But the share of FSBO sales has steadily declined from 18 percent in 1997 to 12 percent in 2006. (The record high was 20 percent in 1987.) One reason could be the considerable difference in the median selling price for FSBO and final sales price of agent-assisted sales. The median home price for sellers who used an agent was $247,000; the median price for a FSBOsold home was $187,200.

While the survey data do not explain the price difference, FSBOs face challenges that agent-assisted sellers do not. Agents know best how to prepare a home and maximize its value; they provide broader exposure to the market and thus the homes are more likely to generate multiple bids. In addition, sales that are between private parties are likely to be at a lower price than those on the open market.

FSBO sellers must make many key decisions about how to price and market their home, often based on limited experience. The most difficult task, cited by 18 percent of FSBOs, was preparing or fixing up the home for sale. Other major problem areas included understanding and completing paperwork (16 percent), selling within the length of time planned (15 percent) and setting a right price for the home (11 percent).

Conclusion

Home sellers rely on the experience and professionalism of their real estate agents to market their homes, find buyers for their properties, and to assist them in the completion of the home sales transaction. In addition, their real estate professionals often help home sellers to purchase another home. The efficiency and knowledge provided by real estate agents and brokers are vital in helping homeowners sell their homes, whether in robust markets or during periods of slower housing activity.

The 2006 NAR Profile of Home Buyers and Sellers is available for purchase at The REALTOR® Store. Price for members is $50; for nonmembers $125.