HomeGain, FSBOs, Idiots and "going it alone"!

Bryant,

These aren't LEADS in the sense that they have been vetted by an agent and that they are ready willing and able to buy.  These are raw internet leads sometimes with phony addresses and minimal information. Have they even been pre-approved. Are they READY to buy? Probably not.  The vast majority  I will probably to do months, perhaps years of hand-holding to get anything out of it.  This is time consuming and drains my resources.  Meanwhile, I've nurtured this lead for months and months and haven't earned a single penny.  These are very early leads.   Sort of like insulin... There is insulin, pro-insulin and pre-pro-insulin.  By analogy these are pre-pre-pre-pro-pro- LEADS.  Most won't pan at all and there will be tons of leg work and hand holding  ahead to get the small fraction that will pan into my office (the pre-pro-pro LEAD stage.) All of this hand-holding and volume is going to act like a giant drain on my time and resources. And once the 10% that remain are in my office,  we've only STARTED the process. Then we have to FIND THE home and only THEN the hard work begins.  These people have obviously never sold real estate. This is NOTHING like what I would get from another agent.  These are leads worth paying for because they have spoken with an agent, there is some urgency and a much higher percentage are ready, willing and able to proceed. 

Further, when another agent sends me a referral I'm not supposed to engage in a race to the bottom with hundreds of other agents - reducing what little I'm going to get even FURTHER in order to secure the "prize."  Put bluntly the QUALITY of these leads is sorely lacking if you compare them to the agent leads that I generally get. Talk about being overpriced.   Wanting a whopping 30% just for procuring a name and address is absolutely outrageous.  I don't charge anything close to that for a basic referral.  When i submit a referral I charge 20% if I haven't worked with that person extensively.  If it is merely someone who I know is moving out of area and needs an agent in....CA.  I will refer them for 20% because I really didn't put anything INTO the process. 99% is going to be done by the agent and that agent deserves the lions share of the commission.  My brokerage would frown on anything less - so that's why its as high as it is.  Now, if its a lead that I work long and hard to secure in Westchester but they feel they can't afford Westchester - I will send DETAILED INFORMATION about their needs, likes, dislikes etc. and charge 30%.  But the agent on the other side has very solid information about a very solid client. 

 There is nothing wrong with middle men if they ADD value. These people add nothing.  They just use search engine technology and insert themselves into the process.  The act as though they are empowering the buyer/seller. In reality none of the agents are vetted.  They just take anyone  desperate enough to use them  and by scarfing up 30% they are reducing services because the agent most make up for this shortfall in volume which means less time and attention to each prospect.  Further - to say that these people don't siphon leads away from us and make our job 10 times harder is ludicrous. 

How could these site EARN THEIR KEEP?  They actually could if they did more than they do. They would be worth 30% if they did what the agent does.  Make sure they are pre-approved, hold their hand until they are ready to act...in other words THEY need to incubate the lead for a year. Send them listings, market information, make sure they are realistic with respect to what they can afford.  If they become lead generators AND incubators THEN and only THEN are they worth 30%.  But I doubt any of these companies is equipped to do that.  They would actually have to put in time and money and be more than a highly optimized web site.  

I am with Lane here.  What I do think is that these folks do need to know what they are getting themselves into.  My general rule is that if a FSBO is going to work it will work FAST.  Some houses, condos, coops are just so desirable that they will be instantly snapped up and for market value.  Most of the people for whom this works out have some connection to real estate whether they be attorney's, investors, sales people from other venues, decorators. They know what the public is looking for and they can deliver at the right price.  For others - they just need to know the risks before sinking about $2k into the FSBO only to find they have to list anyway.  After all that time and all that work, it STILL may fail.  That's something they need to understand - or at least be forewarned about in advance.  If they go in with their eyes open with due diligence - more power to them. 

The reason most of them don't work out is that unfortunately many of these sellers are trying to reinvent the wheel by trial and error. Could they do it if they were trained fully - OF COURSE.  But the difficulty is that there is an awful lot to learn just to sell one property. For most its not practical.

I'm seeing more and more FSBO activity with the down market.  Ironically, common sense indicates they need a Realtor all the more.  But the perception of loss from unrealized gains and for some merely breaking even or being upside down on their loans is the reason.  We have more that are only being put into loss when you add Realtor's fees and closing costs.  Whether or not these FSBO's sell and whether they could have done better with a standard listing is the big question.   

Hi again BB....

It's true.  I am more of a buyer's agent than a  listing agent and you would probably have a different take on the situation.  I have heard signs of strife from the listing side as well.  We have a lot of FSBO activity going on here and a lot of these people sign up saying they want to sell their house.  Then they get a bunch of agents to do CMA's to give them a price point and the "listing" goes up on Craigs List.  This is OK in the sense that it happens to us all from time to time, but from what I have heard from others is that this sort of activity is rampant with this particular type of lead.  The question remains, how many listings appointments are you going to take and how many CMA's are you going to do before you secure a true client and was all that work worth having to fork over 30%?

Now, a listing agent can keep in touch with a lot of the FSBOs and try to win their trust so that when 80% of them fail they are ready to scoop them up.  But that kind of hand holding takes a long time and generally scores of agents (hundreds in my area) followed up on each of these leads.  So you have a high-maintenance, low return hand-holding situation once again that can drain a great deal of time and resources.

My bottom line about these leads is this:  They might be worth SOMETHING, but they aren't worth anything close to 30%.  When I called them blood suckers - I meant that they were gouging and offering almost no value in the transaction for the client and certainly no true value to the agent.  These leads might be worth 5-10% to an agent who doesn't want to be bothered prospecting themselves on the internet - but 30% is for such low quality, high maintenance leads is just insane. 

As for your the main topic at hand - FSBO's  - you are right on the money.  The only thing I do think is that agents should EDUCATE (not discourage) FSBO's as to the real risks they run - at least before they spend money. I spoke to a FSBO last night and suggested (stupidly) that they put up a web site and he told me that it cost $500 - and said that he didn't want to risk it and then have to list.  I was SHOCKED that it was that expensive.  I told them they should see how well other FSBOs appear in the search engines before ever paying money like that. These people may actually sell on their own, they were doing almost everything right and they did not overprice.  But I was very honest with them, gave them some tips.  I will keep in touch and I hope that they remember me.  I do have a client for them who I will try to bring back next week.