FSBO vs Full Service....the local media makes a splash to sensationalyze.

By
Managing Real Estate Broker with Flexit Realty "Flexible Home Selling Solutions"

Today I discussed with a reporter the upcoming media spot dedicated to sensationalyzing the FSBO discount flat fee broker. 

I happen to have a combination company but not a discount company or flat fee company.  I own morfsbo signe websites dedicated to the FSBO seller than anyone in Michigan.  So the reporter wanted my spin....and spin was the right work.

The problem is there is no spin.  There is only the truth.  Some sellers are very well equiped to sell their own homes....most are not.  Some sellers understand the risks....most do not.  Most sellers have a misconception they are going to save thousands in commissions....most do not.

So why do people sell on their own?  They lure of potential savings.  If you are truthful with yourself answer these questions.

If you could save $10,000 dollars on your next car purchase, if you did a few things would that interest you?

Here is all you have to do.

  1. Mount your own tires
  2. Bolt in your own seats
  3. put in your own floor carpets
  4. screw in your own sunvisors
  5. mount your glove box cover

You get the idea...most of these things we actually could do.  They may expose us to some liability but some of us might be willing to do it for the lure of a significant savings.  The reporter thinks he knows why people use For Sale By Owner programs.  The number one reason is the lure of commission savings.

Lure is the right word.  Most buyers expect a larger discount because the seller is not paying a commission...so the home should automatically be priced below one which uses a realtor.  The buyer never considers the advertising costs a seller has to spend to get the same market exposure as a "Realtor" brings when they promote a listing.  Advertising must be free....right!

On average buyers pay between 3-8% more for a home listed with a Realtor.  So like the reporter that is the commission that inflated the sell price!  Wrong!!!! the difference is a professional explaining the benefits and features of the home, property, neighborhood and schools so the buyer is willing to pay more for a better product that meets their needs.

Seller's over sell and create skepticism in the buyers mind concerning condition.  I have had proud seller's take me through their homes...."you'll love this, OH did you know we just painted and added a new toilet paper roll holder"!  Seller's are so anxious to get an offer from everyone that sees their home...so they over sell.

I love having the combination company...I display over 2000 listings across more than 18 major cities.  I have full time agents working on commission just like the traditional companies too.  They also share in the FSBO sign-up fee.  We know that the number of FSBO sellers is going to increase because of the economy but we also know they will convert to full service listings when they are unable or decide not to sell as a FSBO.

fsbo sidewaysSo does FSBO programs work...Yes for some people...certainly not the majority.  Why do people try it if it does not work for the majority?  The lure of commission savings.  The lack of understanding what a Realtor actually does, the media, banks, lenders, on-line listers the list is long but the bottom line the media has played this song so loud and long.  People are not looking at the real estate profession as the professionals we are at this point.  The public is looking at us as over paid for the services we render.  Just for the record our signs do not resemble these in the slightest. 

The first self serve gas station only had a few customers...but try and find a full service one now!  The lure was cheaper gas...where did that go?

I didn't mention the liability issues with disclosures, or contracts this is all things professionals know about and we point out...many companies that offer FSBO programs do not even have licensed agents...no need the For Sale By Owner client is not represented!  The other issue that is going to be addressed and has been already in some states is minimum service and no service companies.  The Broker that is after the quick buck and wipes his hands after placing a listing on the MLS for the For Sale By Owner.

So is there a spin to this story?  Yes...we are not going to eliminate the For Sale By Owner.  Will the FSBO be able to sell....yes in some cases.  Is the For Sale By Owner program something that everyone should try or want to try?  No, most will only waste their money.

So was I happy a reporter twisted the facts and a broker helped by not revealing the true story of the For Sale By Owner...no.  Will this help my business probably...but we explain the facts...take the time and help the potential client make the right decision for them...not just take their money and run. 

We are Realtors first...with ethics, morals and responsibilities to our clients and profession.  Can these programs co-exist...some say no...others say hell no!  But the truth is both are here to stay...so understand it.  Don't think twisting the facts in one direction or the other will make a difference.  The truth is for some people that make the decision with their eyes wide open and have the expertise to handle the process For Sale By Owner can work.  Yet the majority of sellers are not in that position and do not want to deal with or take the liability selling on their own requires.

We want sellers to sell that is the bottom line.  We want buyers to fine the right home at the right price.  We know that a home is only worth what a buyer is willing to pay for it!

I hope this gave you some food for thought.logo

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Rainmaker
1,570,224
David Saks
(retired) - Memphis, TN

It might be fair to compare the FSBO's take on doing it themselves to the gamblers subliminated psychological reinforcement that says "Hey, maybe I can get something for nothing by rolling the dice, flipping the cards, or pulling the slot handle". "Something for nothing" psychology reinforces the addiction to pull the slot machine handle and it doesn't work in the long run. The casinos aren't the enormous buildings that they are because people are winning. On another note, about the only thing left in America that's self-service is the grocery store. I remember when gasoline was twenty-five cents a gallon and even less during the "gas wars". The pump attendant, during that time, checked the oil, tire pressure on all four tires and the spare, wiped the windshield, and pumped the gas. My mother never got out of the car to pump gas, and I can honestly say that I never, ever saw her do so. Now, gas is four bucks a gallon and you run the risk of being assaulted with a window squeegie by a pan handling derelict while you pump your own gas.

