Why Most Real Estate For Sale By Owners (FSBO) Fail

by Bill Gassett on May 3, 2010 · 27 comments

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Why Most Real Estate For Sale By Owners (FSBO) Fail

For sale by owner Metrowest MassachusettsTop Reasons For Sale By Owners Lack Success

One thing that makes the world go around is the desire to save money. Everyone likes to save a few bucks. In Real Estate saving a commission translates into big dollars. It is hard to blame anyone for wanting to save the type of money that is made when a Realtor sells a home or condo.

While commission rates are negotiable, in most areas around Massachusetts someone selling their home will more than likely be paying a Real Estate commission between 4%-6% on the sale price of the property.

On a $400,000 home a commission of 5% is $20,000. There is no question that is a lot of dough! Selling a home for sale by owner is not an easy task and that is why most people end up using a Realtor. Nationally the success rate of a for sale by owner (FSBO) is very low. Over 80% of all FSBO’S end up listing with a Real Estate agent. Why is going the for sale by owner route so so difficult to pull off? There are a number of reasons why selling a home on your own is a hard thing to make happen.

What if I told you that selling a home without the services of a real estate agent is certainly possible? Are your ears starting to perk up? In order to be successful you need to know how to sell for sale by owner. As a real estate agent that has been selling homes for the past twenty seven years I constantly see a myriad of things that for sale by owners do wrong. The problem with many homeowners is they think selling a home is easy and they can figure out everything on their own without the assistance of a professional.

While this is certainly possible it is not likely. There are a lot of things to consider when selling a home without a Realtor including home sale preparation, pricing the home correctly, showing the home, qualifying the buyer, and many others. Some of the issues are discussed below but make sure you read how to sell as a for sale by owner without using a Realtor in the link above. It will be the best advice money can buy for attempting to sell on your own!

The Wrong Price

I have written numerous articles about pricing a Massachusetts home properly. It is the most critical element when selling any product but especially so when you are talking about something as large as a home sale. Over 75% of a homes marketing is about setting the proper price. Homes that are listed with a Real Estate agent and are overpriced stand a slim chance of selling. Overpricing as a Massachusetts for sale by owner (FSBO) makes it next to impossible!

Many sellers seem to either do their own market research and end up choosing the wrong price or have a Realtor help them with appraising the property and ignore their advice.  If more for sale by owners priced their homes based on comparable market data there would be a higher success rate. Doing extensive research of what like homes in similar neighborhoods are selling for would go a long way!

Often times people want more money for their homes because they have done some kind of recent improvement. Unfortunately many projects for the home do not have a high return. For example if you replaced a roof, a septic system, or added a pool don’t expect to see much payback on the money you invested.

Lack of Exposure

Some for sale by owners do nothing more than throw an old beat up for sale by owner sign in the front lawn and expect that will do the trick. Then there are others that think that going in one of the for sale by owner sites like I sold my house.com, for sale by owner.com or buy owner.com is going to bring lots of traffic. WRONG!

Online Real Estate marketing

These sites generate a pittance of Real Estate traffic in comparison to the sites some of the top web savvy Realtors use to promote homes. Their sales pitch is always “we will give you world wide exposure and save you thousands of dollars!” This could not be further from the truth. Just go to Google or any other major search engine and type in a local search with Real Estate keywords a buyer would use.

Things like your town, state and homes for sale. Using my home town as an example would be Hopkinton MA Homes for sale. Do you think a for sale by owner site is going to come up in the results? Not a chance! Go ahead and try it with your town. It will be dominated by sites that show homes listed by Real Estate agents. These FSBO sites promise the world and deliver empty promises the majority of the time.

A Realtor that knows their way around proper internet exposure can change the traffic going through a home exponentially when compared to a FSBO site. Take a look at the Metrowest Massachusetts Real Estate marketing I provide all my seller clients. There is absolutely no comparison what this kind of internet exposure can do when compared to a for sale by owner website. The cold hard facts are thousands of buyers will not even know a FSBO home is for sale.

