West Michigan is a much sought after area due to its beauty, services, and vibrant life (I will cover the advantages of living here in my future blogs.) Not surprisingly, these days in Grand Rapids and surrounding areas there are fewer properties for sale than usual and high demand for housing; in other words inventory is extremely low and we are experiencing what we call a seller’s market.
In market conditions such as these, in order to help my buyers I regularly scout for properties not yet on the market, properties not at all on the market 😊, and properties not listed through the MLS, such as For Sale By Owner, or FSBO’s
Why my interest in FSBO’s? My very first closing was originally a FSBO – before I was asked to list it. It ended up being a cash deal closed in just eleven days, with the bonus of netting my client a little more than expected. With great satisfaction for both parties.
Here in Kent County, the number of FSBO’s currently available totals 130 (Zillow – May 24, 2018.) As comparison, the number of properties currently listed through a broker equals 1022 (MLS – May 24, 2018.) In other words, if we assume that almost every FSBO is also advertised on Zillow, at this time for sale by owner properties constitute about 12.7% of all properties on the market. A significant number. But do all the FSBO’s eventually close without the help of an agent? As per my experience, the answer is no.
Often sellers choose to market their own property without an agent in an attempt to save some broker’s fees. This seems a logical approach. However the reality speaks differently. Many sources are available to provide data. Among them I find this study quite revealing: on average, FSBO’s net less than properties listed by an agent. And here are some points for reflection.
- Fees. Selling as FSBO seems a good way of saving commissions, both listing and selling sides. While notable – a few thousand dollars – these commissions are however insignificant when compared to the several hundred thousand or million of dollars a property is worth. As percentage, these fees can be more or less what we customarily accept to pay – with no objections – for wire transfers, ATM withdrawals, credit cards, or online payment vendors. But there is more, below.
- Offer. Buyers are aware that FSBO’s are not paying broker’s fees. Therefore they will try to make an offer just a few thousand dollars below asking price. Additionally, any agent bringing their buyers to the table will protect their clients from having to pay their commission by adding a provision to the Purchase Agreement, making it the seller’s responsibility anyway. In short, the only potential benefit of selling FSBO – saving on commissions – is neutralized.
- Experience. In the negotiation process, the experience of any agent vastly surpasses that of a do-it-yourself seller. No wonder a represented buyer will enjoy the best end of the deal! This advantage alone could be worth thousands of dollars, possibly more than the listing broker’s fee alone, and should put FSBO’s on notice.
- Knowledge. Markets move, often quickly. Agents who operate daily in these markets possess the experience to properly price a property. Why is pricing crucial? A property hitting the market will generate the most interest within the first three weeks. One that is incorrectly priced will not attract the right pool of buyers or not attract buyers at all during this critical window of time. Chasing down these buyers with multiple price reductions while the property sits unsold can be very costly!
- Marketing. Visibility is key. Agents enjoy a variety of marketing tools at their disposal. The most powerful is the Multiple Listing Service, or MLS. When a property is listed through an agent, it is immediately placed on the MLS, where it becomes visible to all agents and the general public. For example, this is where all current listings in the GRAR area can be found. FSBO’s do not have access to this tool. Sometimes, after unsuccessful attempts at selling, in order to be listed on the MLS a few FSBO’s will resort to entering into a limited service agreement, which carries a cost, further eroding their net profit.
- Showings. Listing your own property means making yourself available to all buyers. Anything between 8 am and 9 pm is typically a go. Phone calls, emails, scheduling, key arrangements, walk-ins (isn’t that “For Sale By Owner” red sign in your yard?), answering questions, and similar tasks can be time-consuming, and time is precious.
- Closing. The good news is that in the end a FSBO will receive an offer. It might take some time, a few price adjustments, a few open houses, a limited service agreement, or even the help of… a listing agent 😉! But there is still work to be done to close. Deals fall apart sometimes. And when that happens properties could lose value due to the stigma that something could be wrong – whether true or not.
In the end selling as FSBO can be a wonderful experience, rewarding sellers with great satisfaction. Or could become a time of frustration. Whether you are planning to sell your property as FSBO or with an agent, do not hesitate to contact me, even if just for some advice.
Happy sales everyone!