March 1, 2018 | FSBOs
I know. The title’s a little much. How can people who sell their own property without the help of a real estate salesperson be dead? Well, the people themselves are not dead, but the practice of selling their property on their own without the help of a real estate salesperson as a FSBO (For Sale By Owner) has certainly declined. But why? Since the late 90s, many have been calling for the end of real estate salespersons all together. Many expected them to go the way of the travel agent – largely wiped out by technology and done directly with the vacation providers and the customer. Some have prophesied that FSBOs would refuse to pay out the average 5 % commission on the sale of a property to a real estate salesperson, and just roll up their sleeves, do it themselves, and save a chunk of change. But it didn’t happen en masse. In fact, according to our American cousins at the National Realtor Association, the number of FSBOs has declined from 20% in the early 2000s to 8% today. Here’s why I think this is happening:
WHAT IT TAKES
Back in the early 2000s a middle class house in a middle class neighbourhood could be purchased between $200,000 and $300,000. Today in Toronto, the smallest of condos would clear $300,000, and a detached house well over $1,000,000. If you have the right salesperson, you will know that the right marketing, staging, and strategy is well worth the 5% commission. Like any investment, the 5% investment on commission should bring you a better return than if you sold it yourself (with the right salesperson, of course). Some times the sale of a property is dictated by the condition of the market, but often I can see a poorly marketed house sell for far below the 5% commission. Then there is all the work you would need to do to prepare your property, the marketing materials, the visits, the negotiations and the paper work.
NOT KNOWING WHAT’S INVOLVED
I really do believe that some sellers can sell their own homes without a real estate agent. These people do exist. They don’t need me or another salesperson to do it. Still, these are a very rare breed indeed. Many FSBOs don’t really know how to sell their home. They don’t understand pricing because they have not been in enough homes. They don’t understand negotiation. They don’t have any strategies or marketing plans. And they don’t know how to engage an offer. Some real estate professionals do not even sell their own home because they feel it is better not to sell property to which you have an emotional attachment. I guess there is a reason that there is a whole group of real estate agents who are dedicated to finding business with failed FSBOs.
THIS IS AN AMERICAN STUDY
To be fair, this study was done in the United States. In the early 200os, the housing market was fantastic. It was much easier to sell your own home in a stronger market (even if you don’t sell for top dollar), than in a less robust American market of today. That may have some baring as to why there fewer FSBOs. It is tougher to sell a property now than in the early 2000s. So, many sellers may be more inclined to look toward a salesperson to help them.
You would think that technology would have removed the real estate salesperson, but it some ways it has done the opposite. Technology has created a whole new side of marketing your property. It has also become a way to enhance and accelerate a transaction. To learn more technology may be too much to take on for some sellers who wish to sell their homes.
PROOF IS IN THE PUDDING
Again, I will reiterate that there are people who can sell their own homes better than a real estate salesperson. We all know there are some terrible real estate salespersons out there who do very little to sell a home. I can certainly see why many sellers would think they can do it themselves with some of the poor listings I have seen brought out by some salespersons. Still, when I walk into a FSBO listing, I know it. There are very few who can pull it off in Toronto. For me there are certain things that happen when I reach out the FSBOs on behalf of my sellers. First, I usually have a hard time making an appointment. They often get back to me 3 days later. They cancel appointments. They change their minds. They often have the property priced wrong. Usually far too high, but sometimes way too low – which is why my I bring my buyers. Often the FSBO homes just don’t sell for what I think they should or at all. Again, they are not all terrible. Some do better than agents, but it’s rare. It’s usually folks trying to save the commission who see the commission as an unnecessary expense, as opposed to paying money to maximize the return on your investment. I suppose there is no guarantee there will be an return on investment, but that’s the risk that is taken.
Let me be clear on one thing. By saying that the idea of the FBSO has largely died does not mean that real estate is immune to a kind of disruption that will shake up this service industry like AirBnB shook up hotels and Über shook up the taxi industry. No doubt there will be many changes to come in real estate that will disrupt this industry. What I don’t see, however, is a rise of FSBOs that would connect sellers and buyers directly. The relationship between a real estate salesperson and a seller may change radically in the future, but I don’t think the real estate salesperson is going anywhere. There’s always room for improvement and transformation, but real estate salespersons won’t be going the way of the dodo bird, the VHS Player or Kodak Film.