For-sale-by-owners are a unique group of players in the real estate market, and most agents attempt to avoid them. Don’t overlook this bunch because they can be a viable client prospect group for you.
I once was one of those homeowners who thought they could sell their house on their own without relying on a real estate professional. Yes, I was a FSBO (for-sale-by-owner). In fact, my experience as a FSBO was one of the reasons I decided to get my real estate license and become an agent.
Many years ago, we had a horrible experience selling our home ourselves. A few of the issues we faced as private sellers included not properly “vetting” prospective buyers, inadequate property marketing and poor home staging.
In addition, I overpriced the home when we first listed it, creating a long wait for a qualified buyer to submit an acceptable offer. I finally “threw in the towel” after we received the offer and hired an experienced Realtor to shepherd us through the counter offers and “contract-to-close” period.
I know, from firsthand experience, that we could have avoided many issues in selling our home if we had worked with someone from the beginning of the listing process who was knowledgeable, who represented our interests, who was there when problems arose and who negotiated and advocated for us.
Undoubtedly, we would have sold our home quicker and received additional money at the closing table if we had used an agent when we elected to sell the home.
Once I had my real estate license, FSBOs became one of my target markets in my real estate business. Selling our property on our own allowed me to have a unique perspective on FSBOs that most real estate professionals do not understand.
On the many occasions I approached unrepresented sellers, I was able to gain their trust, and more times than not, eventually list their home or assist them in purchasing their next one.
FSBOs are a unique group of players in the real estate market, and most agents attempt to avoid them. Don’t overlook them because they can be a viable client prospect group for you.
Going after unrepresented sellers requires strategy and patience. Consider the following:
1. For-sale-by-owners have a different mindset than other sellers
There are two types of FSBOs:
- The “trying to save money” seller
- The “do-it-yourself” seller
The first one believes they will save thousands of dollars by not using an agent. They focus on the money paid to agents and not the value they bring to the table.
The second type might have the same desire as the first, but they believe they can sell their home without our assistance because they know everything about the process.
Unfortunately, both of these types of FSBOs rarely accomplish their original objective, due to the complexity of today’s real estate transactions and the ever-changing housing market.
FSBOs consistently sell their homes for about $65,000 less than homeowners who list with an agent (without an agent the median sale was about $200,000 and with an agent $264,900), according to the National Association of Realtors 2018 Profile of Home Buyers and Sellers.
One reason is that FSBOs do not competitively price their homes, nor do they have the necessary time to devote to the entire transaction process including marketing, showing the property, handling offers and completing the required paperwork.
They discover the amount of work to get their house sold is much more than they anticipated when they decided to do it themselves.
2. FSBOs have preconceived notions about real estate agents
Most for-sale-by-owners dislike real estate agents because of a bad experience with an agent or their friends or family have influenced them not to use one.
To overcome these objections, you must ask specific questions to determine if they have merit or are just products of misinformation.
Present your value proposition in a way that erases any prejudices about us and demonstrates the benefit of using our services. Remember, you possess the experience and expertise to market their home and guide them through the transaction to a successful closing.
As a real estate agent, your value proposition for FSBOs includes:
- You can sell their home for more money.
- You understand the paperwork and all the forms needed in a real estate transaction.
- You are a full-time real estate agent. Marketing and selling homes is your job.
- You know the local real estate market, so the home can be priced competitively.
- You can be objective. FSBOs have a difficult time being objective because they are emotionally tied to the home.
- You can qualify prospective buyers.
- You have negotiating skills.
- You can get the deal closed.
3. FSBOs don’t understand the risk and liability of selling their home sans agent
Mistakes can be made in any transaction. Both unrepresented sellers and their buyers can make errors that can be costly. An attorney can close a transaction for a FSBO, but they don’t carry errors and omissions (E&O) insurance for mistakes made by the seller or the buyer before closing.
For example, if the seller advertises their property as a four-bedroom home, but the septic system construction permit specifies it can only accommodate three bedrooms, chances are the seller is going to have to pay for that error.
