FSBO World
These were two comments that were recently posted on the Property Grunt.
"grunt,
what are your thoughts on the FSBOs that have gotten a lot of attention these days? I seem to read about a great FSBO sale or see one in the Times every other weekend. Online too on various blogs."
"And I'm seeing FSBO fliers posted around the neighborhood. For the first time in YEARS. What does it mean?"
In my experience it means two things.
1. Some sellers have become desperate. They have tried the broker route and seeing little or no results they are now becoming aware that the market has turned against them. By going fsbo they have rid themselves of this sense of powerlessness and by putting their own skin in the game they feel they can expedite the process in a quicker and more efficient fashion.
2. Some sellers have become more educated and realize that the 6% commission is a mighty big chunk of change especially when the market has begun to go south and they will be getting less of a return on their property. So they might as well try it on their own.
Of course there will be sellers who will reach their brain damage threshold and simply hire a broker but the FSBO movement will not be a passing fad much to the chagrin of brokers. Marketing is a huge cost for brokers and is used to justify their commissions but sellers now have other marketing options that are free.
However, you get what you pay for. When you go FSBO, it is all in your hands. Therefore you don't have a broker to yell at if something goes wrong. However if you can pull it off, you can save alot of money.
"grunt,
what are your thoughts on the FSBOs that have gotten a lot of attention these days? I seem to read about a great FSBO sale or see one in the Times every other weekend. Online too on various blogs."
"And I'm seeing FSBO fliers posted around the neighborhood. For the first time in YEARS. What does it mean?"
In my experience it means two things.
1. Some sellers have become desperate. They have tried the broker route and seeing little or no results they are now becoming aware that the market has turned against them. By going fsbo they have rid themselves of this sense of powerlessness and by putting their own skin in the game they feel they can expedite the process in a quicker and more efficient fashion.
2. Some sellers have become more educated and realize that the 6% commission is a mighty big chunk of change especially when the market has begun to go south and they will be getting less of a return on their property. So they might as well try it on their own.
Of course there will be sellers who will reach their brain damage threshold and simply hire a broker but the FSBO movement will not be a passing fad much to the chagrin of brokers. Marketing is a huge cost for brokers and is used to justify their commissions but sellers now have other marketing options that are free.
However, you get what you pay for. When you go FSBO, it is all in your hands. Therefore you don't have a broker to yell at if something goes wrong. However if you can pull it off, you can save alot of money.
posted by Grunt at
8:39 AM
3 Comments:
Hey Grunt,
Good post. I think your right. The FSBO movement is not a passing fad and in fact, I think there will be a big divide between traditional and FSBO. High end brokers will again get 6-7% vs. the avg. current 4-5% because they truly deliver good, high touch, high-tech service and their will always be a certain amount of people who want this (i.e. pay more at nordstrom)and then the FSBO movement who will be better served by all other parties who stand to gain from their real estate transactions. The NAR states only 14-17% of all sales are FSBO. But... keep in mind that it does not benefit the NAR spin machine to tell you it's really 20-30%, (which is probably correct, as I would consider the popular basic $299 flat fee model to get your listing on realtor.com a "FSBO" in most cases as they are only using the MLS for marketing purposes and the "listing agent" really is doing anything). Then all those highly leveraged home owners who bought at the top, may have no other choices but to try and go FSBO. Lastly, FSBO sites are using technology and marketing that in some cases is better than real estate agent sites (i.e. google map search on FSBO sites like: http://www.forsalebyownercenter.com/maps/ ). As the sellers start to realize that big chunk of change... buyers too will realized the fact that they are paying for part of the 3% nugget and they too will start actively looking at FSBO to try and save the "commission" (by offering 1-2% less then asking price to still create win-win) that they are financing into the purchase amount. Lastly, although the "seller is alone" argument will always be around, they still have the support of the lender, title, appraiser, etc... all of whom stand to benefit greatly as their FSBO the deal closes, so they are going to help the transaction along as much as possible... and yes, the seller can even "yell at" them if needed!
By
FHA Lender, at 11:07 AM
I think part of the FSBO movement was created by the bubble itself: In NYC, the apartment you bought four years ago for $350,000 (and a $21,000 commission split two ways) could potentially go for twice as much when you sell today - which means the commission doubles too. Paying what is a year's salary for many people for a couple of months of work starts to sting a lot more, particuarly when you knew you paid half as much for the same amount of work two years ago.
That being said, bigger purchases also require the services of a broker more. Who's going to slap down $2 million based on a cruddy Craigslist posting? And all FSBOs tend to downplay the hassle/safety factor in a really unrealistic way.
I'm a single woman in her 30s, and my father would never let me even sell a used car on my own, let alone invite a lot of strangers into my house and stand there while they go through my underwear drawer. And you'll also have to do individual showings too, which don't always work out that well with a busy work schedule.
In the end I think there will be a compromise/sliding scale: Maybe cheaper properties will still require 5-6% commissions, but more expensive ones will go down to 3-4%. (The highest end properties need more work and will probably still retain full commission.) And flat-rate services will emerge that do nothing but list your apartment; or nothing but show your apartment; or nothing but handle post-contract details - I know I've seen a few of these alternate business models mentioned here. It's going to be scary for people like Grunt, but I'm still excited to see what's going to happen!
By
Anonymous, at 2:09 PM
Mr. Grunt -- nice post. I agree that FSBO is not going away and makes a nice alternative to the full-service agent route. However, neither you nor the other comments mention the fact that an FSBO seller can get some of the same services, for much less money, from an attorney. Sure, the owner will still have to market the home by him- or herself. However, an attorney can provide the legal counsel necessary to insure that the transaction goes smoothly and to the benefit of the seller (which, frankly, is a service that an agent probably should not provide anyway).
By
Craig Blackmon, at 1:58 PM
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