Three economists decided to investigate whether using a for sale by owner (FSBO) web site could actually make homeowners more money compared to selling a house with a traditional real estate agent. The answer, at least in Madison, Wisconsin, is yes.

In the Dark Ages before the light of the Internet beamed across the land, Realtors (the term is trademarked) were the ones who had access to the lists of properties for sale in a given location. This information could be very difficult to collect on one's own without flying to the desired city and driving the side streets, jotting down addresses. But with the growth of the Internet, it's easy to list and share information, and even Realtors are opening up their listings to public access. In such a situation, does it still make sense to pay a six percent commission?

If a low-stress selling experience is what you want, a Realtor is probably the way to go. But if it's all about the bottom line, Igal Hendel, Aviv Nevo, and Francois Ortalo-Magné argue that selling a place yourself can be more lucrative in a city with a well-used FSBO web site. Madison, WI has such a site (FSBOMadison.com) and provided an excellent test case for the authors to compare FSBO results to Realtor results between 1998 and 2004. The study was made available yesterday (PDF) by the authors.

In a nutshell, the paper shows that the FSBO homes sold for an average price of $175,068 in Madison, while Realtor homes sold for $173,205 in the same period. After commissions are removed from that figure, the FSBO folks came out a good deal ahead. Using a Realtor's multiple listing service (MLS) does shorten the time a house is on the market, though, and prevents you from having to watch strangers tramp through your home, pointing out the water stains on your woodwork.

The New York Times had a writeup on the report today, and they note that the National Association of Realtors, one of the most powerful lobbying groups in the country, takes issue with these findings. In an earlier study touted by the group, they claim that selling with a Realtor leads to a 16 percent increase in a home's sales price. That's great news if you're a seller, but not so positive if you're a buyer—and Realtors represent both.

Combine the power of FSBO web sites with pricing information provided by sites like Zillow, and it's getting increasingly easy for homeowners to be savvy salesmen of their own property. The web has already put the hurt on services like travel agencies; will the far more lucrative real estate market feel the pinch next?