A professional real estate agent would have caught the mistake or their E&O insurance would cover it.
We live and work in a litigious society. What seller wants to be a target of a lawsuit? FSBOs need to be reminded of the perilous waters they will be sailing when they try to go it alone.
4. The transaction paperwork can be overwhelming to someone who’s untrained
According to the NAR Profile of Home Buyers and Sellers, managing the paperwork in a real estate transaction is one of the most challenging tasks for a FSBO. The days of signing one or two documents to get the property under contract are in the past.
Today, the average contract package contains close to 30-40 pages of complex and lengthy documents.
Many FSBOs don’t realize they will need to complete disclosures concerning the condition of the property, the presence of possible lead-based paint, capacity and operation of their septic system, past water leaks, etc.
By not completing the required documents, sellers can find themselves in violation of state and federal laws.
5. The marketing a FSBO does for their property is limited
Most FSBOs will advertise their home on Craigslist, Facebook, the local newspaper and possibly the MLS, if they use an MLS discount brokerage. FSBOs do not have the experience or expertise to market their home like a real estate professional.
According to the 2018 NAR Survey of Home Buyers and Sellers, 22 percent of FSBOs relied on a yard sign, 18 percent depended on friends and family, and about 12 percent used social media.
Expecting neighbors and family members to spread the word has its limitations. Even paying for the house to be listed in the MLS won’t be enough. There’s no incentive for an agent to show a FSBO property to a prospective buyer because the seller might offer the agent minimal compensation to bring them a buyer. What agent wants those hassles?
6. The words you use and the questions you ask when speaking to a seller can make or break your ability to work with them
Inman published an article listing the four things you should never say to a FSBO:
- “You’ll never sell your house on your own.”
- “I can help you improve your marketing.”
- “I’m not like other agents.”
- “Wow, how did you come up with that price?”
Instead, you should ask:
- “What made you decide to sell your home on your own?”
- “What are the best features of your home?”
- “What type of service do you expect from your agent?”
- “What method did you use to price your home?”
Winning them over
Getting on the good side of FSBOs can be great for your business, but it’s more of a marathon than a sprint.
Consider employing a ‘FSBO first-aid kit’
One of the best ideas someone shared with me when I was trying to get FSBO listings was to develop and hand out a “FSBO first-aid kit.”
This kit is full of resources for the sellers to use in selling their home. It includes tips on how to prepare a home for sale, a guide to qualifying prospective buyers for a mortgage, how to host a successful open house, free templates for in-house brochures and flyer boxes, safety guidelines and more.
The real benefit of providing this packet to a FSBO is to let them know I am there to help them, not hinder them. My approach is never to try to get the listing.
If they reach the point where they cannot sell their home on their own, I hope I will be the first one they turn to when they seek the help of a real estate professional. And, maybe they will also use me to help them purchase their next home.
Several FSBO sellers did turn to me for help over the years in selling their home. Once they discovered how difficult it was to sell the property themselves, they asked me to list the property so they could get it sold.
Show FSBO properties to buyers if they are interested
If you have a buyer who wants to look at a FSBO property, don’t be afraid to approach the seller because their goal is to sell their home.
Sellers may or may not be willing to compensate you if your buyer elects to make an offer to purchase the home. If they are willing to pay you a commission, you should provide them with a written agreement confirming the compensation between them and your broker.
This agreement should be signed prior to showing the seller’s property to your buyer.
There will always be sellers who will want to try to sell their home on their own. However, I believe there are real opportunities for agents to work with unrepresented sellers. You can either help them sell their home or bring them a ready, willing and able buyer.
Remember, if you work with FSBOs in the right way, you can provide yourself with another revenue stream and possibly an excellent source for referrals.
John Giffen is Director of Broker Operations for Benchmark Realty, LLC in Tennessee. He is the author of “Do You Have a Minute? An Award-Winning Real Estate Managing Broker Reveals Keys for Industry Success.”