Buyers Want to Save the Commission

One of the other factors associated with selling a home by owner is the fact that many of the people viewing the home are going to want to share in the commission savings. Many of the potential buyers who will be looking at for sale by owner homes are bargain hunters. The line of thinking is that since the seller is not paying a commission they should be able to offer less for the home. Sellers end up receiving low ball offers on many occasions. Buyers will often take 5% right off the top regardless if the home is priced well or not.

Home Accessibility and Buyer Qualifications

These last two reasons are often overlooked by someone trying to sell their own home. It is hard to sell a home if a buyer can not get in to see it. Often times when a FSBO is trying to sell they need to match their schedules with the buyer which sometimes is not that easy especially for those that work full time. A Realtor of course makes this part of the home sale process go much smoother. Lastly, home sellers need to be equipped with the knowledge of knowing how to qualify potential buyers. There is no point in having unqualified foot traffic going through a home. This is also part of a Realtors job. Most buyers that view homes today are pre-approved. As a FSBO you need to make sure that the same holds true when showing your home.

If you can sell your home on your own all the power to you! You will be in the minority but you can make it happen! Above all else remember how important pricing and market exposure is to your home selling success.

If you are are Massachusetts for sale by owner and find you do want the help of a Realtor, I would welcome the chance to be interviewed.

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About the author: The above Real Estate information on why most Real Estate for sale by owners (FSBO) fail was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 27+ Years.

Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

I service the following towns in Metrowest MA: Hopkinton, Milford, Southboro, Westboro, Ashland, Holliston, Upton, Mendon, Hopedale, Medway, Franklin, Framingham, Grafton, Northbridge, Shrewsbury, Northboro, Bellingham, Uxbridge, and Douglas.

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Staging and Preparing a Massachusetts Home For Sale
May 6, 2010 at 11:50 am

{ 26 comments… read them below or add one }

Robert Schwabe May 3, 2010 at 1:47 pm

Bill – Great article! I find that for sale by owners don’t really understand how hard it is to sell a home. They also don’t realize that the people looking at their home are not usually not qualified or an investor looking to get a really good deal. I always wish them the best and tell them to call me if they ever have any questions I might be able to help them with.

Loreena Yeo May 3, 2010 at 2:46 pm

Great points! Most of them want to save on selling costs. Very understandably so.

However, when I get my quick survey out to my potential sellers, I always have a question there to ask: How much do you think your home could sell for? How much do y ou think your neighbor’s homes are selling for?

They are usually 10-15% higher than reality. Sometimes even higher. There are more than them than we know.

Hence, it is my opinion that a FSBO usually list their homes for higher than what they think they could get. It is dangering their selling/ moving-on plans.

Great job, Bill! Good explanation.

Kelli Davis May 3, 2010 at 4:08 pm

Bill,

My husband and I used this company when we sold our home recently: http://forsalebyownerhomes.com

This flat fee MLS service organization overcame the objections that you show here, offering a CMA for our neighborhood, advising us on price, suggested using a keybox, provided signage, etc. We sold our home quickly.

Just wondering what your thoughts were on such services. Thanks for the article!

Bill Gassett May 3, 2010 at 9:42 pm

Kelli you didn’t think I would be smart enough to Google your name and see that you are affiliated with this company? You can have your link. A flat fee MLS company does not come close to providing the type of services a true professional provides. In fact the percentage of people that hire flat fee companies such as these and end up with a full service agent is almost as high as those that just do it themselves as a true FSBO. At least that is the case here in my area of Massachusetts. Just putting a home in MLS and a sign out front is not much marketing. I could go on and on about the differences but I would end up writing another article.

mike May 10, 2010 at 6:50 pm

haha… busted!! nice…

Allison June 5, 2010 at 9:18 pm

Nice article.
I talk to a lot of FSBO. They do not realize the time and effort we as realtors go through. I just had a FSBO tell me today that FSBO are going to run many realtors out of business. He said these sites (forsale by owner, ect..) and getting put on the MLS for a flat fee are taking over the business. He also told me I could bring a buyer to him but don’t expect commission, unless the buyer wants to pay. Yeah, I am sure the buyer wants to pay me commission?!
So, many of these FSBO’s think they can so successful selling a home just for being on a MLS. Matter of fact they e-mail me telling me they need more marketing and can I help them. I will not help FSBO. I spent money on training and I have a family to feed too.
Tell me how would you respond to someone that says,”Well I am on the MLS and for sale by owner, so why would I need you?” Thank you

