Posts Tagged ‘For Sale By Owner’

Home Owners are Still Leary About the Market

February 17, 2011

I find and track every “For Sale By Owner” (FSBO) listing in the U.S. and Canada. In 2008 we saw that the number of FSBO properties on the market had dropped by 50% from the previous year. We haven’t seen the numbers increase in the past three years. It appears that home owners are content to be patient and wait until the real estate market rebounds.

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Economists’ Commentary: Home Sellers Seeking Professional Representation Rising

June 15, 2009

February 12, 2009

By Harika “Anna” Barlett, Senior Research Analyst

http://www.realtor.org/research/economists_outlook/commentaries/commentary_falling_fsbo

With housing inventory at its highest since the early 1980s, a greater number of home sellers understand the value of professional representation. This is understandable given that the housing market has been challenged in the past two years and inventory of homes for sale reached its highest point since the early 1980s.

The 2008 NAR Profile of Home Buyers and Sellers reveals that among recent home sellers surveyed in August 2008, the pure For-Sale-By-Owner (FSBO) sales – those cases where the seller did not know the buyer – remain historically low at 7 percent. It had been closer to 10 percent during the housing boom years.

Among the shrinking pool of FSBO sellers, the outcome results of such sales are highly questionable. FSBO sellers, who sold their home to someone they did not previously know, sold their homes within a median of six weeks. By contrast agent-assisted sales took a median of nine weeks. In addition, the median selling price as a percentage of the asking price was 97% for those FSBO sellers, compared to 96% among agent-assisted sales.

At first glance,  FSBO transactions appear to be doing quite well. However, the median selling price of an open market FSBO home was $150,100, while the median price for agent-assisted sales was $211,000.

FSBOs have typically been more popular among lower income households trying to sell lower priced homes. So one may argue that price difference results between FSBO and agent-assisted sales is due to characteristics of lower-valued and smaller-sized FSBO homes. Indeed, the average home size in FSBO sales is smaller. The median home size in open market FSBO sales is 1,515 square feet, compared to the median of 1,850 square feet in agent-assisted sales.

However, when we compare median prices per square foot of home, the data show that it was $92 in FSBO sales, and $116 in agent-assisted sales, with a difference of $24 per square foot of home sold. Considering the median size of 1,515 square feet in FSBO sales, this translates into a price difference of $36,360 on a size-adjusted base. So the claims that FSBO sales are getting completed faster and the owners get a price closer to their asking price are misleading. The FSBO homes, given the nature of the market, are being listed at deeply discounted prices. Because lower prices get buyers’ attention, any subsequent price concession afterwards tend to therefore be small. FSBO owners have in essence mispriced their homes too low.

The chart below shows the price comparisons between FSBOs and agent-assisted sales. The FSBO segment is broken out between those sellers who already knew the buyer to delineate arms-length transactions like those that with occur within a family or friends.

Regarding the length of time a home was on the market prior to sale, the time will obviously be much shorter for mispriced, discounted homes. That result is revealed in the chart below. The length of time a home was on the market prior to sale also changes by location, in addition to sale method. In open-market FSBO sales, the median time on the market was six weeks, compared to the median of nine weeks for agent-assisted sales. This difference gets bigger in the sale of those homes located in a small town – five versus ten weeks. However, it is smaller for those sales that take place in a suburban area (six versus eight weeks); and it is reversed in those sales that take place in an urban area.  In urban areas,  open market FSBO sales take a longer time, a median of ten weeks, compared to the median of eight weeks for agent-assisted sales.

Consumers are smart. In more difficult times for housing and the economy, a greater number of people are seeking professional real estate advice. Consumers in the end are also greatly benefiting as a result of having sought out professional representation.

Loan Officers Profit by Working with FSBOs

August 14, 2008

I have worked with many loan officers over the years benefit greatly from working directly with FSBO’s.  I have jotted down a few ideas.   

 

First, loan officers offer to prequalify buyers for FSBO home owners.  Loan officers should give each FSBO a call and introduce himself.  Explain that they help home owners by pre-qualifying their buyers.  Loan officers explain to the home owner all of the time and frustration they will save by having their buyers pre-qualified.  The great part about this method is that every buyer who the loan officer pre-qualifies for that home will be a lead for the loan officer whether they buy that home or some other home.   

 

Second, loan officers establish reciprocally beneficial relationships with real estate agents by working with FSBO home owners.  After the loan officer has worked with the home owner for a month or two and the home owner is frustrated because they still have not sold their home, the loan officer can refer that home owner to their preferred agent. 

 

Third, offer the FSBO home owner marketing materials for free, like a yard sign and flyers.  Of course, all of the marketing materials will be co-branded with the home owner’s information and the loan officer’s information. 

 

Fourth, it’s likely that the home owner is selling their home because they are moving into a different home.  Loan officers establish good relationships with the home owner and help them with their mortgage for their new home and refer them to an agent to help them with their search.        

 

Fifth, once you have established a good relationship with the home owner, make her a part of your sphere of influence.  Send her periodic emails, letters, and postcards to be in the forefront of the home owner’s mind when they want to refinance or move.   

The FSBO World

August 4, 2008

I have been tracking For Sale By Owner (FSBO) properties for nearly 10 years.  I have become quite the expert at finding FSBO’s in publications throughout North America.  I have helped thousands of real estate agents, brokers and real estate investors work with FSBO properties to make thousands of dollars. 

I find two stats quite interesting… the first, according to NAR, 84% of FSBO’s will eventually list their property with an agent.  The second stat is that for those few FSBO’s who do sell on their own, they sell for 12-24% below the value of the equivelant listed property, so investors can find great bargains working with FSBO’s.