7 ways to overcome stigma attached to FSBO (and how to avoid common and uncommon pitfalls with FSBOs)

As a FSBO real estate lawyer, I’ve learned how to help clients avoid situations that hinder success of their FSBO.  Here is some of my general advice for things to avoid:

1. Listing the Home At Too High A Price (Common Pitfall)

The #1 thing that drives potential buyers away from even scheduling a home tour is when the home is priced higher than the estimates of Zillow/Redfin/Trulia/etc. Quite simply, potential buyers don’t want to spend time looking at homes they think are potentially overpriced (and which their friends and family will think are overpriced).

It is a much better strategy for sellers to list the home at whatever reasonable market value is estimated by Zillow etc, and then show the home to more potential buyers. More potential buyers means more potential offers, which means the seller can then utilize the multiple counteroffer process to explore the true market value of the home. On an $800,000 home, a seller can use the counteroffer process to increase the home price by around $30,000 (I’m speaking generally of course, based on my experience of averages). Indeed, from the Buyer’s perspective, an additional $30,000 is just a small increase in the monthly mortgage payment.

The key here is that a happy seller is usually one who has multiple offers in hand and can therefore do counteroffers. An unhappy seller is usually one who lists the home price too high, and therefore receives less interest in the home.  On an $800,000 home, the best way to make $830,000 is to list for $800,000.   And the best way to make $770,000 is to list for $830,000.  Go figure!

If the home is located in a city or suburban neighborhood (with lots of comparable sales around), then you can get a pretty accurate estimate of market value from Zillow, Redfin, etc. If searching yourself for comparable sales, keep in mind that the most important factors are square footage, the number of bedrooms and bathrooms, and the age of the house.

2. Writing a Property Description That Is Unusual And Discusses Logistics (Common pitfall)

The #2 thing that drives potential buyers and buyer agents away from even calling to tour a home is when the property description is written differently than most listings. For example, a good property description is 1-2 paragraphs and it reads like this, “Come see this beautiful and recently remodeled Victorian townhome. 3 bedroom, 2 bath. 2,100 square feet. Ideal location close to Oakview park.… Friendly and safe neighborhood.

Compare this absolutely terrible property description, “For Sale By Owner. 1% commission offered to buyer’s agent. All showings must be scheduled by calling 555-875-0983. House is in GREAT condition. 3 bedroom, 2 bath…. All showings subject to Owner availability.

Do you see the difference? The first listing (the good one) looks like every other listing on the MLS. It is attractively worded and inviting; it does not discuss any logistics of sale or listing, but rather focuses exclusively on the property qualities. Moreover, the listing is entirely upbeat and does not anticipate problems or issues whatsoever.

Compare the bad listing — it broadcasts FSBO, it discusses logistics of showings, it discusses the commission, it uses ALL CAPS like a teenager’s text message, and it finishes with a disclaimer. It is literally terrible.

The best and most successful FSBO listings do not look like FSBO listings. Rather, they look exactly like agent-assisted listings.

3. Offering A Reduced or Zero Commission to a Buyer’s Agent (common pitfall)

One of the best ways to scare away buyer’s agents is to offer them no commission, or anything less than 2.5%.
From my experience, FSBO sellers should always offer buyer’s agents 2.5%. When listing the home, do not put the commission in the property description. Rather, when listing on the MLS (through a flat fee MLS company), you simply specify the percentage offered to a buyer’s agent in the section/box designated for that item, and nowhere else. And if you are only listing on Zillow, then you do not specify the commission anywhere; rather, it will be assumed that you are offering 2.5%, which buyer’s agents will confirm in writing when they make offers (for example, there is CAR form called Single Party Compensation Agreement).

In an MLS listing, the seller should always offer a 2.5% commission to a buyer’s agent. Do not offer more, and do not offer less. Anything lower than 2.5% looks weird/bad.

4. Not Hiring a Real Estate Photographer (common pitfall)

Real estate photography pays for itself because it generates more interest in the home. More interest means more showings. After a potential buyer sees your home online, they usually email their friends & family to discuss and receive validation or criticism. The only thing those friends & family will ever see are your photos online, list price, and property description. Again, real estate photography pays for itself.

5. Negotiating During the Property Tour (relatively common pitfall)

While a potential buyer is touring your home, don’t try to negotiate with them on the sales price. Rather, your goal is simply to ensure they have a good experience viewing the home. It’s all about the experience, their enjoyment, their visualization.

With that said, you can definitely answer a potential buyer’s questions if they ask you about the home. But your goal should simply be to give them space to visualize themselves in the home and enjoy the experience of touring the home. At the conclusion of the tour, you can encourage them to make any offer they like in writing, which can be submitted any time after the property tour.

6. Fake Buyers (Rare pitfall)

In my 15-years of real estate law practice focusing on FSBOs, I have only had one seller client who reported to me that they had a fake buyer (thief) tour their home. My client was a kind man who allowed an older woman (who turned out to be a thief) to tour the home. This is what the seller reported to me afterwards: the potential buyer carried a large bag with her (red flag); she said she was an all cash buyer and openly discussed a high offer she wanted to make (red flag), and she asked if she could be alone while touring the property so she could get a better sense of the property (red flag). The seller recognized all of these red flags, but when the thief was able to be alone, she stole some of the seller’s personal property. The police were able to track her down right away because the seller recorded her car license plate number, and she returned the property.

The lesson here is that sellers should be vigilant for red flags and trust their instincts. Sellers should avoid showing their home to any suspicious persons. Indeed, if the potential buyer does not have an agent, it is prudent to accompany that person at all times during a showing. And for additional precaution, sellers can record the license plate number of any potential buyers without an agent.

Here are some additional tips for showing a FSBO home:
https://norcalfsbo.com/2012/06/22/showing-a-fsbo-home/

7. Not Checking for Errors on the MLS (rare pitfall)

It is important for FSBO Sellers to double check the work of their flat fee MLS listing company. Here are some errors that can occur with data entry:

(1) the property gets listed on the wrong MLS (i.e., the wrong county)
(2) the designated telephone number for property inquiries doesn’t work
(3) the property details are incorrect (i.e., 3 bedrooms rather than 4 bedrooms)

A good FSBO seller will promptly double check everything about their listing immediately after it goes live.  A simple way to do this is to test everything just like a potential buyer would (i.e., read the listing, call the phone number, leave a message for the seller).

Conclusion

The best FSBOs are the ones where the seller has a positive energy for the experience, because the seller will attract that same energy in potential buyers. FSBO is not hard, it’s fun.  It’s especially fun receiving multiple offers!  The FSBO process really just takes a positive attitude and a little know how.  (And my clients have told me that hiring me as their FSBO real estate lawyer also helps 🙂


Greg Glaser, Attorney at Law
I help home buyers & sellers throughout California
(925) 642-6651 — greg@gregglaser.com
Flat Fee Packages Available (no commission) for Buyers and Sellers Without a Realtor
http://www.GregGlaser.com

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