Property ManagementStalking the FSBO - Part I: Identifying the FSBO
Like it or not, FSBOs make up anywhere from 15 percent to 35 percent of available home inventories, depending on individual markets. That"s a lot of homes! Although many FSBO homeowners can be convinced to list with Realtors after receiving a few bad offers or none at all, as long as there"s a sign in the yard, FSBO properties are a hazard to Realtors.
FSBOs tend to divert buyers from MLS housing stock as well as put questions into the minds of buyers about the validity of working with a Realtor. Some service providers, such as Web sites, free classifieds, and renegade Realtors, are beginning to cater to FSBOs, making it easier for them to successfully transact their homes than ever. Although there aren"t any current figures by the NAR, there is growing evidence by online FSBO traffic and increased listings that the FSBO is multiplying, particularly in hot seller"s markets which are at an all time high across the nation.
No question - FSBOs need to be stamped out.
But, wait a minute. Are they as dangerous to you and your business as they seem? Not if you take steps to turn a foe into an ally.
If you are a new Realtor trying to build a farm in your area, or you want to stop the encroachment of FSBOs on your turf, you can take smart marketing steps which will turn this truculent group into a legitimate customer base. But before you figure out a way to entice them into becoming clients, first you have to know who they are and what motivates them.
Who are FSBOs?
No one to date has done a study on who makes up the FSBO demographic, but you can make an educated guess based on deductive reasoning. Selling a home is time-consuming, complicated and expensive, so why would anyone attempt to do it alone? Only someone with a true do-it-yourself mentality would step up to that plate. If you have ever done your own taxes, painted your own home, or cut your own hair, you were motivated by one of three things - saving money, fear of turning the job over to someone else, and the satisfaction/enjoyment of doing it yourself. FSBOs are no different, but they do come in different social/personality types. Let"s take a tongue-in-cheek look at the three you"ll encounter most frequently.
1. The Coupon Clipper. This FSBO is likely to be someone with time on his/her hands and not necessarily in a hurry to sell. They have the luxury of testing the market waters before making a move. Who"s got this kind of time? Retirees, and single income families with a spouse or parent who stays at home. Selling a home yourself would strike this person as good husbandry. I don"t mean the willing-to-crawl-under-the-house-to-fix-the-pipes kind of husband - I mean the good manager-of-resources kind of husbandry. This person is usually well-versed in all types of home maintenance. This group is more likely to be making a lateral move for emotional reasons - to move to the country, be near a daughter or son, or cut down on responsibility to have more free time.
Primary motivation: To save money. Secondary motivators are to keep busy and feel like a contributor to the family income.
Favorite Saying: A penny saved is a penny earned.
Weakness: Since they aren"t gainfully employed, Stay-at-homes are often out of touch with current trends and they are unlikely to "move at the speed of business." They believe in the value of hard work, not in working smarter. Decisions will have to be made slowly or discussed with another decision maker. They believe a clean, well-maintained home is sufficient to compete in the existing home market. Their home will rarely be remodeled to compete with other homes.
Your strategy: Make sure you drive up in an American sedan or wagon. Offer to take this FSBO in person to see competitive homes and to help them price their home more competitively. Then offer to be on call. Present a fee-for-service schedule which outlines the numerous jobs a Realtor does and the cost per item. This person will respond most positively to perceived value, but they have to understand what you do before they will pay you to do it.
2. The White Collar Climber - An educated professional will market their own home with supreme confidence derived from the belief that whatever they learned in business school can be applied to the real estate transaction. They are particularly confident when it comes to the financials. Since they follow economic indicators and industry trends, they are well versed on the current real estate market and will always attempt to capitalize on the positive momentum of a seller"s market. Who has this kind of market knowledge? Chances are great that your FSBO is an attorney, a CPA, a stock broker, banker, financial advisor, or otherwise closely associated with investment-oriented business. They think competitively, and are always dissatisfied with where they rank in the pecking order, so this group is the most likely to move to a trade-up home and buy a second home for vacation or investment purposes.
Primary motivation: Maximizing their investment. It"s not a home, it"s an income opportunity. Note that this is a different attitude than saving money. Selling a home is a competition against others" net gains that this professional wants to outdo.
Favorite Saying: Take no prisoners.
Weakness: Since competition is the name of the game, this FSBO is personality-driven to overimprove the property and then overvalue the improvements. Since they have only their own gain in mind, they are blindsided by the realities of the marketplace, namely that buyers want to save the same money they want to overprice their homes to get. This is the most likely FSBO to get angry at the industry when their home financial goals aren"t met. They don"t understand why any commodity, including a home, can"t yield the same results as their best performing stock. But a home isn"t a security - it"s a home, and if your professional had done his/her homework, s/he would know that home values have historically only outperformed inflation by very little or not at all. Would you call something with that kind of performance an investment? Plus can you sleep under your stock certificates? Homes are much more than an investment.
Your strategy: Arrive in a performance automobile. Anything German-made will do. Talk to this person as if you were discussing a securities investment. "Past performance is no indication of future performance." "Let"s talk about managing your equity investment." "Will you let me show you how to leverage your improvements?" You"ll have their attention.
Editor"s note: Watch out for the highly hormone-driven younger version of the White Collar Climber. With this hotshot, you"ll be dealing with a big ego. This is a competitive person who believes that anything you can do, they can do better. The Hotshot tends to be young, drive a foreign luxury car or utility vehicle, and feels a great sense of entitlement. Due to their egocentric viewpoint, they are more likely to be contemptuous of older Realtors. Your only defense is to look like you don"t need the money and you"d better know more than they do.
3. Realtor-haters - This group of folks is actually the most difficult to deal with because many of their beliefs are grounded in fact. Their distrust is based on real or anecdotal experience with dishonest or lazy Realtors. They usually have little understanding of how the real estate industry works so they are fearful of being "taken" by a whole new rampaging bunch of Realtors. No matter what you do, you"ll be tarred by the same brush as any other Realtor who ever overcharged or underserved the FSBO, their relatives or their friends. The Realtor-hater is most likely to be in a salaried, non-entrepreneurial working environment unrelated to sales. They tend to stick to "the rules," routines, and are comforted by habits of long-standing. They are not likely to embrace new ideas. Chances are good their negative attitudes have rubbed off in other parts of their lives, so look for signs of other troubles - divorce, job loss, bankruptcies, credit problems, and legal problems. These people are more likely to have their homes for sale because they have suffered some kind of reversal.
Primary motivation: Control.
Favorite Saying: The only good Realtor is a.... Well, you get the idea.
Your strategy: Don"t you dare drive up in your Cadillac. Borrow a truck and pile some 2 by 4"s in it. Agree with the Realtor-hater that s/he is fully capable of selling the home, but would it be okay if you brought a buyer by? Insist that should your buyer want to buy the home, that the contract will stipulate that commission is paid out of the transaction proceeds and the homeowner would not have to pay one dime. Besides, it"s true.
Of course there are other types of FSBOs, such as the Neighborhood Copycat and the Realtor"s Relative, but these are the three that you will encounter most of the time.
Now that you know who the FSBO is, let"s talk about how to get in front of them.
Part II: Stalking the FSBO - Part II - How to Win FSBOs Over
Also See:
Seven Questions That Will Persuade a FSBO to List With You
From Salesperson to Partner: Working With FSBOs
FSBO"s Are Easier Than You Think
What Do You Say to a Bomb Wielding FSBO?