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| December 15, 1998 |
Will The Web Boost FSBO Transactions?
Peter G. Miller
"Internet resources make selling a home without an agent painless and
profitable," it said, flogging a book for self-sellers.
Can this be true? Both painless and profitable? Where is this real
estate utopia?
"Hard statistics are difficult to come by, but given the rapidly increasing
numbers of online listings available, it would seem that this is the new and
fastest growing source of buyers," writes Robert Irwin in the third edition of
his guide, "The For Sale By Owner Kit" ($17.95, Real Estate Education Company,
Chicago, IL).
"If selling online is good enough for the agents," says Irwin, "it should be
good enough for FSBO sellers."
It's an interesting premise, and one worthy of exploration.
The term "FSBO" means "for sale by owner" and there have been a number of commentators who have suggested that the Web represents a new and useful
marketing tool for self-sellers. And there is, after all, some logic to this
thought because -- as Mr. Irwin points out -- if brokers can market effectively
on the Internet, why not owners?
Superficially it would seem that the Internet is ideal for FSBOs. There are a
number of sites which accept free ads from self-sellers, and owners can
certainly build their own web pages to market homes. But a closer look at the
marketing process suggests that internet exposure is not likely to generate a
large number of brokerless sales.
To see why, consider the other part of the marketing equation -- those who buy.
If you're a purchaser how many homes do you want to see?
Surely there are purchasers who buy the first house they see and are content
with their decision. But such buyers are hardly common. A study by the National Association of Realtors shows
that an average buyer searches 14 weeks before purchasing. (See the 1997
edition of NAR's "The Home Buying and Selling Survey.")
Now you have to figure that someone looking at real estate for 14 weeks is
probably going to check out more than one home. And online, the equivalent of
looking for 14 weeks means examining as many Internet listings as possible.
The online advantage that brokers have is that they are able to showcase
enormous numbers of homes in one place. Just look at the recent monthly stats
for Realtor.com:
In comparison, there are few sites that carry a large inventory of FSBO
offerings and finding self-seller properties one-at-a-time in a given community
is tedious.
The most effective marketing tool for FSBOs -- who represent about 15 percent
of all existing sales -- is likely the local newspaper classifieds. Local
newspapers and shoppers (free newspapers) typically combine all realty ads in
one place, making FSBOs part of the range of choices sought by purchasers.
While it may be counter-intuitive, the Internet does not automatically create a
marketing advantage. Until there is a national site with extensive promotion
which offers enormous numbers of self-seller properties -- say 150,000 or more
-- efforts to move FSBO properties online are unlikely to be a major factor in
the realty marketplace. And given the cost to create a leading, well-known
Internet site, the plausibility of building a major FSBO site sufficient to
impact the marketplace seems more remote each day.
Q We were interested in
purchasing a home, but the property was sold to a local real estate broker (not
our broker) -- probably for less than we would have paid. Is this fair?
A If the broker worked for you as
a buyer representative, then no, I would not be comfortable with such a
purchase.
But that is not the situation you describe.
What you describe is this: There was a property for sale. The seller wanted a
given price and terms. One buyer, who happens to be a real estate licensee,
made an acceptable offer. You did not make an offer. What you might have done
cannot "count" because no offer was made and price alone may not be a
sufficient reason to accept one offer over another.
The fact that someone has a realty license does not mean they cannot purchase
property. It does mean they have disclosure obligations, and it also means that
they cannot violate client interests. But in this situation, you were not a
client of the broker who purchased the property.
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