If you want to FSBO do it right...

THE 12 STEP PROGRAM FOR FSBOs

This is NOT an endorsement for you to "list" your property with a real estate agent. But first let me introduce you to a few facts, so that you understand what you're up against.

As a broker, I know you want to save the commission. Frankly, if I'm not worth more than the commission, fees or hourly rate I charge, I'm of no value to you. I have examples in my own personal experience where I've gotten more than 20% higher than "fair market value," as indicated by the certified appraiser. I used to do appraisals years ago, and I've been a real estate investor for nearly the 30 years I've been in the industry. I know something about pricing, terms and negotiations, from not only a client's perspective, but from my own very personal experience - with my own money on the line - a number of times.

What agents know is that statistically 86% of you FSBOs (For Sale By Owners) will eventually list with a broker. They hope they can catch you at the right moment, after pestering you to death, to list with THEM. There are advantages to this. If they wait you out long enough, you likely will have "softened" to the realities of the market, and will be more open to pricing realistically for it. The problem is, when that time comes, the property already may be "market worn" and have an attached stigma to it. Street savvy brokers know that too, and often within a couple of weeks of listing the property, you'll begin to hear the terms: "market worn" and "price adjustment." They will also be quick to "support" this premise, or reality, with a combination of anecdotal data and "comparables." In many cases they're right - but not always.

14% of all FSBOs are successful in selling their own property however, according to the NAR (National Association of REALTORS). The same organization also claims from data in a survey in 2005 of Home Buyers and Home Sellers, that the median price of the average REALTOR sold property is 16% HIGHER than the median of the average FSBO. You're left to extrapolate from these numbers the way they are often presented, that the average REALTOR can get you 16% MORE than the average FSBO. They are careful not to claim that however, but individual agents and companies promote the idea nonetheless. My guess is that there are a lot of "friends and relatives" attached to the average FSBO figures, but nonetheless I also surmise that the average price a REALTOR can get is likely substantially higher than the average FSBO. Think about it, competent REALTORS do this stuff for a living, often 60 or more hours a week. They MUST have some value added, and the most visible discernible value is price. In addition though, behind the curtain, there are LOTS of things agents do that add value, reduce time (which IS money, by the way), and make the transaction less stressful.

OK with all that said, here's some of the things you can do to sell your own home, with caveats included:

1. PRICE IT RIGHT! It isn't ALL about price, but the truth is the average FSBO is at a great disadvantage. You've got ONE house to sell with a fixed set of features, attributes and a fixed site. The average REALTOR has hundreds, even thousands of properties available to their buyers in any given market area. That's why buyers come to them. They have the inventory, and for the most part buyers pay nothing for the service - that comes from the "selling side" of the commission that the seller pays. If I had 100 buyers and you had 1, who has the better chance to sell the property at the HIGHER price? So, that means YOU need to price even BETTER than the comparable market, in my opinion. If you're a Toyota advocate, and I'm a Ford dealer, how can I get you to buy MY Ford? That's what all those rebates and no money down deals are about. Ask yourself: "if I need to discount my price to compete, why bother to FSBO?" Good question!

2. DE-CLUTTER! Get advice from friends and family, because you can't see the forest from the trees, you live there. Better yet, hire a "Home Stager." Agents have been saying for the 30 years that I've been in the business, "unclutter your house, get rid of extra furniture,..." etc. But, who listened? Until the industry began to promote "home-staging" as a fee based "added value" product, it had no value, it seems. Funny how the human mind works. Even though we get free advice, we often view it as not having much value, pay dearly for the same service, and all of a sudden the advice is worth listening to. You don't have to permanently part with your beloved "treasures," you can store the stuff to clutter up your next house! Why is clutter a negative? It makes the house appear smaller than what it is, and I believe it creates a psychological negative in people's minds. Most of us are impressed with organization, even when we're not organized ourselves. Disorganization often implies that there is some kind of "neglect" or imperfection, and where else might that show up? Maybe in the maintenance of the property that's not readily apparent. I'm not a shrink, it's just my perception from dealing with hundreds of buyers over the years.