Bill Gassett June 6, 2010 at 8:07 pm

The answer to your question is a very simple one Allison. I will actually answer it by asking you a question…How many successful Realtors do you know that sell homes by just putting into into MLS? The answer is very few. The fact of the matter is that putting a home on MLS and nothing else is doing the least you possibly can. Maybe if the Real Estate market was booming that would be all you need to do. That is not the case today in most Real Estate markets across the country. A FSBO website garners a very low percentage of Real Estate traffic. In regards to bringing the buyer and having them pay why not? Just have the buyer reduce their offer by whatever percentage you are going to charge them! This is typically what buyers do anyways when they purchase a FSBO. The seller thinks they are saving money but in the end they sell the home for less than if they had listed it with a Realtor!

Jim Johnson June 27, 2010 at 8:13 pm

You make some good points, especially in your last comment. Too many agents rely on the MLS and the proliferation of listings through Internet sources, and seem to know little about marketing.

I think your estimate of success rates for FSBOs may be a little high though. NAR surveys generally come in at less than 10%. Then, there’s the question of how you define success. NAR has also found that FSBOs generally sell for an average of 15% less than they would had they sold through a brokerage.

Bill Gassett June 28, 2010 at 2:43 pm

Jim I think the last study I saw was that for sale by owners on average end up selling for 16% less than if they used a Real Estate company. What most FSBO’s fail to realize is that buyers who are attracted to these properties are bargain hunters themselves! Every buyer looking at a for sale by owner always factors in the fact that the seller is not going to be paying a commission. Sellers rarely ever save money going the FSBO route.

Scott Senn July 3, 2010 at 6:13 pm

I read this post with a great deal of skepticism. It is a known fact that %20-25 of all homes sold in this country are FSBO’s and I believe that number will only increase over time. The old school way of realtors doing business by controlling information is over. One does not even need the MLS website to sell a home as the information on homes for sale can be readily attained through many other means, thanks to the wonders of the internet. A person can retain a qualified real estate attorney who can handle all of the “mystical paperwork” that keeps people from controlling their own destiny at a fraction of the cost that they would spend on realtors. Realtors know this and have been losing ground to savvy sellers (and buyers) at a steady rate over the years. The only thing left that a realtor has to really offer a potential client is customer service. The idea that realtors are only going to bring qualified buyers into your house is also misleading. Most of the time, a sellers realtor has no idea who the buyer’s realtor is bringing into a showing. If you don’t believe me, try this yourself. If you are a current homeowner and are working with a realtor as a seller, ask your realtor if he knows the disposition of the people the buyer’s realtor is bringing over. Most of the time they don’t have a clue as their secretaries set the showings anyway. They are flying by the seat of their pants and they don’t want you to know it. Quite frankly, I have never really been able to ascertain what realtors really do for the incredible amount of money they want to be paid. It’s time that we, the American home owner, eliminate the middle man and take matters into our own hands.

Bill Gassett July 6, 2010 at 11:17 am

Scott where are you getting your information from? It is absurd to think that 20-25% of the homes sold are for sale by owners. It is no where close to that! While I agree that Realtors do not control the information like they used to it does not change the facts about selling homes. It is hard enough today in this environment for a Realtor to sell a home never mind a consumer who thinks they know how to do it. As I mention in the article, most sellers don’t price their homes properly. Even the best agents can’t sell overpriced homes! I think there would be far more successful FSBO’s if they took the time to price their home where it should be and not some number they feel they need or want to get.

I disagree with you as well that most buyers are unqualified that look at homes. Most agents are not going to waste their time driving buyers around that can not get mortgages. In know personally that I do not work with a buyer unless they are pre-approved.

Peter Buch February 2, 2011 at 3:09 pm

Good points: Sales Price is always the key, MLS and propagated internet listings are crucial

Bad Points: This article is completely biased towards the importance of high commission Realtors. The whole game has changed with the internet. I don’t know any qualified home buyer or buyer’s agent who isn’t looking for a $400,000+ house on MLS or through Zillow.com or Realtor.com. Nobody cares who is selling the home.

