Buyer Beware FSBO

Buyer Beware The For Sale By Owner!

Provided by Jay Burnham, VP
Coldwell Banker Residential Brokerage

Written By Blanche Evans
Agent News

Recent adventures in home buying have led me to wonder what other home buyers go through when they try to deal on a For-Sale-by-Owner home. Having just had a taste of this myself, I can appreciate the professionalism of Realtors all the more by comparison. Here is what I encountered when trying to deal with two different FSBOs.

Dallas, where I live, is currently in the tightest market in decades. Homes are being snapped up at phenomenal rates, often the same day they are listed on the MLS, and many at full asking price. Some areas have less than two months' inventory of homes on hand, in contrast to 120 days less than two years ago. Agents are testifying to bidding wars on desirable properties, in which some homes have multiple contracts for consideration, some at well over listing price.

So as a buyer, I knew I had to use all means necessary to find the move-up home of my dreams. I got myself prequalified, narrowed the neighborhoods I was interested in, and secured the services of a brother/sister agent team. I surfed the Internet daily and drove to my favorite neighborhoods looking for any new activity. And, I'm now ashamed to say, I even watched for FSBOs.

One day, I noticed a curious new sign in the yard of an attractive property. The owner had written: "Coming soon. For Sale by Owner," plus the phone number. When I called, the owner told me the home wasn't on the market yet because the family was waiting for school to get out, and in fact, they didn't have a set price yet. I told him that the home was already on the market the moment he put a sign in the yard, and that should we agree on a price, the contract could be written in such a way that he would not have to move before he was ready. In fact, I told him, buyers interested in his home might easily agree to his closing date, since they might have children, too. Buyers like me.

Already, I was getting clues as to this seller's egocentric, I'm-the-only-one attitude and his ineptitude at putting a house up for sale in advance, as if it were the trailer for a blockbuster movie. He obviously didn't know that buyers cruising for FSBOs would all see his home in a matter of days, and his marketing edge would be "kaput" by the time he finally put his home on the market.

Knowing this, I confidently asked the seller to call me, reminding him that I was prequalified and ready to write a contract. When he did call two days later, I was shocked to find that he was pricing the home $70,000 over comparables in the neighborhood. When I asked him whether he had seen the neighborhood comparables, he quoted homes that were in the vicinity -- but hardly "comparables" -- and ignored smaller homes for sale across the street from his own. Since he had enclosed a garage to gain more space, he felt justified in manipulating the square footage in his favor. I told him about a home similar to his, located only one street over, that had just closed at considerably less than what he was asking. But he was unaffected.

Like many owners who can be unreasonable about seeing their own property in its true light, he honestly believed his home was worth 25 percent more than others on the same street, same block, and immediate neighborhood.

Disappointed, I told a friend of mine about the home and how much I would like to have it. Coincidentally, she knew not only the home, but the family, as well. She told me that when the family was considering putting the home on the market, the husband asked her what she thought he could get for it. (To put this in perspective, my friend is a flight attendant, not a Realtor.) She named a price somewhat more in line with what I thought the home was worth, but he scoffed at that. He then asked her what she paid for her house, which is more than a mile away in a completely different neighborhood, with homes of a different age and specifications. Then he said if her house brought that price, then he felt confident he could get his price. So he tacked on another $20,000 and put out his teaser sign.

Although I was planning to pay my agents to represent me should this transaction ever come to fruition, it was clear that it never would with such an unreasonable seller. So all three of us kept looking, and the seller lost a preapproved, qualified, ready-to-close buyer offering fair market value.

I thought not all FSBOs will be like him, so I felt emboldened to call upon another one whom I found a couple of days later. The home's price, again, was higher than the market, this time by about 15 percent. When I was able to tour the home, I found it to be neat and clean but disastrously in need of updates. The updates would put the home well out of my means, and there was little likelihood that the updates could be recouped at resale. Although this seller was willing to come down somewhat, he could not offer me comparables to look at or any other justification for his price except that it was a one-owner, well-maintained home (his mother's). Again, comparables of the neighborhood showed that updates had been performed on many of the other properties in the area, and the home was clearly overpriced.

It was obvious that the FSBOs wanted to save on agents' selling commissions, but they also clearly had no intention of passing any of the savings on to the buyer. Also, their inflated prices seemed to be an attempt to tack on selling commissions for themselves but without offering any service to the buyer. My question is: Why would a buyer want to have poor service and pay more for it? After all, buyers don't pay Realtors' commissions, but they do pay for the service in terms of higher purchase prices.

I confess that I had always been slightly suspicious whenever I heard a Realtor put down FSBOs. I thought it was because of professional ego, that a layperson could sell a home as easily as they could. Now I feel different. I didn't have a bad experience with a Realtor, but FSBOs definitely had put a bad taste in my mouth over the entire home-buying experience.

Less than two days later, I put a contract on the home of my dreams (of which there are more than I thought) and have never looked back. My Realtor team has performed beautifully, helping me at every turn. The lesson I learned is one I won't soon forget: There is no substitute for professionalism. And you can take that to the bank.

JAY BURNHAM, VP
Coldwell Banker Residential Brokerage
PREVIEWS International® Property Specialist
54 Dodge Street
Beverly, MA 01915
978.233.2828

Designations Earned: CRB, CRS, GRI, RECS, SRES