Do Real Estate Agents Shun FSBO Properties?

45 Replies

So I'm genuinely curious about this topic, and I apologize if it's been covered previously.  I've been thinking a lot lately about sellers who go the fsbo route but say they are willing to entertain buyers with agents.  I did this recently with a flip home and had my own experience, but I'm curious to hear about yours.

Buyers... have you ever approached your agent about a fsbo property and felt like your agent steered you away from that property just because it was fsbo?  I'm interested to hear what experiences you've had.

Agents... how do you really feel about fsbos? Do you avoid them because they potentially degrade your trade, are you impartial to them, or are you big fans?  I'm curious to learn where on this spectrum you lie.

And sellers... I'm interested in your experiences.  Do you feel shunned by agents because you chose fsbo vs. listing through an agent?

Thanks all!

@Chris Jensen I feel like in the modern age there is a better solution for folks who don't want a listing agent which is the "flat fee" listing model. This allows sellers to put their property on the MLS for very low fee, but in return the listing agent gives very minimal services. I don't personally understand why folks go the FSBO route. You don't get maximum exposure, which can significantly lower the sales price of the home statistically. In addition, you don't have a professional to help you negotiate.

I personally have had bad luck trying to simply get in touch with the few FSBO properties my clients have tried to look at. I am sure there are plenty of folks who have had good experiences with FSBO, but not me personally.

I do not deal with FSBOs as a matter of practice because they are typically a waste of my time. They have so many problems with them. They tend to jave unreasonable price expectations, will not negotiate a home inspection in good faith, the property usually wont appraise because there is no listing agent involved, they wont drop the price when it doesnt appraise, they wont make lender required repairs and so on and so on.

So why spend 20 hours on a transaction that is very unlikely to close?

@John Warren , great perspectives, thanks for sharing. The flat fee approach is definitely a good option for getting exposure to the MLS without having to pay for unneeded or undesired services. How often have you had sellers approach you regarding this option? And I hadn’t considered the difficulty in contacting fsbo sellers. I guess if a seller were truly motivated to sell their home they’d make it very easy to be contacted. Good insight. And yah, I’d love to see verifiable statistics on success rate, profitability, etc of going fsbo vs. listing with an agent. Any idea where data like this would exist? Thanks!

@Russell Brazil , very good points.  If the fsbo seller were truly serious about selling their property they would be more cooperative.  No doubt you encounter some of these issues even with listed properties, but maybe just not as frequently?

I'm curious about the comment that properties won't appraise because there's no listing agent involved. Can you expound on this?

@Chris Jensen "Statistics show that selling your home with the assistance of a professional real estate agent will garner you a higher profit, enough to cover the commission as well as put more money in your pocket. According to the National Association of Realtor®'s 2016 Profile of Home Buyers and Sellers, the average FSBO sales price was $185,000, while the average price for a home represented by an agent was $245,000. That's a difference of $60,000!"

Here is the link to that article....this is a pretty accurate stat. https://www.realtor.com/advice/sell/why-fsbo-sales...

When I talk with sellers who are thinking of going FSBO, I tend to use the example of a signing with a publisher. Sure, you can write you own book and self-publish--keeping 100% of what you make and you'll be lucky to sell 2,500 books. Or you can sign with a publishing house, give them 30% of whatever is made from selling books, have the benefits of massive exposure and their expertise and make significantly more with less headache.

The last FSBO I toured it was obvious this man hadn't done a CMA, was thinking the fixes in the home were going to be cheaper than they actually were and felt he could charge $60K more because the lot was the largest lot in the neighborhood. It was very apparent he was emotionally wrapped up--he was selling the home he and his wife raised their kiddos in. So, obviously emotional for him--but that didn't mean he could charge as much as the house that had been completely remodeled and updated down the street with a .25 acre smaller lot. I felt badly for him---and the home is still "For Sale By Owner"--with his only advertising being 1 small rider type sign at the entrance of the subdivision and right in front of the house.....

Here's another link: https://www.upnest.com/1/post/reasons-fsbo-sellers...

@Ashley Wise do those stats consider a flat fee MLS listing an agent, or FSBO? I have sold my flips back in CT myself using a flat fee agency. I offered 2.5% buyer agent fee, had it on the MLS and had smooth sales with each. I consider my sales FSBO as the agency I used only got the house on the MLS, however I believe my stats would fall under "agent listed".

