Special to Realty/Builder Connection
Watch TV game shows, and it’s hard not to wonder what goes on in the minds of contestants: Why isn’t he giving the obvious answer? Why doesn’t she take the money and run?
When the game is trying to capture FSBO business, it actually pays to spend time trying to get into the prospect’s head. FSBOs aren’t all cut from the same cloth. They have different motivations for wanting to sell without an agent. How you respond to their beliefs about the value of real estate agents and the cost of representation can have a direct impact on your bottom line.
Look for clues about whether money, control, or another factor drives an owner’s desire to remain unrepresented. For example, owners who price high may just be testing the market. They may not want to sign a listing agreement because they’re not really motivated to sell. On the other hand, if the owners are pricing low to sell quickly, money is likely the concern because they don’t want to further deplete an already low price.
Money is probably less of a factor for sellers who’ve sold homes on their own before; they likely enjoy retaining control and may believe that representation isn’t necessary. And sellers who complain about the bad job the last salesperson did are probably worried less about spending money than they are about getting their money’s worth.
Once you know the why, you can tailor your marketing and listing presentation accordingly.
It’s the money
A majority of unrepresented sellers choose the FSBO route to avoid paying a commission, according to NAR data. Practitioners put the number even higher—some say 80 percent or more.
To identify whether money is the sellers’ primary motivating factor, one expert says to ask if they’d be willing to pay a commission if a practitioner brought them a buyer.
“If you ask them this, it eventually leads to what their motivation is,” he says. Many FSBOs will respond to the question with something like, “I don’t want to pay a commission.” Or they might say, “I don’t mind paying the commission; it’s the bad representation the last time I used a salesperson that bothers me.”
To show sellers that they’re being penny-wise but dollar-foolish by focusing on the commission, there is NAR data available that shows that homes sold by practitioners fetch 16 percent more than those sold by FSBOs. The data shows an even greater difference for those who start out with an agent.
Showing FSBOs the higher price they could realize with representation is especially important for sellers who are upside down on their mortgage and fear that having a salesperson involved in the transaction will mean coming to the closing table with their checkbook.
In many cases, friends or neighbors who had a successful experience going it alone persuade sellers to go without representation but qualified practitioners know the subtle pricing adjustments based on condition, neighborhood, comparables, and other market factors that can alter a home’s appeal to buyers.
Retail control
Although money matters to every seller, keeping control of the transaction is another major reason sellers go the FSBO route. According to NAR data, about one in 10 FSBOs either wants to avoid contact with salespeople or feels dissatisfaction with a practitioner who couldn’t sell a home.
Converting these disgruntled sellers means identifying the cause of their dissatisfaction, then showing how you can give them the help they need.
For instance, a Realtor converted an unrepresented seller whose previous listing agent had failed to sell the home. He started by demonstrating where the first agent went wrong. Using a copy of the old MLS listing, he walked the sellers through the previous salesperson’s mistakes, thereby demonstrating that he could manage the listing competently.
“The listing was described as a 2-bedroom when in fact it was a 3-bedroom; it included only one photo; and the cooperating commission was very low. I had the listing right there in my hand as we talked and I asked the owners if they knew any of this, and they said no,” said the Realtor.
The mistake on the number of bedrooms was particularly damaging because buyers looking for a 3-bedroom home wouldn’t even see the couple’s house in an online search.
Disgruntled owners such as this are often easier to work with than sellers who are solely motivated by a desire to stay hands-on no matter what.
A smart Realtor should let control-oriented FSBOs know they can ask questions of him or other professionals with whom he maintains a relationship (including an attorney and a lender) for free. Of course, if sellers decide to use any of their services, the professionals charge a fee.
After their initial distrust, buyers gradually will see the agent as an ally rather than just another practitioner trying to get them to sign a listing agreement. Even if a particular owner remains unrepresented, the positive feelings this consultative approach creates may lead to referrals.
Having a buyer
Perhaps the hardest type of FSBO to convert is the one who already has a buyer—or thinks so. NAR data shows 22 percent of FSBOs sold were to a friend, neighbor, or family member. Another 12 percent had been contacted by an unsolicited buyer. Hard doesn’t mean impossible. Many FSBOs who think they’re all set to go learn the hard way that an expression of interest does not a transaction make.
For this group of FSBOs, focus your presentation on the money they’re leaving on the table by not exposing the property to market forces. If you’re selling to your neighbor, usually you’re selling too cheap.
You also want to alert them to the risks of selling to someone with whom they have a relationship.
Even if the transaction seems likely to close, you can offer your expertise in handling the hundreds of details needed to get to closing. NAR’s survey found that handling paperwork was one of the two biggest concerns for unrepresented sellers.
It can be scary for sellers working alone when their buyer is seeking 100 percent financing and wants closing costs funded from the transaction.
For these already-connected sellers, some offers a pricing structure that’s lower than the one they typically negotiate. Some also offer to work without a long-term listing agreement.
Whatever their motivation for going it alone, unrepresented sellers who choose to make the switch and work with a real estate professional can win in the end with a quicker, easier transaction and a likely increase in what they realize from the sale.