Do Real Estate Agents Shun FSBO Properties?
Rental Property Investor · Bettendorf, IA · Member since 2017 · 187 posts · 256 votes
Do Real Estate Agents Shun FSBO Properties?
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
8yI 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?
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- Rental Property Investor · Bettendorf, IA · Member since 2017 · 187 posts · 256 votes8y
I appreciate all the comments and perspectives.
Several folks spoke to the pros and cons of going the FSBO path, which deserves a separate thread.
Many talked about pros and cons of dealing with a FSBO seller, or being a FSBO seller themselves, which is what I'm very interested in.
Sounds like the general answer to my question is, yes FSBO properties are often shunned for a variety of reasons. Over-priced listings, sellers that are unrealistic, uncooperative, hard to reach, emotionally attached, an environment that is unstructured or chaotic, etc.
Of course there are plenty of problems with the realtor/MLS path, too. Maybe that also deserves its own thread.
- China, ME · Member since 2014 · 3k+ posts · 4k+ votes8y
@Chris Jensen I would show a FSBO to my buyer clients, but only with a Buyer's Broker agreement that stipulates that I will be paid my commission, whether or not the FSBO agrees to it.
That sets up an uncomfortable situation, and to be honest, it's one I'd rather avoid - but my first obligation is to my client.
So to answer your question, I don't shun a listing because it's a FSBO, but I don't go seeking them out either.
- Engineer · Portland, OR · Member since 2014 · 1k+ posts · 1k+ votes8y@Chris Jensen FSBO’s are normally a waste of an agents time so I don’t blame agents for avoiding them. Remember I think most agents are terrible in general, but in this case they have a valid reluctance. Most FSB Owners are complete fantasyland members
- Rental Property Investor · Bettendorf, IA · Member since 2017 · 187 posts · 256 votes8y
@Charlie MacPherson and @Steve B. great comments. Agents generally don't go seeking FSBOs out because they have a valid reluctance to do so (for a variety of reasons). Makes sense. Thanks.
- Real Estate Broker · San Diego, CA · Member since 2015 · 725 posts · 129 votes8y
@Account Closed While I haven't run the numbers on each MLS we are a member of in California, I would believe the 1 out of 3 not selling to be an accurate number.
- Real Estate Broker · San Diego, CA · Member since 2015 · 725 posts · 129 votes8y
@Chris Jensen Here's a the issue with doing FSBO:
1. Prior to showing the home their buyer, the agent would have to draw up the paperwork which guarantees the seller pays the commission. The agent doesn't even know if their buyer wants to put an offer on the place. If the buyer doesn't, then the agent just wasted a bunch of time.
2. The agent could show the home, and the buyer could love it - but now the agent has put themselves into a terrible negotiating position with the seller.
The nice thing about the MLS, regardless of whether you do a flat-fee or full-service listing, is that there is a contractual guarantee of commission. It just removes that hurdle and time to negotiate. If the seller is sincere about offering a commission, then they should just do so on the MLS - by not doing so it sends a mixed message and creates a future time investment.
- Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes8y
Originally posted by @Chris Jensen:
@Charlie MacPherson and @Steve B. great comments. Agents generally don't go seeking FSBOs out because they have a valid reluctance to do so (for a variety of reasons). Makes sense. Thanks.
I have a FSBO on the market as we speak and an agent called and asked if I work with real estate agents. I said "sure, I'd pay a 3% buyer's fee if an agent brought a buyer". They wanted to schedule a walk through, so I asked if the buyer's were pre-approved and she said "yes". Then I asked her for how much and it was $200,000. Well, good for them. But, I am selling the house for $245,000. Can someone explain to me why they are wasting my time and why the agent is wasting the seller's time? Not all agents are this dumb, but many are.
- Real Estate Broker · San Diego, CA · Member since 2015 · 725 posts · 129 votes8y
@Ashley Wise @Brian Pulaski @Chris Jensen The numbers from NAR consider Flat Fee as an agent, not as FSBO. It would be impossible for NAR to understand the contract between the seller and agent based on the data in the MLS.
Also, the fact by NAR is well known to be misleading "the average FSBO sales price was $185,000, while the average price for a home represented by an agent was $245,000" makes one think that agents will get a seller $60,000 more for the same home.
If that were true, we could all go around buying FSBO homes and then relisting them with an agent for a nice profit - you'd be rich within a year.
