Learn why FSBOs need the services you have to offer and how to communicate your value.
According to the 2018 National Association of REALTORS® Profile of HomeBuyers and Sellers, For Sale by Owner sellers, commonly known as FSBOs, accounted for 7% of home sales during the previous year. According to NAR statistics, that translates to 389,900 homes that were sold by-owner. While working with FSBOs has its challenges, those numbers mean that it’s worth it to open the lines of communication in order to serve this market.
One of the ways to answer FSBO objections is to understand the biggest stumbling blocks FSBOs encounter in selling their homes. This can help you to develop a marketing message that resonates and hits on the unique real estate pain points by-owner sellers face.
NAR’s polling identified a number of challenges faced by FSBOs, then categorized and ranked them according to those most often cited by sellers. Here are the Top Five, along with the percentage of homeowners who identified them as their greatest challenge.
Not surprisingly, pricing their property right, then getting to that right price, was the top problem for most FSBOs. In general, by-owner sellers tend to be price sensitive. They are usually selling their home themselves in order to save money by avoiding real estate commissions. In order to counter FSBO beliefs about expensive commissions,you’ll need to show them that your service will more than pay for itself.
Here are some messages that you need to include when marketing to FSBOs:
NAR’s report noted that FSBO homes sold for an average of $200,000 as opposed to the $265,500 average home price foragent-assisted home sales. While some of the difference may be accounted for by FSBOs who are selling to friends and family members, and thus accepting a lower price from the outset, statistics suggest that the majority of these lower-priced sales are the result of bad market analysis and underpriced properties.
Because real estate agents have access to a variety of tools for determining market price and home value, as well as industry knowledge and insights on value-added improvements and enhancements that pay, a real estate agent’s home valuation will be more accurate than the neighborhood scuttlebutt that most FSBOs rely on when pricing their property.
In addition, a clear-eyed appraisal by a real estate professional is a more reliable pricing indicator than a homeowner’s subjective and emotion-based view of their property’s condition and value.
In every field, marketing adds perceived value, and this is no less true in real estate sales. Professional photography,copywriting, and staging, not to mention MLS exposure and a network of local brokers and buyer agents, increases the odds of success for a timely sale and contributes to higher sale prices through increased demand.
Most FSBOs rely on a yard sign and the goodwill of friends, relatives, and neighbors to get their homes sold. That,along with a lack of negotiation expertise and experience, can result in a slow sale for less, with increased carrying costs and out-of-pocket expenses.
Selling a home is about more than a standard sales contract. Contingencies, addenda, disclosures, and a variety of other documents are required to be properly completed and signed by both parties. For many FSBOs, one wrong stroke of the pen, one undisclosed fact, or one missing document can result in a sale that never reaches the closing table.
Worse than that, even after the sale the FSBO can be open to civil penalties if it is found that a material fact was not properly disclosed. Real estate attorneys and homeowners don’t have Errors and Omissions (E&O) insurance to cover such possibilities; real estate agents do. That means that both the agent and client are better protected.
Due to the lack of marketing, it is all but impossible for a FSBO to sell their home in a timely manner. Depending on a yard sign and the kindness of strangers is no way to compete with professionally marketed and represented properties. For homeowners in a truetime crunch -- those relocating for a job, for instance, or selling a house to stave off foreclosure -- a FSBO sale can upset even the best-laid plans.
Make sure to emphasize the time-saving benefits of proper marketing, including the online platforms and resources you can offer. While you can’t guarantee a quick sale, you can certainly improve the odds.
Because they don’t know what current buyers are looking for, FSBO sellers may spend thousands on home improvements and upgrades that just don’t provide adequate return on investment. That’s money that would be better spent on professional representation.
Moreover, because they are coming from an emotional place, FSBO sellers may end up in denial about needed repairs until weeks or months have passed, increasing carrying costs and blowing uptime lines. Decisions about updates and upgrades made out of desperation are almost inevitably bad (and expensive) ones.
Here is the crux of the matter for many FSBOs.We all know the frustrations sellers experience when preparing their home formarket: dealing with contractors, keeping it looking perfect, and finding a place to go when someone is coming in to view the property. Now add to that preparing paperwork, setting up showings, marketing the property, and conducting every stage of the transaction, all while packing up the house and preparing to move.
Most sellers do not have the bandwidth to take on a FSBO sale. Part of your pitch should be the amount of time and trouble you can save them by taking on the preparation, transaction coordination, and other tasks needed to get them to closing.
Understanding the mindset of FSBO sellers and developing answers to their strongest objections can help you speak their language and turn them into clients. Serve them well and you may just find that your former FSBO becomes a great referral source, and your biggest cheerleader.