Responding to FSBO Challenges

For Sale By Owner is a bad idea, but how do you convince FSBOs that you’re worth the commission? Here are some of their likely objections -- and your answers for countering them.


Whether they talk about it as “cutting out the middleman” or simply saving money on real estate agent commissions, in 2018 7% of home sales were For Sale By Owner (FSBO) transactions. This was a record low number, but still represents a significant portion of the market. How can you effectively approach FSBOs in your area and convince them that working with you makes more sense?

What follows are some common objections raised by FSBOs and the FSBO facts and figures you need to counter their often incorrect beliefs and narratives.

FSBO Belief 1. I know enough about the market to properly value my home.

You hear the conversation at every block party, soccer field, and PTA meeting: So-and-So just sold their house for [Fill in the Blank], an astronomical sum that no one was expecting. Based on this information, and on their own emotional belief in their home’s superiority, many of those handling FSBO properties price their house far above its value and with no regard for market realities.

Many of those stories are based on either bad information or on the initial offer price. They don't take into consideration repairs, seller help at closing, and other subsequent price adjustments that can make the net price considerably less than the rumor mill would suggest. In addition, these false pricing scenarios may not take into account updates, upgrades, and unique features that can differ from one house to another and impact price.

Of course, sometimes it works the other way around and FSBOs end up under-pricing their property or receiving a lower offer because the buyer knows there is no agent commission to pay. According to a 2018 study by the National Association of Realtors (NAR), FSBO homes sold for an average of $60,000 less than agent-assisted home sales.

FSBO Belief 2. I know enough people in the community to find a buyer.

Many FSBOs may be active in the community, in churches, or in professional or social organizations. Therefore, they operate under the assumption that all that they have to do is mention to their personal network that their home is for sale and buyers will beat a path to their door.

Alternatively, they may believe that friends and neighbors in the community will tell their friends and relatives about the home, providing a steady stream of potential buyers. This strategy, along with a For Sale sign in the yard to attract passing motorists, is all it will take to get the home sold.

In reality, of course, most people are more focused on their own personal concerns than with acting as free advertising for a friend or colleague who is selling their home. In fact, unless explicitly told that the FSBO is selling on their own, most people will assume that they are working with a qualified agent who is properly marketing their property on the MLS. Very few people will know any potential buyers for the property and fewer still will reach out to anyone on the FSBO’s behalf.

FSBO Belief 3. I know enough about real estate to handle the negotiation process.

The proliferation of home improvement and house hunting shows has made everyone believe that he or she is a real estate expert. Watching these shows -- where there is usually an offer that is either accepted as-is or countered once and accepted -- makes the complex process of real estate negotiation appear enviably simple.

In reality, real estate transactions can involve a huge number of contingencies, special requests, and other specific items, any of which can derail the initial offer and put an end to the negotiation. Things can also change during the contract period, creating the need for a new round of negotiations in order to keep the deal together.

What’s more, because FSBOs are personally invested in the outcome of the negotiation, they will often struggle to accurately assess offers, and may even be insulted by a low up-front offer or a request for changes or improvements. This type of emotional and personal response can undermine the negotiation process and keep the parties from ever reaching an agreement. This can be a major reason as to why there are problems with FSBO and why FSBO sales fail.

FSBO Belief 4. I work in another field which has familiarized me with contracts and legal language. That will be enough to properly evaluate paperwork.

While a homeowner may be familiar with contracts and language specific to his or her work, there is a great deal of highly specialized information and title work for closing pertaining to the offer and sale of properties. This information can change from state to state and from year to year as new rules and regulations go into effect.

In addition, fair housing laws and other rules governing the marketing of a home can land FSBOs in hot water if they fail to properly follow guidelines. These, too, can change from year to year and may be more or less restrictive depending on the market.

A basic knowledge of contracts or legal language based on a casual understanding will not protect homeowners from mistakes that can cost thousands of dollars in buyer compensation and legal fees. Even licensed real estate professionals carry errors and omissions insurance in order to protect themselves in the event of a mistake. The potential financial effect of even a small error can be devastating. A home sale is no place for guessing or for amateur legal analysis.

FSBO Belief 5. Real estate agents are just out to gouge their clients for the highest possible commission. They all work together against their clients and for their own interests.

Many FSBOs are motivated by their belief that the real estate industry is one big racket and that agents work together in order to drive prices up or down according to their own personal interests. They believe that licensed real estate agents are somehow less trustworthy than a buyer off the street, whose intentions and tactics could potentially create legal and financial havoc around their home sale.

At the center of your discussion with a potential client who is currently a FSBO should be an explanation of your legally-mandated fiduciary duty to your clients. Ensure that they understand that your only faithful service is to your client and that you can provide no information, and accept no offer, without their approval. Reassure them that their best interest is at the very center of everything you say and do as their representative.

Understanding the fears and concerns that drive FSBOs can put you in a better position to counter their objections and challenge their false beliefs. Go into your next listing appointment armed with the facts -- about your intentions, your market, and your expertise -- in order to help them understand the value you bring to the equation.

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