The Truth Behind FOR-SALE-BY-OWNER (FSBO)

by Sundaybell on September 2, 2011


FSBO myth exposed?

Colby Sambrotto’s story is an all too familiar one. Mr. Sambrotto decided to sell his two-bedroom New York condo but wanted to avoid paying a 6% commission fee to a REALTOR®. So he opted to go the for-sale-by-owner route, commonly known as FSBO (pronounced “fizz-bo”), and do it himself. However 6 months later, when his condo still hadn’t sold, Mr. Sambrotto did what 90% of all FSBO sellers end up doing: he turned to a real estate agent for help. But the true significance of this story, first reported by the Wall Street Journal in August, is that Colby Sambrotto isn’t just your run of the mill FSBO seller; he is a founder and former chief operating officer of ForSaleByOwner.com, a FSBO company that claims to “make selling a home fsbo easy”.

This didn’t seem to apply to Mr. Sambrotto though, or even most other FSBO sellers for that matter, which would explain why FSBOs only accounted for 9% of overall house sales in 2010.

AGENT-LISTED HOMES SELL FOR 25% MORE THAN FSBO ONES

On the other hand, in return for a standard 6% fee Jesse Buckler, a New York based real estate broker, sold Mr. Sambrotto’s 2,000 square foot condo for $2.15 million, which is $150,000 more than the original asking price. He said he told Mr. Sambrotto that the condo had been priced incorrectly, which was why he wasn’t attracting the right buyers. Left in Mr. Buckler’s capable hands, the property quickly received multiple offers, before finally closing at a price that was 7.5% higher than Mr. Sambrotto’s original listing, and thereby more than offsetting the cost of Mr. Buckler’s fee.

INCORRECT PRICING IS THE #1 REASON THAT FSBOs FAIL

Colby Sambrotto’s experience is merely a reflection of what many FSBO sellers across North America are discovering for themselves: that trying to do a FSBO isn’t quite as easy as Mr. Sambrotto and his friends would have you believe.

Typical among the problems faced by FSBOs is a tremendous lack of exposure. When signing up with a FSBO company, sellers are usually given an online listing, a yard sign and perhaps a few flyers to hand out; everything else is left up to them. Many sellers realize too late that you need a lot more than just a sign and an online listing if you want to sell your home successfully.

SOME REASONS WHY REALTORS® SUCCEED WHERE FSBOs FAIL:

  • REALTORS® have better marketing tools and resources
  • REALTORS® know how to price properties to sell
  • REALTORS® are always up-to-date on the latest trends and market conditions
  • REALTORS® get maximum exposure for properties by using their professional networks

What many sellers don’t know is that REALTORS® market properties to other real estate professionals as well as to the general public, thus reaching the maximum number of possible buyers. This is something that’s next to impossible for a FSBO seller to achieve.

In fact, over 50% of sales occur through agent-to-agent cooperation, where REALTORS® work with one another to buy and sell properties. These are known as cooperative sales.

4 MOST COMMON REASONS FOR DOING A FSBO:

  • Did not want to pay commission fee: 38%
  • Sold it to a relative / friend / neighbor: 32%
  • Did not want to deal with an agent: 12%
  • Buyers contacted seller directly: 11%

While there will always be for-sale-by-owner enthusiasts out there, what does it say for their credibility when a founder of a major FSBO company himself needs an agent to sell his property for him?


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