The truth is that:
1) FSBO homes are typically way overpriced, and
2) Lower priced homes (mobile or located in rural areas) are more likely to list FSBO. This is acknowledged in the NAR data. This skews the numbers greatly as it's not an apples-to-apples comparison. http://www.realestatedecoded.com/do-real-estate-agents-really-sell-homes-for-13-percent-higher-prices/
- Rental Property Investor · Bettendorf, IA · Member since 2017 · 187 posts · 256 votes8y
@Jonathan Minerick, thanks for additional clarity on the awkward position FSBOs put buyer agents in. I wasn't aware of that aspect of the FSBO path. More and more, I'm understanding why buyer agents may not want to get involved with FSBO properties. And it looks like there's a lack of accurate, reliable data that would help gauge success rate (at least financially) of opting for FSBO over listing on MLS. Everything seems to point to the MLS providing a structured market place for buyers and sellers to connect and engage in business. FSBO world almost sounds like the wild west. Very interesting. Sure appreciate the perspectives.
- Rental Property Investor · Bettendorf, IA · Member since 2017 · 187 posts · 256 votes8y
@Account Closed that does sound like a frustrating situation. Who knows why some people do the things they do. Hope your property sells quickly!
- Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes8y
Originally posted by @Chris Jensen:
@Account Closed that does sound like a frustrating situation. Who knows why some people do the things they do. Hope your property sells quickly!
@Chris Jensen, Thanks. It's a hot market and I am looking for someone to put $25k down and I'll carry the note. They don't need a bank loan. I figure I save $14,700 in realtor fees, get $25k cash and I can cash flow it for about $600 a month more than the payment. I've already had a couple of offers for $20k down, but I'm looking for $25k. Besides, everyone who has $20k to put down goes onto my buyer's list. ;-) I buy using owner financing and sell to my buyer's list. I'm having fun. By the way, the best steak I've ever had was that fancy restaurant on top the hill in Bettendorf.
- Rental Property Investor · Bettendorf, IA · Member since 2017 · 187 posts · 256 votes8y
@Account Closed that's a great way to make good money. I've not opted for that, given that most of our rehab projects are in neighborhoods I'm not targeting for buy-and-holds. BUT I'm definitely keeping that in mind as a viable alternative exit strategy if and when we do a home in the neighborhood I'm interested in. Keep having fun.
More importantly... you've been to Bettendorf?! And apparently had dinner at Steventons at the top of the hill?! What a small world.
- Broker · Phoenix, AZ · Member since 2015 · 351 posts · 273 votes8y
I don't "steer" any client away from a FSBO. Of course, if buyer's want me to work for them and represent them as their agent, they or the seller must pay my brokerage. Besides, most FSBO's eventually become listings because the seller's find out that they are doing a lot of work to save a little money. This is why FSBO's are usually concentrated in the lower part of the market. Wealthy people know their time is better spent making money doing what they know and hiring professionals for everything else. FSBO's also usually net less in proceeds than a property represented by an agent.
FSBO's soon find out that most buyers are working with a buyers agent. Why not? The seller usually pays the broker fees. If a FSBO doesn't work with agents then they have a very small pool of buyers, and fewer buyers equal a lower sales price, so they usually end up offering a commission to agents. Now the 6% savings has dropped to 3%.
From that 3% begin deducting signs, advertising, contracts/disclosures, attorney fees, and time off work. I recently spoke with a seller considering a FSBO and asked how he would show the home while he was at work. He said, "My wife will be at home while I'm at work." I asked "Your wife is going to show the house to strangers walking in off the street?" and there was a very long pause before he said, "I never thought about that."
So let's say the FSBO seller is a work from home attorney who owns an adverting agency and saves the full 6% commission. The FSBO/attorney/ad agency owner finds a willing buyer not working with an agent. There is a reason this buyer is not working with an agent and doing all of the work themselves. They know that the FSBO seller is not paying any commissions on this deal, and guess what they want?
So the short answer is I welcome FSBO's, they often end up being good clients!
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes8y
FSBO is a small,small part of the market. What I do is different in commercial real estate. I intentionally do not list properties for sale. I call owners directly to see if they want to sell off market. If they do I simply write in my fee in the LOI paid at closing, as a condition of closing.
With commercial owners they are generally experienced with their own attorneys so it is not like joe blow homeowner who wants to sell 5 to 10 years later and has no clue how things work today. Those types of situations can be bad for brokers/agents with residential because it can accidentally create an implied agency with the seller even though the broker/agent represents the buyer.
