My dad will, somewhat famously, hawk anything from the lawn next to our real estate office. There is nothing safe from this side-of-road mentality. He’s sold several John Deere tractors, at least two fishing boats, a couple of Sea Rays, a red and white 1956 Chevy, and the list likely goes on and on. He lists these things for sale by putting them next to the road, and taping the accompanying FOR SALE sign onto their windshield, or hull, or engine cover. He sells these things By Owner. Never mind the heated debates as to whether a real estate office should double as a Flea Market because the sane among us have already won that debate.
These are, in my opinion, the only sorts of things that should be sold in a By Owner fashion. Houses, they’re famously offered By Owner, or FSBO so I don’t have to keep writing the By and the Owner, and needlessly capitalize them as I’ve been doing so far. Times were, back in the good old days of real estate, an old timer would list his property FSBO on a Saturday, because it was sunny and he had just finished mowing his lawn. He cuts the grass way too short, but that’s what old timers do. Anyway, happy with his short grass, he sticks the FOR SALE sign in the lawn, and he waits. A buyer in a fancy sedan pulls up, finds out that the old timer has listed his house for $199k, and shakes his hand to buy it for that price. The fancy sedan guy did this because the $199k house was actually worth $250k, and everyone but the old timer knew it.
But, as is the goal in the FSBO, the seller saved $10-$12k in commission, and we all know that’s way more important than selling at a silly market price. FSBO properties used to offer unique value to a buyer, but that’s not really what happens now. Today, the old timer cuts his grass super, ridiculously short, and then he calls brokers. They come over, one by one, with their nice clothes and their shiny cars, and then if I come to the appointment, I bring my dirty car and wear my too-casual clothes, and we all, in order, give our opinion of value. The numbers vary, but the consensus is that the home is worth somewhere between $199k and $219k. The old timer is tired after all that Realtor nonsense, and so he naps.
The next day, he lists his house FSBO. His price? $289k. It’s a deal, he thinks, after all, the house down the street that’s twice as big and thrice as nice is listed for $299k, but he has the exact same mailbox, so his place is worth at least most of what that one’s worth. He lists the house, the Realtors are all sad, except me, because I didn’t really like the guy anyway. The next Saturday, the old timer is out mowing his lawn, extra short this time, so it’ll look extra nice. A fancy stranger in a shiny car pulls up, looks at the house, hears it’s only $289k, and buys it. This, of course, proves to the seller that he was right and that all those name-tag-wearing-Realtors were dead wrong. Except me, because I don’t own a name tag.
This scenario demonstrates two dangers. First, the seller got lucky. He did. Just as I’ve represented properties before and gotten extremely lucky. It happens. The seller listed high because he didn’t like what the Realtors thought, and this is the first danger of the FSBO. It used to be that those sorts of sales represented value, due to a naive, possibly ignorant, but still sweet, seller. Today, most FSBO’s are listed that way because the seller doesn’t agree with the brokers’ opinion of value, and they list much, much higher. Look around the lake today, or perhaps your suburban neighborhood, and you’ll likely see there’s truth in that statement.
The other way of looking at this is that, indeed, our seller got lucky and nabbed a buyer. Did the buyer buy the house because it was perfect for him? Or did he buy the house, at least in some part, because he perceived the FSBO arrangement to represent opportunity, because he didn’t have a snake-oil-selling-name-tag-wearing Realtor there to whisper in his ear? As buyers grow increasingly confident in the market, they are making an increasing number of mistakes. And as buyers make these mistakes, sellers see this and aim to capitalize. For both sides there is a warning to be heeded.
Sellers should be wary of the FSBO process, and listen to the market opinions of brokers. Sellers, both listed and FSBO sorts, should be keen to check their confidence, as the market is improved but buyers, for the most part, are not stupid. For buyers, consider the FSBO trap that I’ve laid before your feet. These properties are typically not the equivalent of classic car barn finds, where some rare value is discovered and bought for a fraction of retail. They are, instead, potential traps. Properties that wish to sell for so much more than the broker recommended prices. Buyers gallivanting around these shores on a weekend would do well to write down the addresses of FSBO properties, call the sellers to inquire as to their desired sales prices, and then call an agent who typically sells those sorts of properties (that’s me), to get the scoop on whether or not the price is from 2014 or 2007.