I hope that we can educate more considering the FSBO route, and that they absolutely consider your thoughful insight. I really appreciate it.

Mar 26, 2008 02:16 PM #3
Rainer
340,913
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

Could you forward me a copy of the article when it comes out?  I'd love to read it and see how slanted the article becomes.

Fully agree with you.  Some home sellers CAN do it on their own.   And yes, we can peacefully co-exist.  

Mar 26, 2008 10:07 PM #4
Rainmaker
4,432,317
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Congratulations on being interviewed. Please send us a link when it comes out.

Mar 26, 2008 10:34 PM #5
Rainmaker
1,073,964
Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375
Flexit Realty "Flexible Home Selling Solutions" - Grand Rapids, MI
Real Estate Services You can Trust!
Hi Melina, Thanks for your comments. Since I am the broker for a full service company that offers the For Sale By Owner option I have a different perspective than most.  We have to recognize issues that we face and what the driving factor are that are going to change our business.
Mar 26, 2008 11:57 PM #6
Rainmaker
1,073,964
Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375
Flexit Realty "Flexible Home Selling Solutions" - Grand Rapids, MI
Real Estate Services You can Trust!
Hi Cindy, when you consider that a For Sale By Owner is on his own...pricing is a big issue.  We do not mind that people make the decision to go the For Sale By Owner option...we can not offer them the normal CMA services because of representation issues.  So they will make mistakes...so do some of the Realtors when pricing properties...just not as many.  Knowing that the average Realtor brings in 3-8% more for the selling price should be a highly motivational issue for any seller.  You are always going to have For Sale By Owners...we give them the tools to try if they wish and honestly want them to sell.  We have a buyer once they sell either way.  Thanks for the comments Cindy.
Mar 27, 2008 12:04 AM #7
Rainer
139,927
Kelly Sibilsky
Licensed Through Referral Connection, LTD. - Lake Zurich, IL
I think that all business models "work" and have merit. Whether or not they will work for specific clients in specific situations is another matter altogether. Great post, Gary.
Mar 27, 2008 01:48 AM #8
Rainmaker
27,551
Leonard Thomas
RE/MAX Dallas Suburbs - Plano, TX

Gary.  As a successful hardcore FSBO warrior the first 3 or 4 years of my career (real estate gods have since granted me reprieve with a beautiful farm area and productive sphere of influence), I'd say you're spot on behind the majority of FSBOs' reasoning for FSBOing in the first place - they THINK they're going to "save" the commission.  But for the uninitiated agents interested in making a fortune working FSBOs (those that have yet to do 100 FSBO listing presentations ... okay, maybe 50), we should tell them the extension of that reasoning.  FSBOs think they're going to "save" the commission because a Realtor has yet to demonstrate the value of their services.  They think they're going to "save" because they haven't been told/shown/convinced otherwise.

Granted, some people list with Realtors just because they think we're a necessary evil but most people list with Realtors because they understand/have experienced the value of professional representation.  The only difference between a seller who lists and a FSBO is that the FSBO has yet to see the value of professional representation (with exceptions, I understand, but I'm talking the other 90% here).  How do we know this is true?  Two ways, one, FSBOs historically get 3-8% lower sales prices than agent-represented transactions - the value was there, they just didn't know it!  Two, over 75% of all FSBOs will ultimately list with a Realtor, usually within the first 30 days - they didn't know the value until they tried, then they learned the value in a hurry.

Knowing this, FSBO warriors and wannabe FSBO warriors need to understand that successful FSBO farming has less to do with "following up" with FSBOs and "being a real estate resource" for FSBOs and all the other goofy keep in touch "strategies" I've seen and create a plan that demonstrates VALUE to the FSBO.  Done correctly, one should be able to convert FSBOs on the first visit and not have to drip email, drip mail, drip visit or otherwise just be a drip.