3. DE-PET-ERIZE! Pets are great. I loved mine, when I've had them over the years. However, many pets generally have odors associated with them, just like houses do. Yes, many houses have a certain "odor" attached to them. Many people find that unpleasant. They also don't want Fido jumping all over their $600 suit, no matter how "cute" and "friendly." Get them away from inside of the home, and DEODERIZE, either with a commercial spray, or with the famous "baking cookies or bread" routine that used to be so heavily promoted by real estate agents.

4. DECENT SIGNAGE! Signage accounts for about 20% of sales, if you believe the statistical data from various industry polling sources. I have a FSBO near my home that has replaced their signage at least twice with about size "12" font. You can't read the phone number, it's almost illegible, and the hand scrawled property description where the phone number should be is about size "10" font. No one driving by can read that. I had to stop the car get out and decipher the code. The phone number should be at LEAST 3" tall. For FSBOs, that should be the most prominent feature. Stop trying to write an advertisement on the sign. Signs are made to make the phone ring. The work begins after the phone rings, except as a FSBO, you don't know what agents know: statistically most people that do call are trying to eliminate the property from consideration. YOUR job is to get them to SEE it. Unlike agents who can point to a dozen or so viable alternatives to the "elimination call," you can't do that. You need to get them to see it. That requires some skill, without appearing to be too "desperate."

5. ADVERTISE WHERE? Start with friends, family, neighbors and co-workers. That's what agents do - they work their "sphere of influence." Internet advertising? Maybe, but you don't know where to advertise, and most FREE sites are for spam purposes. HOWEVER, Acceptance Group WPI DOES offer our FREE e-Classifieds. Try it. It's FREE, and we don't spam. The idea is if we can drive more people in our broader communities to our site, some might look beyond the e-Classifieds and actually look at our offerings. It's a novel idea for most real estate companies, really giving something for nothing, instead of "interruption marketing." Sorry, that's the only unabashedly blatant plug here, but I do think it's a great service. Though 80% of buyers start their search on the internet, it's costly to individually buy "click-through" key words, or hit "lead generation" sites that charge brokers up to 35% of the listing side of a commission for a buyer "lead." Often they are suspect too, since they've been "bid out" to other brokers. You can go the the FSBO sites and try that, or the marketing IsoldYourHouse people. I don't test these FSBO marketing things, but my guess is that since the FSBO market success has been relatively stable percentage wise, they aren't particularly effective. They no sell advertising, from what used to be an ancillary service for them to sell mortgages.

You've got to spend REAL money to get noticed over the the competition. In your case, the "others" are the brokers with their thousands of competing properties. They can "bait and switch." Buyer calls in on property "A" but the agent gets them to look at "B, C and F," because they realize after a couple of minutes in the ad call that property "A" just won't fit the bill. You don't have that option.

Print advertising has been noticeably declining as an effective advertising medium in some markets, but many savvy newspapers now include internet ads as part of their print advertising package. By the way, "community newspapers" and "penny savers" seem to be growing more than the institutional branded newspapers.

The average listing gets somewhere between $1,000 and $4,000 spent on it, depending on the market activity and desirability, as near as I can tell from anecdotal data gathered from various sources. You need to spend at LEAST that amount, and likely more. In my opinion - DOUBLE. Why? Because agents have that silly MLS that buyers have come to rely on for local and national market data for property. It's free to the consumer, but believe me there's a HUGE cost for the REALTOR groups that sponsor them. That's what you're competing against. Call us, we can give you the statistics we know about, and you can hire us by the hour to place ads for you, if you like. Oops that was the second plug. But, what other broker offers you THAT kind of service. Helping you advertise WITHOUT listing the property. Yeah, they think it's blasphemous too.

6. DEMONSTRATE DON'T SHOW! Many agents and most sellers don't know about "WOPEN" questions, "yes-no" questions and effective "demo-ing." Many agents and FSBOs start off a "showing" with the typical meet and greet stuff and then go on a diatribe about the obvious: "this is the kitchen, nice dining room huh?" Instead of: "one of the things I found most impressive about the abundant storage in this home, was the California Cluster Closets. What do you think of these...?" (Trial close). Get the picture? A competent agent does this stuff sub-consciously and has been practicing for years. It's second nature.