An FSBO sticking a hard sign out (mine was a professional looking sign on a sign post, not a small FSBO one) listed simply on CL and Zillow won't get the exposure and traction that an MLS listed house would. I would expect that house to sit and I could see realtors being hesitant.

I'm not sure if a realtor steered their client from my listing when they found it was FSBO. It is possible, but would have been a disservice to the buyer. Hard to blame an agent if their FSBO dealings are difficult, but I would say all of them are not created equal.

@Brian Pulaski I'm not sure whether the stats include a flat fee listing like you describe--I would assume that, yes, they do, and ethically an agent isn't to steer a client away from any FSBO. For me, as a social media marketing coach/teacher, it's all about the proper marketing and being where your buyers are searching. MLS def helps.

Originally posted by :

I'm curious about the comment that properties won't appraise because there's no listing agent involved. Can you expound on this?

One of the most important jobs a listing has is getting the property to appraise. I tell my clients, I need to sell your house twice....I need to sell it to the buyer, then I need to sell it to the appraiser. Knowing how to get the property to appraise is a very specific skill. It is a skill that most top tier agents have. Below that top tier of agents, they may not have that skill.....a FSBO seller certainly doesnt have that skill. Many agents like myself, or @James Wise for instance actually have appraisers calling us to get our opinions on a properties value when they are doing an appraisal on another sale.

@Chris Jensen @Ashley Wise @Brian Pulaski @Russell Brazil

The largest Keller Williams office in Maricopa County (Phoenix, Mesa, Scottsdale, Glendale, Gilbert, Chandler etc) says that on the MLS listings, fully 1/3 of the houses don't sell.

That is to say 1 out of 3 houses on the MLS drop off the MLS without a successful sale even though they are represented by a real estate agent. People don't realize it takes *work* to sell a house and not every body is successful at it just because they are licensed.

That statistic stunned me. 

Is it the same in your areas?

@Ashley Wise thanks for the link to the articles. And good arguments for using a listing agent, especially the comparison to book publishing. We use a realtor almost exclusively, in a return for a discount to her fee. I imagine people have many different reasons for going fsbo, as we did with one of our projects. But you definitely need to know what you're doing and why!

@Brian Pulaski yours and Ashley's comments get at the heart of my question. It would be nice if all listings (via MLS or fsbo) received a fair shake with agents, but true that not all listings are created equal and no doubt implicit bias comes into play for all parties.

@Chris Jensen

I concur with much that is being stated and might add a couple. 

  1. MLS listing have an automatic offer of compensation via the Broker cooperation agreements to be a member of the MLS. Yes, the amount of compensation may vary but at least you are assured that what is offered in the MLS will be tendered. With a FSBO you need a separate compensation agreement with each seller. Try showing 10 houses in one day when you first need to have each seller sign a compensation agreement.
  2. Agency: Most every FSBO I have ever worked with came to me (Buyers Agent) asking for advice before the sale was over. Becoming an undisclosed Dual Agent is very easy to become and exposes an agent and broker to significant liability.
  3. It was stated above but most clients (buyers and sellers) need talked off the cliff and or spoken with so they have reasonable expectations void of emotion. FSBO tend to go online or family and friends for such advice to be told what they want to hear.

Go Hawkeyes!!

Hi all! (I'm a newer licensed agent in Michigan, as of February of this year with Keller Williams in West Bloomfield, MI). My first sale as an agent this year was with a FSBO property.

My first transaction as a buyer's agent was for my and my husband's first house. Because we were looking at a specific area (Southern Redford Charter Township), we looked at both MLS and FSBO properties just to "cover all the bases."

The seller's son was representing the sale, though I'm not sure why they didn't list the house (something about he was licensed for commercial real estate and didn't have MLS access?). Coordinating phone calls, showings, and meetings was a little tricky with a FSBO rep; regardless of their motives, I/my husband felt a little bitter by closing time because while closing quickly and happily was our top priority, the sellers didn't seem as motivated. Granted, our emotions were a little high since it was going to be *our* house, but other dealings we had with listings agents had frequently gone much quicker and smoother. Perhaps it was simply our perspective that affected our expectations of the sale.

