Working with a FSBO

The main reason homeowners opt to sell their home without a Realtor is to save money. According to the 2021 NAR Profile of Home Buyers & Sellers, 36 percent of For Sale By Owners (FSBO) did not want to pay a commission fee, 30 percent sold it to a relative/friend/neighbor, 8 percent had a buyer contact the seller directly, 56 percent did not want to deal with an agent, 1 percent said their agent was unable to sell the home, less than 1 percent could not find an agent to handle the transaction and 10 percent cited other reasons.

With the majority of FSBO's not wanting to pay commission and/or not wanting to deal with an agent, this can be a tough seller to work with as a buyer agent. One of the biggest challenges to working with a FSBO is getting them to cooperate and agree to pay your buyer agent commission, which given their motivations for not listing with an agent makes sense.

So how do you proceed if your buyer finds a FSBO of interest or you discover one that may meet their needs?

To start, did you know that NAR has "References" for "Working with FSBO's"? Click here for the link.

The "References" include links to articles, reports, brochures, ebooks and more, all relating to FSBO's. Much of the material is related to converting a FSBO to a listing. Given the brisk pace of the current real estate market, by the time a seller has started to market their home for sale, it's probably too late to convert them into a listing. They're likely getting bombarded with showing requests from buyers and agents alike, or at least enough interest to lead them to believe they are on the right track.

However, the "right track" is really just an illusion. The FSBO should be able to secure a buyer in this market. After all, there is a tremendous surplus of buyers. But there are many other considerations that make the FSBO sale less successful than a listed property sale. There is a great article by Keeping Current Matters that outlines the FSBO pitfalls titled "Why Selling Your House on Your Own in 2021 Is a Mistake". Here are some highlights from this article:

1. The seller's safety is at risk with no way to qualify the people they are meeting with and allowing into their home.
2. The FSBO does not have the same online listing exposure of a licensed Realtor. This is important because this is where the buyers are.
3. Negotiations aren't for amateurs. The FSBO will negotiate with the buyer, the buyer's agent, the home inspector (maybe) and the appraiser.
4. How does the FSBO know a buyer is qualified? As active agents in this market, we've all received the inflated offer to purchase a home from a buyer with an FHA mortgage or 3 percent down conventional mortgage that will never appraise. We know this is a risk, but does a FSBO?
5. The FSBO is assuming all liability for the sale.
6. The FSBO will make more money by listing with an agent.

Click here for a full link to the article.

The bottom line is that when you're searching for homes for your buyers in this market, you will likely encounter a FSBO or two. You should be prepared to work with them and be prepared for their perception of you. Understand that they are either trying to save money by not paying a Realtor and/or don't want to work with a Realtor at all. So how do you proceed? I'm going to consult another article in the NAR "References" titled "Can You Buy a FSBO Home With a Real Estate Agent?". This article offers the following steps once you find a FSBO your buyer wishes to see, and I've added a few more:

1. Contact the FSBO seller and ask them to sign a fee agreement. From my experience, this is easier said than done. Some may be prepared to offer a buyer agent commission, others will say something along the lines of being negotiable with paying commission depending on your offer. There will be some who simply won't consider paying any commission.
2. Be prepared to explain to the FSBO seller the benefit of working with you, a Realtor. This includes professional management of the full transaction, preparation of all contracts, scheduling of settlement and a resource to get their sale to the settlement table. This is a start to demonstrating your value to the seller and making a case for them to pay your commission.
3. Prepare your buyer with the prospect of paying your commission fee if the seller is unwilling to pay it.
4. Be prepared to do all the work. There is no way around it . . . if you are representing a buyer in a FSBO sale, you are going to be facilitating the entire sale. You will be communicating with both the buyer and the seller throughout the transaction. Some go very smoothly, others are a bit more bumpy. It will give you more respect and appreciation for co-op sales when you do not have to communicate with both buyer and seller and you split the work load.
5. Always be professional. The FSBO seller does not have to act professionally, does not have to comply with licensing law and does not have a code of ethics, but you do. Don't react poorly to bad behavior, always maintain your professionalism.

Click here for the full article.

In conclusion, FSBO's make up a small percentage of sales, but it's large enough that you should have a plan to work with them if you find a home that meets your buyer's needs. Ask your broker and colleagues for tips and advice if you need it, and consult with the NAR "References" to brush up on all things FSBO.

Facts, opinions and information expressed in the Blog represent the work of the author and are believed to be accurate, but are not guaranteed. The Lancaster County Association of Realtors is not liable for any potential errors, omissions or outdated information. If errors are noted within a post, please notify the Association. Posts represent the author's opinion and are not necessarily the opinion of the Association.