6. NEXT APPOINTMENT PLEASE! Here's how most FSBO showings end. Buyers: "We really like your house, it's very lovely. We need to talk about it and look at a few more. We'll get back to you." Sure they will. Did you get their phone number to follow up? You should have. How about an email, so that you can report to them any activity - in case another buyer wants to buy it. If they give it to you, that will tell you something. If not, that will also tell you something. Your job is to not get them to buy the house right then and there - unless of course they request it. Most people REALLY do need some time to think about it, especially a FSBO, because they are, and likely have been looking at other FSBOs and broker listings.

Buyer's spending $300,000 or more on a house aren't crazy. They'll travel 10 miles to get a 3 cent reduction in gas, that equates to about 50 cents a tankful. You don't think they will THOROUGHLY exhaust the market and compare feature for feature? Of course they will. The competent agent advantage is that they take all the input they've received from buyers and match that, house for house, trying to narrow the choices down to the top 3 or so, and get the buyer to make a decision. An EXCELLENT agent (not a common commodity) can often promote one over the other, but only of the narrowed house choices, unless the PRICE is SO MUCH better of one over the other. YOU need to set up a reason to meet again. That's another reason why you need contact information.

7. GOT A LIVE ONE! Don't blow it. When you have someone seriously interested, get them to paper FAST. Buyers suffer from "Buyer's Remorse." You should already have procured the services of a good real estate attorney, or AGENT, who has agreed to help you with this phase of the transaction. Yes, look around. There are agents who will help you get the buyer on paper, at least we will. You should still have an attorney look over the paperwork. It's only prudent, but strike while the iron is hot. Once the contract is a contract - and an offer is not a contract until there is a signed agreement by buyer and seller on all terms and conditions. Offers and counter-offers until agreed to IN WRITING, are just negotiations. Only an attorney can give you appropriate legal real estate advice on contracts, but agents can "fill in the blanks" of pre-approved state standard forms, binders and purchase and sales agreements, as they are often called in most states.

8. YOU THOUGHT YOUR JOB WAS DONE! Surprise, you've only just begun! This is where the REAL work begins. Appraisals, inspections, pest inspections, and in MA Title V reports, lead paint disclosures, etc. (another bugaboo to be aware of - see your ATTORNEY BEFORE you get in trouble about this) that weren't already required. This is where your on-the-job training can be COSTLY.

CAUTION: there's a potential lawsuit behind every undisclosed defect. Buyers have been to "Buyers School." They already "know their rights" or think they do, and they've likely had some excellent "coaching" from the agents they spurned to buy your FSBO. They will use anything and everything about these inspections to "adjust the price." They already "saved the commission" because isn't that what they told you when they made that ridiculous offer? "We made this offer because we know you aren't paying a commission." Funny, you BOTH can't save the commission can you?

You'll likely be calling that attorney quite regularly, by the way. Try to find one that is relatively "reasonable," which today is usually in the 3 figure per hour ranges. Your conversations with your attorney often go something like: "What do you mean? They can't do that. We have a contract!" At which time you are advised that the buyers had several "contingencies" in their contract that seemed SO reasonable at the time you signed the agreement. Buyers graduated from Buyer's School usually intimate something like, "Of course, it's just a precaution that our attorney advised us to do. We don't know you, and just want to be sure..." You didn't know they were setting you up for the next discounting phase. By the way, this becomes a part-time to full-time job in many cases. Hope you have a flexible schedule, because most appraisers and inspectors don't like to work many evenings and weekends. Real estate agents however do.

9. FUNNY FINANCING! Oops the buyer's rate went up during the loan process. There was a finance contingency stipulating a 6% rate in the purchase and sale agreement, but the lender now wants 6.5%. Of course, the buyers NOW indicate that the ONLY way they can still go ahead with the deal is if you "help them with the closing costs." How much? It depends on what Buyer Training School they went to. Their request is often more than the "financing adjustment" would indicate - but you're getting worn down now "and just want this darn thing over with." Often you'll concede "just to get it done."

