Converting FSBO listings involves a process that, in a number of ways, is similar to working with expired listings. However, there are two key differences between the two areas.
The biggest difference has to do with timing. Most expired listings are re-listed and back on the market within a matter of days, while FSBOs convert at a much slower pace. If you contact the owners of a FSBO, usually you can expect them to take at least a few additional weeks to try to sell on their own before they commit the listing to you.
The second big difference has to do with the sales approach. When working to convert an expired listing, you need to take control in order to prevail over a bunch of other unknown agents who are vying for the listing. The owners of the expired listing rarely have an agent preference at this point. Their “first-choice” agent was the one whose sign just came down; from that point, they’re pretty much up for grabs. This isn’t always the case with FSBO owners, who sometimes have an agent “in the wings” who they are considering signing with if they have no success on their own. For this reason, you need to take a lower-key approach and work to build a relationship in order to win over the FSBO listing.
When the marketplace is active and everything in sight seems to be selling, as was the case over the last few years, FSBO listings abound, and FSBO owners achieve a reasonable sales success rate even without the services of an agent. So you may be wondering why an agent would even spend time trying to convert FSBOs to agent-represented listings. Here are just a few good reasons:
- FSBOs are simply too tempting and attractive not to work with. Real estate agents market homes for sale, and FSBOs most certainly fit that category. It doesn’t make sense to ignore this great market segment, though most agents do.
- Owners of FSBOs are qualified, motivated sellers. Clearly, they want to sell, but likely, they don’t realize the long odds of the game they’re playing.
- Owners of FSBOs are viable client targets. Unlike other prospective clients, you don’t have to wonder whether they own their home, whether they’re serious about selling it, and whether or not they have the authority and ability to conduct the deal.
- Owners of FSBOs are easy to find and reach. One of the most difficult steps in the sales process, no matter what you’re selling, is locating prospects in need of your product or service. With FSBOs, like expireds, you know who your prospects are, and you know how to get in touch with them. Reaching FSBOs is easier than reaching expireds because they want to be found.
- The vast majority of FSBOs fail to sell on their own. Even in a robust market, fewer than 30% of FSBOs sell themselves. This means more than 70% of the owners, if they want to sell, will eventually enlist the services of a real estate agent.
- FSBO sellers often net lower prices than those achieved by agent-represented sellers. Among the 30% of FSBO homes that result in a sale, most are priced right at or below fair market value. In fact, to FSBO sellers, price is the primary marketing ammunition. There is no reason for a buyer to take the additional risk of working with a FSBO except that they are trying to acquire a home for less money than they’d spend on a traditional transaction. The problem is that low price is exactly the opposite of what the homeowner is trying to achieve.
More than nine out of ten serious FSBOs end up as agent listings within a reasonable period of time - usually four to five weeks. Originally, owners set out to sell their own homes for one reason: They want to “save” the agent commission. They view the $10,000 or $15,000 that an agent will earn as too much pay for such an easy job and as money that they could put toward an additional down payment or a get-out-of-debt plan. They ask themselves, “How hard can it be?” as they pound the FSBO sign into their front yard. In the back of their minds many think, “Let’s give it a go. We’ll probably meet a few agents along the way, so we can always change our minds.” And most do.
After a month of the hassle, time, energy, emotion, and stress of trying to sell their own home - after running ads, fielding phone calls, holding open houses, and showing parades of people through their home 90% of homeowners rethink their answer. Fortunately for agents, selling a home isn’t all that easy.
Before you pursue FSBO listings, it’s worth it to know the situation you’re entering.
When a FSBO goes on the market, most often only one of the owners is leading the charge. One half of the couple is fixated on saving the commission and the other relents for a specific period of time. As part of their compromise, they agree to give the FSBO approach a try for 30 to 45 days, after which time they agree to list it with an agent.
More often than not, the consenting partner gets frustrated with the whole process long before the FSBO test period elapses – tired of all the calls from agents and of the buyers who make appointments that end up as no-shows. If they do secure an offer, the owners grow weary when the buyer can’t secure financing. They get tired of people who need “help” to buy a home and who ask the seller to take less, carry a second mortgage, engage in creative financing, or even entertain some form of fraud. And then there are the jokers fresh out of some “no money down” seminar…
This is the life of a FSBO, and it’s why the odds of FSBO-conversions are heavily in your favor. Over 80% will end up as agent listings if they are serious about selling.