FSBO SELLERS IN A DOWN MARKET

Tough times can motivate, frustrate agent-less sellers

Four years ago, when Judy Cruz decided to try to sell her house on her own, it couldn鈥檛 have been easier. She struck up a conversation with a neighbor who said he鈥檇 love to buy it from her. Deal done.

But when she decided to sell her Chicago condo this year, it was a different story.

鈥淚 tried advertising it online for four months,鈥 said Cruz, who explained that posting free classifieds on Craigslist were the sum of her efforts. 鈥淭he only calls I got 鈥 and I think there were just five 鈥 were from people who wanted to know if I would consider rent-to-own.鈥

That wasn鈥檛 an option, so right after Memorial Day she gave up and listed the unit with an agent. Her for-sale-by-owner experiences are a familiar story line in housing鈥檚 then-vs.-now saga, where time and effort have acquired new, sometimes painful meaning.

But 鈥渂ottom line鈥 has new meaning, too, considering home values have declined and the notion of milking every dime from a transaction has inspired many sellers to dig in their heels and go it alone to pocket the money they might otherwise have paid an agent.

So, even in a daunting down market such as this one 鈥 or perhaps because of it 鈥 the FSBOs are out there, amounting to perhaps 20 percent of all homes on the market today, by some estimates.

Money motivates

鈥淚n 2003, I could have sold this house in a heartbeat,鈥 said John Kerkam, who in May began advertising online for a buyer for his mountain cabin in Loudon County, Va., outside Washington, D.C. After one week, his ads had generated two calls, which he viewed as a good start.

He says his eyes are wide open to housing鈥檚 changed picture. Although over the years the former contractor built and fairly easily sold three homes on his own, he expects the sale of his own residence could be a prolonged affair.

鈥淚n the fall, I鈥檒l probably pack it in for the winter if it hasn鈥檛 sold,鈥 he said. 鈥淎nd then I may turn it over to a friend who鈥檚 a real estate agent.鈥

Or maybe not, once he runs the numbers. Saving the cost of an agent鈥檚 commission motivates him because he needs to maximize his retirement savings, he said.

鈥淭hat鈥檚 their concept, trying to save the commission,鈥 said Palos Hills, Ill., agent Kathy Toscas, who said in her experience FSBOs lose money by spinning their wheels.

Pitfalls of flying solo

She recently has taken on listings of failed former FSBOs. She said where those homeowners tended to trip up 鈥 when they did attract potential buyers 鈥 was in the vetting process.

鈥淭he average FSBO is attracting people who aren鈥檛 qualified buyers, or if they are qualified, they still have a property to sell 鈥 and today, if a buyer has to sell their own property to sell first, forget it,鈥 Toscas said. 鈥淥r, they attract bargain hunters鈥 who try to wheedle down the price too far.

So, in addition to asking hard questions about the qualifications of potential buyers, she says would-be FSBOs have to work hard to put the word out on the street, creating fliers and working the phones 鈥 calling everybody they can think of to say, 鈥淢y house is for sale 鈥 do you know anybody who might be interested?鈥

鈥淚t鈥檚 hard work,鈥 she says. 鈥淵ou have to promote the daylights out of it on a daily basis.鈥

Other agents also say FSBOs have to be wary of running afoul of property disclosure and fair-housing laws and of contract wording.

Firm data on for-sale-by-owner properties is by its very nature difficult to collect and subject to many qualifications. The National Association of Realtors and companies that assist for-sale-by-owner properties long have sparred over it.

Crunching FSBO numbers

NAR data show that FSBO sales vary widely by region, from 10 to 26 percent of all sales last year. Overall, they accounted for 13 percent of sales, up from 12 percent in 2007 and 2008, which he said were record lows.

However, many such transactions are complicated to classify, as they aren鈥檛 technically on the open market because they were between friends or relatives, according to NAR spokesman Walter Molony.

True open-market FSBOs accounted for 7 percent of transactions in 2008, which he characterized as a downtrend from 10 percent in 2004.

Eric Mangan, a spokesman for ForSaleByOwner.com, which offers online marketing services and information for sellers, contends that FSBO properties sell more quickly than agent-assisted homes. He said NAR鈥檚 own research showed that in 2008, sellers in the open market sold their homes in a median six weeks vs. 10 weeks for agent-assisted sales.

He also said FSBO properties sold for more money, proportionately, than agent listings. Citing the Realtors鈥 2008 report, 鈥淧rofile of Home Buyers and Sellers,鈥 he said the median agent listing sold for 96 percent of its asking price vs. 97 percent for FSBOs in the open market.

The NAR report, however, also said that agent-assisted sales netted a $204,900 median vs. $153,000 for all FSBOs.

Mangan contends that FSBOs are plentiful today.

鈥淲e rely on data from RealTrends (an industry research and information company) and we think 20 percent of the market today is FSBO listings,鈥 he said. 鈥淏ut not all FSBOs are equal,鈥 meaning that the aggressiveness of their marketing will make all the difference.

Do-it-yourself marketing

鈥淪omebody just putting a for-sale sign in the yard or just a Craigslist ad 鈥 they probably won鈥檛 be successful,鈥 he said. 鈥淣inety percent of buyers use the Internet to search for a home, so online has to be the centerpiece of their marketing strategy, and it has to be everywhere 鈥 we tell people to advertise on Craigslist and we syndicate our listings to Yahoo, Google and CribFinder, the real estate application on Facebook.

鈥淭hen they have to go word-of-mouth, telling everyone at the PTA meeting and their neighbors. They do have to have yard signs, and those yard signs have to have a flier box,鈥 Mangan said.

But, Mangan agrees, the current market is a challenge that may turn out to be a learning experience to any FSBO seller who had an easy time of it a few years ago.

鈥淭his is one thing we鈥檙e telling sellers: The biggest thing in a slow market is to be patient,鈥 he said. 鈥淭hat, and not to make it an emotional event 鈥 to treat it like a business transaction.鈥

Ryan Pilkington said he took that to heart when he posted his Lincoln, Neb., home at ForSaleByOwner.com in mid-February, paying the online company what he estimates at $200 to $300 for the online ad and various services.

鈥淚 didn鈥檛 really know a lot about selling for-sale-by-owner until we decided to do it,鈥 he said. 鈥淚 downloaded some of the information on the site, and there鈥檚 a tutorial on the site on how to sell your house.鈥

At first, he said, there wasn鈥檛 much activity. Then he and his wife, Jennifer, dug in.

HGTV, fliers and a price drop

鈥淚 watched a lot of HGTV,鈥 he said, laughing. He took their shows鈥 tips to heart, rearranging furniture and repainting the house鈥檚 front door for more appeal.

He said they got a lot of phone inquiries and distributed 鈥渁 ton鈥 of fliers. Their open houses 鈥 in all, about a dozen, he estimates 鈥 got old, but the couple decided they were necessary. They got one offer that fell through because of financing issues.

鈥淚 didn鈥檛 think to ask, 鈥楢re you preapproved?鈥 鈥 he said. 鈥淲e were going off his word that he was good to go.鈥

Undaunted, they kept going on their own; they dropped the asking price from $139,900 to $138,000. In mid-May they got a solid contract for $136,000 from someone who had found the home online.

鈥淵eah, ideally, it would have been easier if we had had a real estate agent who could have done it for us,鈥 he said. 鈥淏ut the whole process wasn鈥檛 bad, and eventually we got our objective.

鈥淚鈥檇 do it again.鈥