I just sold my in town Atlanta home using http://www.gaforsalebyowner.com which is basically a cheap way to get listed on MLS and several other sites, but the .0012%commission Realtor provided us several bits of good advice on procedural issues. My friend a mile away used the same service and actually stole a buyer from us. that’s two successful sales. We didn’t get much traffic until we were realistic with our price. However, we saved $12,900 in commissions and sold our house for $25,000 above market based on comps pulled by our low cost agent and the appraisers comps. My wife and I were involved in two home sales previous to this successful for sale by owner. We had sold a home with an agent who under priced our house and ended up with two backup full price offers. I had bought a home for sale by owner without an agent and learned some things procedural things the hard way.

The buyer’s Realtor is just as interested in making the sale happen as the seller. Listing on MLS is the key. Several other sites like Zillow automatically list your home as well. We interviewed a top seller’s agent in our neighborhood and his sales strategy was to talk up the house to his contacts. Really??? Give me a break. Our house is gorgeous and the in town location was a plus. Everybody is tightening their belts except the Realtors. We had several agents come by who wanted to list our house for 2%. Always stick that “For Sale by Owner” sign in the ground at minimum you’ll get a reduced seller’s agent commission

Bill Gassett February 2, 2011 at 3:31 pm

Peter it is great that you sold FSBO but your story is a RARE one. You can check the stats yourself. It is hard enough today to sell a home with a Realtor never mind without. It is also very unusual to sell a home above market as you mention unless the buyer’s agent and the appraiser for the lender were not doing their job properly.

Most buyer’s who look at FSBO homes want to share in your commission saving which in the end amounts to most sellers not saving the amount of money they think they are going to. There is no question that selling FSBO is not impossible but the key is making absolutely certain that the home is priced right. By the way the stats say the 8-9 times out of ten a seller will end up listing with a Realtor because they were unsuccessful.

Lisa Glowacki September 3, 2011 at 6:41 pm

Bill this always a great debate. Peter and other FBSOs just wondering if there was a buyer’s agent involved in your sale. Peter I am confused by this, “Everybody is tightening their belts except the Realtors. We had several agents come by who wanted to list our house for 2%.” Seems to me that is tightening their belts. Another point to be made is that the Banks thought selling homes was so easy until they found out the task at hand isn’t so easy now they are asking for suggestions on how to get their homes sold. Government Seeks Suggestions on Sale of Government-owned Homes – http://www.americanhomeowners.org/AHF/Home%20Base/September_2011.htm#Government_Seeks_Suggestions_on_Sale_of_Government-owned_Homes_ Some will always think they are of great value and others are of no value. Realtors do much more to sell homes than put a listing on the MLS, stick a sign in the ground, and hope for the best. It may work for a few FBSOs but it doesn’t work for all.

Liz Provo September 5, 2011 at 4:13 pm

Hi Bill,
Always a lively discussion when FSBO is brought up. Having operated a regional for-sale-by-owner service in Massachusetts since 2002, I can say that a lot has changed and the resulting success or failure of FSBO is hard in many cases to document. Agent-listings fail almost 50% of the time and sellers may go through multiple agents with similar failures, making expired listings a popular source of prospecting for many agents.

Our best results have always come from sellers who have obtained a professional appraisal for their property and used the results to price the property fairly. We started out by publishing a high-end print magazine that was distributed throughout Western Mass for 8 years. The Internet has helped level the playing field in recent years. While I agree that sites like isold my house.com and national sites like for sale by owner.com or free listing FSBO sites are largely ineffective as buyers soon learn that outdated inventory is rampant, smaller regional services in many areas of the country outperform the MLS.

We have always welcomed buyer’s agents to view our properties and have done our best to to educate our advertisers (sellers) how to work with them effectively. There are many entry-only services available that provide additional exposure which we sometimes recommend. Together, our results have been very good, even in this market.

Social media is a big part of our marketing strategy these days and we promote our listings through many channels (Facebook, Twitter, LinkedIn, YouTube, blogs, etc) as well as syndicate them to other websites where they are seen side by side full-commission agent listings. Sellers can easily share their listing within their own network and ask for the information to be reshared.

