For Sale By Owner Doesn’t Work
How can you sell a product when you don’t believe in the product?
Recently, the founder of FOR SALE BY OWNER (dot) com was selling his house. Of course he initially tried to sell his New York Condo on his own, after all, it’s easy, right?
Enter a local real estate broker, who recommended a PRICE INCREASE on the condo (which Mr. Sambrotto opposed but allowed the broker to do his job) and sold the property at the higher price.
The funny thing about this story is that it plays out everyday in our country. Yes, there is no special magic to selling a home, but there is a certain set of skills and experience.
I would bet that MANY people could change their own brake pads on their car but most won’t do it because they lack the time, resources, tools and skills needed to be EFFICIENT at it.
Changing your own brake pads can be done in about an hour by the local brake shop or mechanic. If most people who have never changed brake pads were to attempt it, you’re probably looking at 4-6 hours to complete the task. Do most people have a place to do this task? Do most people have the specialized tools to do that or will that be an added expense to the job? And of course, experience…it’s what we generally are PAYING for when we hire a professional in any field.
A few years ago, a neighbor was selling her house on her own. She did everything she could to sell that house for over 4 months. Then she turned to me, as a real estate professional to sell her home.
We raised her price $12,000 and went under contract in 11 days. She was stunned. I wasn’t.
The founder of the For Sale By Owner (dot) com website attributed the inability of his FSBO efforts to sell on a tightly dominated agent market in his area…Honestly, that’s pretty much a lame excuse because ANY market with an MLS is tightly agent dominated (meaning that the MLS is a place where 90-95% of all houses listed are found in the MLS, listed by AGENTS).
Some facts that For Sale By Owner (dot) com doesn’t share with those who use their service:
1. Most people that decide to sell FOR SALE BY OWNER end up hiring an agent. (Statistics put this as high as 97% with others putting that number at 87% depending on the source you use. Regardless, that is a HUGE number that are NOT able to sell on their own).
2. Most For Sale By Owners have decided to sell to save the commission. This was the number ONE reason for NOT hiring an agent.
3. In 2010, according to a National Association of REALTORS® study, of the 9% of homes sold as FOR SALE BY OWNER, 40% of those sales were to a friend or family member…someone the seller already knew. That means true sales of For Sale By Owner homes accounted for about 5.4% of all homes sold in 2010.
4. In 1991, 19% of the market was sold via For Sale By Owners and yet in 2010, less than 6% of the homes sold were sold by For Sale By Owner. This is very contrary to what has been said that technology makes the agent obsolete. It seems that the more tech we get, the specialized the profession becomes and hence the fewer opting to sell on their own without representation.
5. Most FOR SALE BY OWNERS do not have a screening process for buyers nor any knowledge how to determine if an offer is a truly CLOSE-ABLE offer. This may cost time and money dealing with offers that are not truly legit.
6. Many FOR SALE BY OWNERS will work with a real estate agent who brings the buyer for a normal commission. Ultimately, this means that while saving 5-7% sounds GREAT to begin with, if you want to include ALL buyers in the market, not just those wandering around looking on their own, you will only end up saving 2.5-3.5%. For a $300,000 home, the appeal of saving $18,000 is huge, but the saving of $9000 vs the work and cost it will take to sell is usually not nearly as attractive.