Mar 27, 2008 02:13 AM #9
Rainer
384,128
Duane Hosek
Coldwell Banker - Lewis-Kirkeby-Hall - Rapid City, SD
hello Gary..........love the blog...........I called and left you a message today, Thursday, at 4:45 pm mountain time, was wondering if I could use bits and pieces of what you wrote for a small real estate column I write for a small local newspaper here in Rapid City, SD.....please call me when you get this......Thanks...............Duane Hosek   605-391-8424
Mar 27, 2008 10:46 AM #10
Rainer
67,222
Keith Perry
Coldwell Banker - Hiram, GA
REALTOR - West Metro Atlanta
Great post Gary! Let us in on the link when you are published please. I am sure it will make some good reading.
Mar 27, 2008 11:35 AM #11
Rainer
55,006
Tammy Stone
Prudential Preferred Realtors - Grand Rapids, MI
"Eco-Green" Agent in West Michigan
Gary~I've always had the perspective of "helping" FSBOs, that's why I've been the one to land those listings when others have not.  Takes work and persistance but it does pay off.  I love the program that we have to offer and now my job with working the FSBO market has become much easier.  As you know, I was contemplating something like this last year... I guess great minds think alike!
Mar 28, 2008 02:17 PM #12
Rainmaker
717,706
Ruthmarie Hicks
Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY
Most FSBO's are very  stubborn around here.  They really think that they can "clean up" by listing it themselves.  I trying to work with them because more than half of them fail.  I do some simple things to help them, and then I'm there if things don't go well for them.  It takes about a month or two for most of them to realize its not so simple as a couple of ads on Craigs list and a sign in the ground.
Mar 29, 2008 04:43 PM #13
Rainmaker
1,073,964
Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375
Flexit Realty "Flexible Home Selling Solutions" - Grand Rapids, MI
Real Estate Services You can Trust!

Hi David, we are taught that the only way for a property to sell is use a Realtor...yet, some properties, some sellers that have previous experience have done this...the numbers have moved up a bit for the success rate of the FSBO but for the most part over 80% end up using a Realtor.  Most of this is education for both Realtors and sellers.  Thanks for the comments David.

Mar 30, 2008 12:12 AM #14
Rainmaker
1,073,964
Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375
Flexit Realty "Flexible Home Selling Solutions" - Grand Rapids, MI
Real Estate Services You can Trust!
Hi Kris, this was a television spot...didn't get much fan fair....except from Realtors.  I will look to see if they posted a clip on the television's website.  Thanks for the comments Kris.
Mar 30, 2008 12:14 AM #15
Rainmaker
1,073,964
Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375
Flexit Realty "Flexible Home Selling Solutions" - Grand Rapids, MI
Real Estate Services You can Trust!
H Gita, unfortunately because my comments were not slanted the way the reporter wanted they were never used.  I am looking on the TV website to see if they posted a clip.  Thanks for the comments Gita.
Mar 30, 2008 12:16 AM #16
Rainmaker
1,073,964
Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375
Flexit Realty "Flexible Home Selling Solutions" - Grand Rapids, MI
Real Estate Services You can Trust!
Hi Kelly, you have left out one key issue they may not work for the agent.  If they are using agents....many of these do not use agents.  But the key factor is they have to work for the clients.  Thanks for the comments Kelly.
Mar 30, 2008 12:18 AM #17
Rainmaker
1,073,964
Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375
Flexit Realty "Flexible Home Selling Solutions" - Grand Rapids, MI
Real Estate Services You can Trust!
Hi Leonard, well put.  The caution is that some of the new FSBO company programs are listing For Sale By Owners on the MLS within their real estate company as licensed Realtors.  This means you should know the difference....because you could be getting into an ethics violation for soliciting another agents listing.  You have outlined one of the key issues...value.  The FSBO seller has several reasons for selling on their own...the number one reason is commission...but the underlying reason is lack of value demonstrated by the Realtor.  I really appreciate your comments Leonard, thanks.
Mar 30, 2008 12:25 AM #18
Rainmaker
1,073,964
Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375
Flexit Realty "Flexible Home Selling Solutions" - Grand Rapids, MI
Real Estate Services You can Trust!
H Duane, I appreciated the phone call...nice chatting with you.  Hope all goes well.  Thanks for the comments.
Mar 30, 2008 12:26 AM #19
Rainmaker
1,073,964
Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375
Flexit Realty "Flexible Home Selling Solutions" - Grand Rapids, MI
Real Estate Services You can Trust!
Hi Keith, I will have to call the TV station.  I ended up not being part of the broadcast...my views did not slant the issues the direction they were hoping to present.  I will see if I can attach the clip.  Thanks for the comments Keith.
Mar 30, 2008 12:28 AM #20
Rainmaker
1,073,964
Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375
Flexit Realty "Flexible Home Selling Solutions" - Grand Rapids, MI
Real Estate Services You can Trust!
Hi Tammy, understanding the FSBO seller is a key element in helping them sell and having them convert to a full service listing once they understand the value Realors bring to the table, should they choose to make the change.
Mar 30, 2008 12:30 AM #21
Rainmaker
1,073,964
Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375
Flexit Realty "Flexible Home Selling Solutions" - Grand Rapids, MI
Real Estate Services You can Trust!
Hi Ruthmarie, it isn't as simple as it looks that is why we only have people flock to our business when the media reports that home sales are soaring and selling homes is easy.  They never report the learning curve of dedication required for our profession.  Thanks for your comments Ruthmarie.
Mar 30, 2008 12:33 AM #22
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Rainmaker
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