Agent commissions have not changed over the years and until they do, consumers are finding exciting new ways to chart their own course when selling. Creative agents are learning how to provide additional services for those who want to work with them instead of bashing home sellers for choosing to sell privately.

Bill Gassett September 5, 2011 at 4:31 pm

Liz it sounds like you are going above and beyond most For Sale by Owner companies. I certainly commend you for that. There are many home owners however, that don’t even use a service such as yours thinking that throwing a sign out in the yard is all it takes to sell a home.

Jennifer Lopez November 22, 2011 at 1:49 pm

There are some downsides to selling a home without a real estate agent. Another reason is that buyers realize you don’t have an agent and can try to do some hard negotiating with you and drive your price below market level because you are already “saving money” from not paying a commission and they think they should benefit from those savings as well.

Bill Gassett November 22, 2011 at 2:24 pm

Jennifer you must have missed it but the fact that a buyer wants to save on the commission was mentioned in the article.

real estate fredericksburg January 13, 2012 at 10:06 am

Bill, I agree with most of what you say. FSBOs do work, IF they get proper exposure and are priced right. The issue that you correctly identify is that most sellers are emotionally attached to a price they think the home is worth, and don’t know how to get their listing onto an MLS or distributed properly. Good piece, thanks for sharing.

Home Appraisers October 3, 2012 at 3:44 pm

This is the single most important reason why some FSBOs sell and others do not. I have personally bought homes FSBO and done nothing more than a yard makeover for $500 to $1000 and sold the home for $15k to $20k more. Take a close look at your house. How is the paint? Is it cracked or needing a fresh coat? How are the hedges and bushes? Do they need trimming? How about weeds, are they under control? Could your yard use a few decorative stepping stones? Maybe a fresh layer of bark or landscaping stones? Make the house look as new as possible from the curb the few hundred dollars you will spend will make you thousands more I promise.

Bill Gassett October 3, 2012 at 3:54 pm

There is no questions that curb appeal is very important when selling a home. You are right…today it is all about doing the little things. Many for sale by owner’s have not been given guidance by a pro on what it takes to sell a home today.

Fred Carver October 29, 2012 at 9:10 pm

Hi Bill,
You make some Great points here, as a fellow Realtor I spend countless hours dealing with possible buyers, looking for the qualified and serious ones. My experience with FSBO’s they seldom save any Commission Dollars, Home Buyers know they are not paying a commission and discount their offer by at least the commission amount. And Who is giving the home seller advice when offers come in? Not all our Commission goes to us, we spend 10-30% on marketing, and countless hours of our time, starting with processing the listing to arriving with the keys many times months later on move in day.

Great Post Bill

Bill Gassett October 29, 2012 at 9:31 pm

Fred – you are right, a For sale by owner home is an automatic invitation for a buyer to try to save the commission instead of the seller. The biggest reason why most FSBO’s fail is improper pricing to begin with!

brian March 30, 2013 at 3:11 am

I like when you busted Kelli!! I LOVE your article and I am NOT putting my website in there because we are a hybrid brokerage! haha:)

But love the points you made! Thanks for the read and I hate people that are not legitimate!!!

Meng Zhao May 5, 2013 at 7:55 am

While using the fact that FSBO sellers sell 16% cheaper then those who use a Realtor to demonstrate that FSBO fails, it only underlines the fact that Buyers are ripped off if the transactions involve a Realtor. Thus, this down side for the seller should be considered upside for the buyer. Regardless, the Realtor took 6% off the transaction, which would otherwise be savings for either side.

Bill Gassett May 5, 2013 at 10:53 am

Wrong Meng! Free markets determine market value not a Realtor! If a buyer is willing to pay X amount for a certain type of property that is the value. If a FSBO decides to put their home on the market for $50,000 more than market value because they don’t know any better, lets it languish on the market for months and then finally decides it must be overpriced and reduces that is their own fault. This of course is the biggest underlining factor why FSBO homes sell for less without the assistance of a Realtor. Once you overprice your home to start it is hard to recover from. In fact most of the time you will sell for less than if you priced it correctly coming out of the gate. This is why there is a big gap between listing with a Realtor or not.

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