10. YOU MADE IT - CLOSING TIME! Yes, there's just ONE more thing, and one more, and one more after that, often right into the closing room. "We didn't know that this was _________ until we did the final walk through inspection. We think this will cost $ ________ and will need some kind of relief..." Often this message is delivered from the buyer's attorney 2 days before the scheduled closing. Just substitute "we" for "my client." Then, what do you do? You're almost there. You complain to your spouse that "there's no way..." but in the end "you just want to get rid of this darned thing," so you often just concede - more money.

11. YOU DID IT! The check is in hand. It took four hours to close. Your attorney was there. The buyer's attorney was there, and the title attorney was there. There was great camaraderie amongst them - hope you weren't paying too much by the hour, or worse yet, agreed to pay "attorney's closing costs" - including the buyer's attorney costs. But, YOU did it. You sold on your own. Now you can tell all your friends. "We didn't need a REALTOR. We sold it ourselves." Then everyone pats you on the back and congratulates you. Someone usually says some derogatory thing about "blood sucking" real estate agents. Some courageous soul just has to ask, "so, what did you get?" You now have been to "Seller's School, " sponsored by the buyer, of course, and you also don't want to intimate all that you DIDN'T see coming, or the CONCESSIONS you made, so you calmly say: "we got what we wanted." Everyone says "great!" You smile and act serenely, thinking, "I'll never do that again!" That is, until the next time. Since the average person only moves once every 7 years on average. Time has a great tendency to obfuscate unpleasant experiences. Instead 7 years from now, you'll remember how "I sold it myself last time. It was easy!"

12. FINAL TIPS

Pay attention to this post. Many pitfalls FSBOs face are spelled out here. Some parting thoughts are that you can help take some of the "renegotiation" ability that buyers AND buyer's agents use - the inspections. Get them done at YOUR EXPENSE PRIOR to marketing your property. Get an bona fide APPRAISAL done by a certified appraiser - not just an agent CMA.

Why? If you have a bona fide appraisal in hand you can point to that when buyers try to negotiate your price DOWN. With inspections already in hand, you can use them to take the "sting" from the buyer's renegotiation attempts, "because we already priced the property with these conditions in mind. We're happy to fix them for you at $ ________ as we've been told by these contractors, but we'll need to adjust the price (upwards)!" Hmmmm. Now that's a tactic you don't hear often from your average agent is it?

13. MOST IMPORTANT! Lastly, the unpleasant side of the business. I know of more than one instance over the years where real estate agents have been abducted and murdered. In several cases the killer was never found. I also have a relative that was robbed at gunpoint TWICE.

I do not mention these things to alarm you unnecessarily. I don't believe in that kind of a tactic. Over the years, I've told my agents, men and women alike. If you have ANY doubt whatsoever. Don't show it ALONE. Buyer's often want to meet you at the property, with FSBOs, it's often your own house so that's the only choice. I am in no way a security expert. For that kind of advice, I suggest you consult one, or call your local police department for advice about letting strangers in your home. Also, keep in mind that it is not only strangers you need to be wary of. Criminal files are ripe with crimes perpetrated by people known to the victims.

Based on my personal experience only, for what it is worth: ALWAYS have another ADULT with you when the property is being shown. When in doubt always err on the side of caution. Keep a cell phone handy on your person, preferably with an emergency speed-dial plugged in. Let someone else know when the showing is - a friend, or neighbor. Ask them to call you 15 minutes or so into the showing to check in. Map out a quick escape route, if needed. If you feel uncomfortable at any time ask the people to leave. I also suggest keeping everyone together. Letting buyers split up can be trouble, especially if valuables are lying around. Hide valuables BEFORE they show up. These are some tactics we've used successfully over the years. They certainly are not all of the things you can do to secure your safety as best you can. Your police department is a good place to ask questions. I advise that you do so before letting strangers into your home. My intent is not to end this post on a negative note, because many people let strangers in their house with no negative results, but if my advice saves just one crime from occurring, it is worth it to me. Thanks for listening!

Happy FSBO-ing

Chris Michaud
Acceptance Group WPI
chris@acceptancegroup.com