As far as wealthy people yes most want service and expertise. Once someone gets 3,5,10 million bucks or more they never want to go back to (working a J-O-B). They can if they love it but not a requirement. Basically they have control to live the dream life on their own terms. My clientele is different in that they are highly affluent and most of the population lives paycheck to paycheck so they way they tend to think about money versus time and savings is different. Someone making 40k a year might go through 40 steps to get a Best Buy card to save 10% on the purchase. Me I do not want to sign up for another card with another password blah,blah,blah. Someone making 500k,1 million a year etc. thinks about time more than money generally.
There will always be someone trying FSBO. Plenty of investors in the commercial space as well that their personality is to do everything themselves. That's great if they want to do that. I do not need all the business. I can do 10 transactions a year at 100k commission a pop and life is wonderful. Lot's of FSBO's become expired's and brokers/agents try to target them. I have the buyers on the commercial side so when I call I tell a seller I DO NOT want to list their property. I tell them I have a specific qualified client I am working exclusively with and would they consider selling?
If they will not sell that property I ask if they have others they might sell instead? If they do not want to sell any I ask if they know any friends of colleagues who might want to sell? If all those are NO's then I ask if they are in acquisition mode and what is their criteria? I come at it from many,many angles so that I increase my chances of getting something out of the connection.
- Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes8y
I dont know whether a agent was involved in any way , but in the neighborhood I live in 4 houses sold FSBO , on facebook , all within a week . All were over $500,000 . ( thats above average for the neighborhood)
- Real Estate Agent · Astoria, NY · Member since 2016 · 60 posts · 55 votes8y
Originally posted by @Chris Jensen:
@Jonathan Minerick, thanks for additional clarity on the awkward position FSBOs put buyer agents in. I wasn't aware of that aspect of the FSBO path. More and more, I'm understanding why buyer agents may not want to get involved with FSBO properties. And it looks like there's a lack of accurate, reliable data that would help gauge success rate (at least financially) of opting for FSBO over listing on MLS. Everything seems to point to the MLS providing a structured market place for buyers and sellers to connect and engage in business. FSBO world almost sounds like the wild west. Very interesting. Sure appreciate the perspectives.
Chris, I'm certainly biased, being an agent, but I think you've really hit the nail on the head. Going the route of listing with an agent on the MLS (full-fee or flat-rate), at the very least provides a structured marketplace, with accepted practices and at least basic standards in place.
One analogy I've heard used before is buying a vintage watch or used piece of electronics... do you want to buy that at a garage sale being sold directly by the owner, or would you rather buy it in a store, sold by a salesman, backed by some kind of guarantee? Certainly the one in the store will cost more, but most people would gladly pay extra for the value of peace of mind. I know I would.
Everyone has thrown around a lot of numbers, but there are two subtle aspects I'm not sure have really been mentioned. Sellers who want to attempt FSBO are generally thinking of savings on commission cost, which is totally understandable, but I feel conflates COST with VALUE. In all things, we pay a certain amount to get something of value back. We pay a mechanic to work on our cars. We could maybe do it ourselves, but we'd have to buy the tools and spend the time, and probably wouldn't do as good a job. We pay lawyers to represent us. We could do it ourselves, but we would have to study the books and relevant laws, and probably wouldn't do as good a job. You can list a house yourself, and handle all the showings, phone calls, emails, follow-ups, disclosures, negotiations, and moving the deal from contract to close. Or you can delegate that out to a good agent and free up your time and energy to focus on what matters to you -- perhaps finding your next deal.
The other, subtle aspect, that rarely gets mentioned, is positioning the property on the market, and market perception. When you post a home FSBO, you might do it on Zillow/Trulia, and Realtor.com. That's great, but you've just done THREE things that work against you: you've eliminated yourself from the radar of many buyers, you've limited the marketing on your property, and you've positioned yourself as a TARGET -- because you know who loves FSBO listings? Investors looking for a good deal who think they can beat up the seller on price.
Let me explain the first part. About 85% of buyers are represented by an agent. That means 85% of buyers have delegated, at least partially, the search for a home to their agent. That agent isn't looking on Zillow or Trulia for his client. He or she is looking on the MLS. Zillow and Trulia are full of inaccurate information and bad listings, and most agents don't search there. So, if I'm searching for a great property for my busy client, I'm going to spend the majority of my time on the tool that I know will get me the most reliable results: the MLS. And I won't see your FSBO property there. And if you want the most money for your property, you really want the maximum amount of end-users (home buyers) to see your property.