@Ashley Wise that analogy is spot on! One person only has so many hours in a day. Let a trained professional take care of the marketing if that's what they do best. You worry about you. ;)

@Russell Brazil , your note on helping your properties appraise is quite interesting! I actually ran my own comparable properties report before the appraisal, using several recent sales near/around our subdivision. However, when we reviewed the appraisal report, their comparable properties were from within the subdivision, several years prior! The appraisal came in at exactly the sale price, which we were grateful for, but we were puzzled. What do you find appraisers weigh more heavily in their calculations- current market activity, or proximity to the location?

Personally I have found FSBO to be either unrealistically (high) priced, or under disclosed, or both-the usual case. And the owner wants to sell you on the property-Geez!

So I do not pursue them at all and neither should my agent.

FSBO sellers are hard to deal with - plain and simple. They are trying to save money (nobody blames anybody for wanting to save some green), but they are often times doing it to their own detriment.

I have never "steered" any client away from an FSBO, however I do have an obligation to inform my client that, as per the buyer-broker agreements in my state, if they have hired me to help them purchase a home, and the home pays less than the rate that was agreed to on the buyer broker agreement, the BUYERS are on the hook to pay the real estate commission. More often than not my clients are expecting a seller to pay the commission, but adding 3 points on top of a sale price oftentimes deters a buyer from even looking at a FSBO.

Beyond that, a buyer might not be able to finance a buyer's agent commission with their mortgage - so it may have to be paid out of pocket, which will often times mess up finances and DTI ratios, which then causes a problem with underwriting, yada yada yada...

FSBO sellers don't know what they don't know - doesn't mean they are dumb, but it usually does mean there are delays, appraisal conditions or repair issues, miscommunications, paperwork issues, etc... Additionally, there is a substantial amount of liability that a homeowner assumes when they sell their home. If they miss a disclosure or forget to give even a minor piece of paperwork it could come back to bite them pretty hard for literally the rest of their life. Brokers and agents have insurance to protect them from this - an FSBO seller usually doesn't even have the slightest concept of what liabilities they are taking on.

There are many well educated and highly experienced FSBO sellers that are easy to deal with - many are here on the BP communities, but the folks here are not the normal FSBO sellers. Those that are here are at least getting educated and have some experience and will know what to look for and how to deal with whatever comes up. However the typical FSBO seller doesn't do this for a living so they really just don't know how to get a deal done clean and neat, and compliant. It really does take work to get a house sold - even in such a heavy seller's market. It's technically very simple for anybody to do a FSBO and get an offer. Keeping that offer in place, and moving a deal to completion is a totally different story.

Originally posted by @Chris Jensen :

So I'm genuinely curious about this topic, and I apologize if it's been covered previously.  I've been thinking a lot lately about sellers who go the fsbo route but say they are willing to entertain buyers with agents.  I did this recently with a flip home and had my own experience, but I'm curious to hear about yours.

Buyers... have you ever approached your agent about a fsbo property and felt like your agent steered you away from that property just because it was fsbo?  I'm interested to hear what experiences you've had.

Agents... how do you really feel about fsbos? Do you avoid them because they potentially degrade your trade, are you impartial to them, or are you big fans?  I'm curious to learn where on this spectrum you lie.

And sellers... I'm interested in your experiences.  Do you feel shunned by agents because you chose fsbo vs. listing through an agent?

Thanks all!

For the most part I don't interact with FSBO too often. FSBO are typically cheap & are a real pain in the a** to deal with. On top of that though the main reason is I handle so many listings I have no need to work that type of business. That is low hanging fruit, i've spent years building my business up to where i'm paid much better than that. As they say "lister's last"

I am firm believer that a good broker will more than pay for themselves.  I have had really bad experiences buying directly from owners, they tend to be more emotional and have a harder time internalizing issues with their property. 

@Chris Jensen . I am no longer working full time as an agent, but when I was a few years back I was closing 70-80 listings annually. I would typically contact the FSBO’s near my listings and try to get a look at them if I was in the area. I would let the sellers know that I took pride in knowing everything that was on the market and not just what was in the MLS, ASK if I came across a buyer that was not a fit for my listing, would they co-op with me? It was usually a yes. If the FSBO wasn’t selling I would check every few weeks and see how traffic was, Marketing etc. If I stayed in touch, many of the sellers would eventually ask me to list, so I liked FSBO’s and found them to be a good source of new listIngs. The upsell to going with an agent was easy since they had already agreed to pay half the commission if I brought a buyer.

