Why Technology Has Not Increased For Sale By Owner Success

I should preface this by saying that I do not loathe people who endeavor to sell their home without an agent, commonly known as “For Sale by Owner” or FSBO. I’ve actually listed hundreds of FSBO clients over the decades, and I even had a side business conceived to assist them from about 2006-2010. I sunsetted that venture because I thought it was doing more harm than good. The National Association of Realtors has published data on the (lack of) success of FSBOs; the summary is that they net less money and that about 90% of them end up listing with a broker.

Whether you agree that 90% really do give up and list with a broker or not, I can offer my own non-scientific, anecdotal observations that the vast majority do indeed and up hiring a professional. But why, with the democratization of technology, access to listing on Zillow and other platforms, and the availability of so many Internet solutions, do FSBOs still end up listing with a broker? Let me count the ways.

1. Attracting buyers is just the beginning. Many FSBOs start out with the idea that market value is market value, buyers want to buy, sellers, want to sell, and that middle men only add a layer of unnecessary expense. So they start with whatever ads or postings they can think of, hold their homes open, and do get some bites and foot traffic. But when someone walks through that house, the work is only beginning, and that work requires more skill than consumers realize. Most sellers have no idea how to qualify buyers beyond asking if they’ve been to the bank.  And they can’t sell or negotiate as well as they think they can. If you think the value of the agent is attracting people to look, you’ve been gravely mistaken since the early 2000s.
2. Most people can’t sell, especially sellers. Homeowners are by nature subjective parties with understandable bias. They love their home, and in Westchester and the surrounding counties, it is easy to assume that once someone decides they love your house that it’s just a matter of having your lawyer draw up the papers. Yet it seldom happens that way. This often shows up in ways like a overpricing the home, botching showings with distracting small talk or descriptions, or talking the buyers out of acting with information overload.
3. Most people can’t negotiate. The purchase and sale of a home is, for most people, the largest transaction of their lives. Those are pretty high stakes. It’s therefore quite understandable for a seller or buyer to operate under some unfamiliar pressure that takes them off their game, if they even have game. The process of making a buying decision is delicate, and one wrong remark, proposed term, or ill-advised joke when attempting to create rapport can-and does- kill deals in utero.
4. The Internet gives horrible advice. People search online for everything, and they will always find answers. But all real estate is local, and if you live in White Plains but are taking advice from a real estate blog in Provo, Utah, you are very likely getting wrong information for the local market. Every state has its own laws governing commerce and real estate, and the devil is always in the details. I recall a FSBO customer who lost more than $100,000 in their sale because they read somewhere to never sign a contract with anyone who doesn’t have a mortgage commitment. And as offers were squandered under that faulty belief, they kept lowering their price when they didn’t sell. When I asked why the many offers they received never went to contract, I was stunned. I then told him that no buyer in New York can get a mortgage commitment without a contract, he sold soon thereafter…for more than $150,000 below his original price, which was more than fair to begin with.
5. Brokers have more tools than the MLS. I appreciate the frustration of sellers who feel that brokers are overpaid for doing a little paperwork, uploading some data onto the MLS, and little else for their commission check. I wish it were that easy. When I put a listing on the MLS, the work is only beginning. One of the tools I employ is something called “reverse prospecting.” This function matches my listing with every other MLS subscriber with a matching client or saved search. This allows me to see around corners, often to the tune of dozens of matching buyers working with a realtor. The stereotype of agents being tech luddites is false. Even garden variety agents are immersed in digital solutions and AI more than we could have imagined even 5 years ago. I say this without diving deeper into SEO, targeted Internet marketing, predictive analytics, and so forth.
6. This is not the space for DIY. Hiring an expert is always good advice for matters with far lower stakes. And with apologies for sounding like a broken record, flying blind in the largest transaction of your life without a trusted advisor isn’t the formula for happiness. Qualifying prospective buyers, know what (and what not) to say when, understanding the market dynamic and optics of pricing correctly, and answering questions, to say nothing of due diligence, compliance, and disclosure requirements are all the tip of a very large iceberg.
7. Serious buyers are working with buyer agents. Buyers who approach FSBOs without an agent aren’t generally the cream of the crop. Today, buyer agents will walk buyers through a considerable process of prequalification, financing, buyer education, and much more. Serious buyers hire agents because they understand that they aren’t experts and need advice, advocacy, and expertise. Lone wolf buyers who avoid agents aren’t better educated and are seldom as qualified. And I’ll digress on due diligence as well: I’ve seen transactions go on for months before falling through because the buyer never verified the true tax figure or the compliance of improvement made without permits. It’s like the blind leading the blind.

I could go on, but the long and the short of it is that homes listed with a broker have superior exposure to the buying public, get more showings, more offers, and have far fewer transactions fall through because there’s a professional at quarterback, not a biased, unskilled amateur who can’t admit they bit off more than they could chew. For Sale by Owners, even if successful, may save a line item in the commission category but net far less in their bottom line.

The best anecdotal example of this was when the founder of a prominent FSBO website failed to sell on their own and ended up selling successfully- for more than their original price- when they hired an agent.

So why hasn’t technology enabled FSBO transactions to increase? Technology enhances the skills of the practitioner. If the practitioner is an expert who does this for a living, the results are awesome. If the practitioner is an amateur, that lack of skill is what’s enhanced, which doesn’t help the FSBO cause.