For sale by owner properties, or FSBOs, are notoriously difficult prospects to convert into a commissionable transaction. More often than not, real estate agents bypass these prospects completely, instead focusing on things like expired listings. After all, someone who believes they are better off without a real estate agent, may be a tough sell. However, FSBOs are an underserved niche that struggles to sell their homes under the conditions they envision. Specifically, FSBOs typically stay on the market longer and sell for less than homes represented by real estate agents. Let’s explore some of the reasons FSBOs are attractive prospects for agents and some tips on converting FSBOs into closed transactions.
Why should I prospect FSBOs?
- Need to sell
- FSBOs typically have a qualified need to sell. Often, the resistance to enlisting the help of an agent is the result of previous bad experiences buying or selling a home with an agent. As such, people who do not want to pay commissions to real estate agents typically don’t opt to move unless they have to. They might need to downsize or relocate for a job or family emergency, or any other number of reasons. When approaching FSBOs, it’s important to go in with the mindset of understanding what their motivation is for listing their homes and appeal to that accordingly.
- Lack of negotiating skills
- The most typical reason homeowners list their property without the aid of an agent is their reluctance to pay commissions. This is understandable – who would want to pay a commission for someone to perform a job one can do for themselves? However, the fact is most homeowners can’t do the job themselves. In addition to a lack of marketing experience, many homeowners lack negotiating skills. This lack of marketing and negotiation skills, along with an impending time frame results in FSBOs being sold on average for 6% less than homes sold by professional agents. This means FSBOs save 3% in commission fees while losing 6% in sale price.
- Lack of transactional expertise
- It is often reported that 15 – 20 people will touch a single real estate transaction. If a homeowner is selling and then buying, this number doubles. If they are selling to or buying from someone who is also selling and buying, this number quadruples. All of these transactions will impact one another. While many homeowners list their homes themselves thinking they just need to fill out some boilerplate forms, they often quickly discover they are in over their heads and lack the experience needed to close a transaction smoothly.
Tips for converting FSBOs
- Check newspaper listings, Craigslist and keep an eye out for ‘For Sale’ signs in the neighborhood. Many FSBOs do not actively market their listings. By approaching first the prospects who are spending money to market their homes, you will find prospects more eager to sell and possibly more open to the idea of working with a real estate agent.
- Don’t bother approaching FSBOs on the MLS. These homeowners have been solicited to already, most likely by tens of agents. Instead, focus on FSBOs you identify through other sources as these will have the least amount of eyes on them.
- When prospecting FSBOs, take the time to understand what their motivations really are. Do they hate real estate agents? Have they been burned in the past? Are they just frugal and wanting to save money? Find out what exactly is motivating the homeowner and be prepared to speak to that objection. If they are worried about money, produce evidence that homes sold by owners net significantly lower sale prices than those sold by agents. Show them exactly how you intend to market their homes in order to attract the right buyers. Tell them stories about how you were able to fight for your clients and protect their interests. At the end of the day, people who sell their own homes are typically not knowledgeable about all the things a real estate agent can do for them. So tell them. And be prepared to meet with them several times before earning their business. Remember, FSBOs are typically a little jaded and they may need time to open up and trust you with their life’s investment.
FSBOs are inarguably one of the most challenging types of prospects for agents to convert. However, if you take the time to truly understand the FSBO mindset and explain to them how exactly you are going to help them accomplish their goals, you just might get the chance to demonstrate why you are the best choice for them.
What are some methods you use to convert FSBOs? Tell us in the comments!