As I mentioned, the 2nd problem with going FSBO is marketing reach. When I post a property through my brokerage's back end systems, it goes on the MLS (or the Manhattan equivalent), and then that syndicates out to dozens and dozens of other websites, including Zillow, Trulia and Realtor.com. So I'm getting my client's listing in front of not only every agent, but also every possible end-user. That is powerful marketing reach that I don't think any individual seller has. Additionally I'm going to be doing mailer campaigns to generate interest, social media advertising campaigns on my Facebook business page, Twitter, Instagram and LinkedIn accounts, which are in turn linked to a sophisticated and automated online marketing apparatus to drive interest and traffic to YOUR property. An individual property website is also created, and everyone who visits that has their information captured and is marketed to regarding the property. Email blasts go out regularly to the entire brokerage community, and to all the agents in my office. Broker opens might be arranged to create buzz. Not all agents will do all of these things. I don't even do all these things in EVERY case. But all of these things are possible because a good agent runs a business that allows him to use scale to implement all these things. And it all means one thing for the seller: more eyeballs on your property, more interest, and more offers bringing you a higher sale price. And THAT is really what you pay for. Compare all of that to your average FSBO who has a listing on Zillow and Realtor.com with some average pics, and a sign in the yard that only passersby see...
Lastly there was the issue of making yourself a target. Simply put, FSBOs are one of those listing types that are targeted by investors and people looking for great deals. And if an investor looks at your FSBO listing and sees that you are listed at or close to full retail, he's likely to just pass you on by for the next listing.
So, you're not getting the full marketing power you could, which means fewer eye-balls, less interest and fewer offers; agents aren't seeing your listing because they aren't searching in the places where you posted it; and the investors that see it posted on Zillow or Realtor.com are skipping it to find better deals -- so how is all that helping the FSBO?
- Rental Property Investor · Bettendorf, IA · Member since 2017 · 187 posts · 256 votes8y
@Daniel Akerman, wow what a helpful post. Great comments about marketing and customer reach, as well as the competitive forces working against a FSBO listing. I also liked the analogy of buying a used piece of electronics. Lots of good insight there, thanks for taking the time to pull it all together and add it to the thread. Several agents who've posted here have mentioned some of the strategies, tactics, and tools they use. I must admit that as technology has evolved over the last couple decades I've become skeptical of the value agents bring to the process. Your comments have me rethinking my assumptions.
- 8yMike CumbieBusiness MemberREALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
I have no problem contacting a FSBO seller. Generally speaking they do not know the contracts like I do. They also do not know the local customs. I can slide a 10 day bump clause in or 9 inspections we are never going to do just so the buyer can get in to measure curtains. I can put in a attorney approvals that are long enough that my buyer can keep shopping. I can make them go get permits they didn't realize were never issued, hook their septic to sewers or end up buying us a propane tank because they forgot to check a box. I represent the buyer and making sure they are positioned properly is what I do. Doing that against a FSBO seller is easier than an experienced agent.
Also there is less competition. While most FSBO's in my opinion are overpriced, they also tend to get nervous alot quicker. When they have 2 people on week one and no offers, run an Open House (That they never market and just put a sign up) and have nobody show up they really begin to worry. Many people do not know it exists and most agents will never see anything not on the MLS (a whole different discussion) They try and play it cool but you can see the desperation for an offer, that's when it comes. It looks fair enough price wise (a little low), but it's the terms my client really makes out. The high dollar fixes and updates. The evaluation and repair by "licensed" (insert profession here).
The biggest real problem is they don't know what they are supposed to do so the calls go "Hi it's Mike, did you guys get that septic inspection that was due yesterday"..... "How do we do that?". Of course I get to turn that into a positive for my side "Call John over at Upstate, he will get it taken care of"..... By the way I know John is a very thorough inspector and nothing gets past him, if there is something wrong he will find it. So my clients might just end up with a new Distro box!!!!! If they had an agent they would have had Larry inspect it, he pumps it, looks in and says "looks good to me".
So no, I don't shy away from them at all.
- Rental Property Investor · Bettendorf, IA · Member since 2017 · 187 posts · 256 votes8y
@Mike Cumbie, thanks for the perspective. Gets back to the risks and challenges sellers face going the FSBO route. This has been an interesting thread. Some realtors will work with FSBOs and some won't. Very interesting pros/cons with each path. I really appreciate your time and thoughts.
- Attorney · Northbrook, IL · Member since 2017 · 719 posts · 549 votes8y
Realtor's know they will get a commission based on the MLS. When they show a FSBO, they don't know if the seller will pay a commission. If you are really determined to sell your house FSBO, contact all the local brokerages and sign an agreement that if any of their agents bring a buyer, you'll pay X commission. They won't be happy that you aren't listed with a Realtor but it will get you more exposure.
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