The Good, Bad and Ugly of selling 'For Sale by Owner'
Hi everyone,
Thought I would tackle a very important topic today about the realities of selling a home 'For Sale By Owner'. There is a growing amount of people selling their homes for sale by owner. These numbers can be seen and many "for Sale by Owner Sites are popping up all over to accommodate this. What isn't seen is the numbers on how many are actually selling. I deal with alot of FSBOs (For Sale By Owners), as a matter of fact a large portion of my business comes from them. Why is this? I was doing some research and found some interesting facts. Like I said there are more people 'trying to sell their homes for sale by owner as the housing prices go up people want to save that increasing commission. While many FSBO sites will advertise more people in America are selling their home by owner, what they tend to forget to advertise is the numbers of FSBOs selling is actually going down. Roughly 18% of For sale by owners end up in a sale, and many of those are actually below market value. See, I'm a numbers guy. The numbers or averages are there because that is what you can expect to happen because that is what has and is happening. Don't get me wrong, FSBO is OK for a select few. If the home is in a very desirable area where there is a shortage of homes and it shows great bingo! These are the ones that have a good chance. But lets get educated first about what it means to sell your home FSBO and see if it makes sense or not.
First we'll look at the goods. The potential dollars saved in commissions. Now I said potential because it's only potential if you can market, negotiate and sell your home at the same price as the other 3000 some Realtors in say Spokane for instance. I tell people that they are competing against all the same 3000 agents as I am for those same buyers. These agents do it full time and have large marketing plans designed to scoop up every buyer at every turn. If they call an ad they offer a list of all the homes so they can comparison shop and get the most for their money. Of course the buyer wants the most and the only home not on the list is the FSBOs, if they happen to see the FSBO after or already saw the FSBO and go pick up another flyer or call on an ad the Realtor sucks them into the list system and unless the FSBO is a better deal then the best home on the market , they took your buyer. Even if they like your home they are now going to negotiate a lower price because you must beat the best homes. See the Realtor doesn't care what home they pick on the list because they get paid anyway, They will though discourage their buyers even if they like a FSBO from buying a FSBO because they don't have a contract with them and don't know if they will get paid. The last thing they want is to have their buyer fall in love with the FSBO and they wonder if they are going to lose that client. The reason I bring this up is that I talk with so many FSBOs every week and when I share what is really happening they start to see why they either haven't been getting much traffic or the ones who come never came back.
See I have to know my competition so I can get to the buyers before them. 80% of people use the first agent they talk with so the smart agents know they want to be the first to make contact and offer the list. 3000 of those people seeking ways to vacuum up the buyers before anyone else is why FSBO numbers are declining. The bottom line is along with the real estate boom there was a Realtor boom and it's getting more and more competitive. So competitive some people who do it for a full time job can't compete and have to stop doing real estate. Then here comes Mr. homeowner who 'heard' they should sell their home themselves, and they want to simply put up a sign and throw it on a FSBO website and see if they can compete with all the professionals. Unfortunately it just doesn't work most of the time. The other problem is that the FSBO websites attract investors and people who want to pick up a deal so the offers aren't as good. That mixed with the lack of negotiating power coming from the novice homeowner means less money. See the buyer knows your not paying the commission and so they think they will get a better deal. Now can both the buyer and seller save on the commission. No, but that is what happens, they both want to so you get low ball offers and stubborn sellers. Much of my listing business comes from people who tried the signifying system, or washingtonfsbo system. The reason is it just didn't work.
They paid a fee up front and rented a sign. See the FSBO company didn't care if it sells because they got their money already. Unlike a Realtor who doesn't get paid usually unless they get it sold. since 82% end up listing anyway, they now are paying the commission plus the upfront fees they shelled out. I always say to the FSBOs I talk to "It's all about net numbers" it doesn't matter if you, me, or the cat sells the home, it's about how much you walk away with. See even a poor agent who just puts you into the MLS improves your chance of selling by 4 times. over 50% of the homes sell because of the MLS alone. Just tapping into the other 3000 agents and their systems to scoop buyers the minute they think of buying. A large portion of the remaining difference is made up with the listing agents marketing plan. we have a system called our "Seller Best Net System" that guarantees we will beat any other marketing program, whether FSBO or agent driven. We also have a "We Match" program so we won't be undercut on our fees by the discount guys. Usually in one sitting I can explain the pros and cons of all the different ways of selling and help people make informed intelligent decisions before they waste time and money by not knowing how things really work.
Just the security concerns alone for a FSBO should be enough to scare some people. In my years of talking to FSBOs I've heard stories of burglaries and people taking jewelry and prescription medicines. FSBOs are letting complete strangers into their home, some with small children or wives home alone during the day. There are predators out there who know about FSBOs, We know this because every now and then they actually try it with a Listed home but our satellite keypad system and lockbox system monitors everyone who comes and goes, and every person is accompanied by a professional and we get training on how to watch for scammers and safety issues. It really blows me away people would not think of safety in these times. The other issue is liability. Many FSBOs don't have the right disclosures that they must give by law. There are $5000 fines they could get besides not disclosing things right can lead them to a lawsuit and potential damages paid. I have heard stories,like I said by the time they tell me it's too late. Many times they call me for advice on how to get out of what they got into. Or they sign things they should have never agreed to but they don't have negotiating experience enough to know how the contracts really work when push comes to shove.
Problems happen even when you have a professional working for you. But we can solve them or avoid many of them. People thinking of Selling FSBO need to talk with some seasoned agents. We have stories of all kind of crazy problems that come up. But when that homeowner puts the sign out, they became the newbie agent with no training and experience. At least the newbie agent took classes and got licensed, though they don't have any experience. you wouldn't hire Johnny Newbie who got in three hours ago to sell your $600,000 investment, but your doing even worse when you hire yourself. Marriages can go through trouble when the husband makes mistakes and the home isn't selling or they have to be out and the other home isn't closed yet because there were unexpected delays. It would be like a person having some kind of problem and deciding to operate on themselves. Yet this is why people more and more in this sue happy world put themselves in danger by opting to FSBO. I see the bad side of it so I'm just being frank. I can't tell many FSBOs some of the real facts because they thin I am just trying to get them to list their home. But the reality is, if I want to list their home I can just wait a few months until it becomes the 8 out of ten that don't sell and talk to them again. This is why Realtors all over the US are starting FSBO businesses, because they can make money up front by renting them a sign, and when it doesn't work they can convert the FSBO to a listing. Businesses are being built on this model all over because Realtors don't want to wait for them not to sell and compete with other agents later. We have only scratched the surface of this topic, I know it may not seem bright and cheery but you have to get educated on the real numbers before wasting your money your trying to save by selling FSBO. A good agent can actually sell the home for top dollar and net you more than you couldn't sell it by yourself. I have done this many times selling homes listed at 200,000 that they had FSBO for over a year and I sold it for $225,000 in two weeks and they paid my fees and made $10,000 more than they couldn't get trying it themselves. I'm not saying it never works, The numbers prove it does sometimes, but if they could have got $250,000 I could have got $279,000 with a big marketing plan. Anyway until next time. Thanks for listening.
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"FSBOs are like Lottery Tickets, Some Win, but Most Lose"
Ross Quintana
Team Quintana Real Estate - MJ McAdams Realty
509-362-1966