National For Sale By Owner Companies – They May Not Save You As Much As You Think!

The For Sale By Owner home seller: FSBO (Fizz-Bow). One of the most sought after of all real estate clients. Why? Because their homes are for sale and real estate agents can mail these folks any number of solicitations without stepping on another agent’s toes. These are the home sellers that have taken a chance in order to potentially save thousands of dollars in listing commissions. They’ve done a little homework and have decided to try and save some of the equity that has accrued in their homes.

As a real estate agent I love For Sale by Owner home sellers! Sound a little strange for a real estate agent to say he loves For Sale by Owner home sellers? Perhaps, but when the numbers are in and it becomes clear that only 14% of all homes that are For Sale by Owner actually sell as a true for sale by owner, you’ll understand why. Because that leaves fully 86% of these home sellers as potential listing clients for real estate agents (such as myself) to try and snatch up! And the number of true FSBOs has actually declined from a high of 19% in 1991 to just over 14% in 2004.

Now, as with many statistics, it depends on whose numbers you’re looking at. The big, national For Sale by Owner (FSBO) companies have one set of numbers and the National Association of Realtors (NAR) has another set of numbers on homes that are actually sold by owners. Personally I’m sticking with the numbers provided by the NAR (which are the numbers quoted above). They have been compiling and providing these numbers for a heck of a lot longer than the National FSBO companies have. The bottom line is that true for sale by owner successes are declining.

One of the major problems I see with the For Sale by Owner segment of the real estate market is that they have a tendency to fall in love with the idea of selling their home on their own, but they fail to create a good back-up plan that can be quickly implemented in the event they are unsuccessful with their For Sale by Owner adventure. And many of these folks are down right militant toward the traditional, conventional real estate community! Many of them regard traditional real estate companies and agents as nothing more than charlatans and snake oil salesmen! Which may be all well and good in a white-hot housing market but not so good in a changing real estate environment.

Just a year or two ago a home seller could put a „For Sale“ sign in their front yard in the morning and have their home sold by dinner. And many times at or above their asking price! Not so any longer. The housing market has been on a great run but it’s now showing signs of running out of steam. Those For Sale by Owner signs are now staying in the front yard for weeks and months rather than hours and days. But even in this changing market, I still recommend that home sellers at least make an attempt to sell as a true For Sale by Owner. I recommend that they try it for a set period of time, say, four to six weeks and, if the home doesn’t sell, then give it up and move on.

And often times it’s that moving on that gets the true FSBO into financial hot water. First, they don’t have a good back-up plan in place that can be quickly activated when they finally give up on the FSBO dream. Second, they often end up going from one extreme to the other by listing with a traditional, Big Name Real Estate Company and paying a 4% to 6% listing commission. (Just for the record, the national average listing commission is currently 5.1%). Or they may fall for the smoke and hype of one of the big, national For Sale by Owner assistance companies and still end up paying a huge flat fee, and a Multiple Listing Service (MLS) listing commission on top of that. So what’s a poor, uninformed FSBO to do? Why, outfox them, of course!

But before our FSBO hero can outfox them, he or she first needs to know how they work. So, let’s now take a look at the truth behind another type of for sale sign; let’s take a look at the Truth Behind The For Sale By Owner Sign.

The true FSBO is a home seller that does not pay one red cent in sales/listing commissions and doesn’t use any type of conventional Real Estate Company or Real Estate Agent to sell their home. These folks are totally on their own! They make the sign in the yard, they price their home, they field all the calls and deal with prospective buyers, they conduct the open houses, they write and pay for any and all print advertising, they qualify the buyers, and they prepare all of the paper work and documents necessary to close the deal. These brave souls are the sellers that fall into the magical 14% of successful, true For Sale by Owners whose homes actually sell.

But what about the other 86%? Well, they usually end up falling into the Almost For Sale by Owners category: the AFSBOs as I have named them (pronounced Affs-Bows). They choose instead to list their property with one of the many new and emerging real estate services companies that are challenging conventional brokerage firms by offering an à la carte menu of real estate services.

Some of the biggest names in the For Sale By Owner real estate assistance business offer many of these à la carte services. These big, national For Sale by Owner assistance companies are playing the same game the large, brand name, traditional real estate companies have been playing for decades. They’re banking on that so-called „big, trusted, familiar name“ to sell their services. And it’s working! One of these large, national FSBO assistance companies is opening one new franchise office every 48 hours! They expect to hit 1800 franchises by 2008.

The current president of this national FSBO assistance company is quoted as saying the following on the company headquarters web site: „The winds started shifting away from the traditional way to compensate REALTORS® years ago. It’s like a gale wind now and by all signs, it’s going to continue to grow in force“. Sounds great to me! A gale force wind of change blowing across the stagnant waters of the current real estate industry is just what is needed. But FSBOs can still find a better and more cost effective way (without sacrificing service and knowledge) to navigate the equity in their homes to safer waters.

If you’ve decided to pursue the route of a true For Sale By Owner, that’s great! By now you know the drill. And you can find enough information in books and on the web to help you out in your quest for the FSBO dream. But if your back up plan (and as you now know, everyone should have a back up plan) is to go the non-traditional route as an AFSBO, you first need to get over the notion of wanting, or thinking you need, a „big, familiar name“ to sell your home. The idea of no longer needing that „big, familiar name“ applies to AFSBOs every bit as much as it does to traditional, conventional home sellers. And AFSBOs should never forget the fact that these big, national FSBO assistance companies know all to well that 86% of their sellers will end up not as true For Sale by Owners, but as flat fee/discounted commission listings! And the flat fees that these big For Sale by Owner assistance companies charge can be huge! Some fees running as high as $2,500 to $4,400!

Before you sign on the dotted line with any real estate company either For Sale By Owner or traditional get the facts. Know the true cost. Read the fine print. And, watch out for the up sell on services. It’s the additional services that can put a FSBO in the listing commission poor house before they ever know what has hit them. Make these companies put it in writing. Because, if it isn’t in writing. It isn’t going to happen!

But just like a bug caught in a spider’s web, most home sellers that sign with these big, national FSBO assistance companies will, out of ignorance or for the sake of convenience, continue on to the next level and end up paying more than they should to sell their home.

I know this may seem like subversive stuff but hey, you’ve worked hard to purchase your current home and the equity you have in it is real money! Why give it away? What you need to do now is work just a little harder to educate yourself on the changing real estate industry and all that it currently has to offer. And the more you educate yourself, the more of your home’s equity you can keep from falling into the hands of the over priced real estate companies, be they traditional or FSBO assistance. A little knowledge isn’t always a dangerous thing, often it can be a money saving thing!

„There Is Nothing So Costly As Ignorance.“

-Horace Mann — The Father of American Education

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