Account Closed It's not really anything that shocks me. There are plenty of agents in my area "selling" homes for clients and the price is wrong, there is little to no marketing. I mean, I look for homes for investors on the MLS with bargaining power--as in, lengthy days on market with no action. It does take work to sell a home--and there are plenty of old school agents still "doing things" the "old school" way. :-)

it's also true that less that 8% of homes sold last year because of an open house--yet some agents still swear by them. 

@Chris Jensen I’ve had a real estate license for 17+ years. I’ve sold FSBO houses before and negotiated my commission with the seller. It may sound cheesy but I don’t worry about if I’ll get paid a commission (I always ask though) because at the end of the day I want what’s best for my buyers and believe a good deed to another will be returned to me in some way down the road. I’ll also add that I bought two FSBO houses last year for myself (one off CL and another from ZIllow). Both sellers didn’t want to pay all those horrid commissions which is why they were selling themselves. I happily paid their asking price which was well below market value. My point being that not all FSBO deals are over priced and you should use a professional so you don’t leave money on the table. As required by law I disclose in writing each time I buy a house, FSBO or not, that I have an active real estate license.
@Chris Jensen I echo many sentiments already shared. If representing a buyer, I won’t avoid showing them FSBO properties, because that’s a dereliction if my obligations to the client, but I will warn them of all the difficulties in working with FSBO sellers. FSBO Sellers are typically the type that are head-strong and greedy, which is why they are selling on their own in the first place. Their attitude to selling is often adversarial rather than cooperative, and they generally over-value their property and their own expertise, which makes negotiations difficult. I tell my buyers all that and then let them decide. If they want to pursue it, then I’m obligated to do so. As far as capturing listings, I LOVE FSBOs. First of all, they are tough nuts to crack, so I can really sharpen my negotiating skills, scripts, and value proposition by working on signing FSBOs. More importantly, it really allows me to educate a FSBO as to everything I actually do for them. Agents who can’t show their value and worth to a seller are just poor agents. FSBOs are usually willing to pay 3% to the buy-side, so when I show them that by paying me another 3% they can actually sell for 5% more and net 2% more in the sale, and I can show them the dozens of things I do to make that happen, and they get it, it’s rewarding.

@Chris Jensen

Lots of great points here. I’ll make one more - I barely want to interact with other real estate agents let alone homeowners. Most real estate agents aren’t well versed in transactions, so homeowners will be even less informed on how to handle the transaction. 

If I personally go after a FSBO I'm going to beat them up on negotiations so bad.

If you’re asking because you want to sell your own houses to save money, I’d suggest simply getting your license. 

Most FSBOs I run across are overpriced and the sellers don't even know how to offer or what steps to take, what disclosures they should have filled out already, etc.  I don't even like dealing with most and I'm not an agent.  If the sign is in the yard already, I am too late.

That said, I do sell my rentals FSBO. Like any industry, a few know what they are doing and do it well. I do it mostly for the principal and commission savings are easy pickings on my way to my annual goal of saving $90k per year.

Here's how skewed the statistics quoted above are though, the ones saying listed property sells for $60k more. I only sell my rentals FSBO. I would not sell my primary that way. My friend sells his little rentals FSBO, too. We live in the same $500k neighborhood and no way would he sell his primary that way.

People with nice houses don't sell FSBO. That's your 'Sell for $60k more' variable. It doesn't prove listed sells for more above FSBO, but I bet they do by a little. Keep in mind the break-even is 6%. Your listed house has to sell for at least 6% more, plus you will have a much more invasive and painful process listed. Trust me, I've done both. I don't leave my lights and a/c on or back door wide open after I show my own house. If I list a vacant, I have to check on it and put things back 4x per week at least. Nobody agents with nothing better to do wandering through my house. No thanks.

If you buy a loaded mutual fund (Like Dave Ramsy does) then turn around and say you beat the s&p 500 by 1% per year on average, you have to also say you started with 5.75% (the load or commission) less going in.  That's a lot of ground to try and make up with the hopes of making 1% more.  A lot of the 'listing statistics prove' nonsense are the same way. They leave out key metrics, key information, and are obviously biased.

@Chris Jensen agents shun listings that COST them money in the end. Agents need to be protected and paid to bring the buyer. Why should they work for free?