Why FSBO's Don't Get Full Market Value
In the fall of 2005, I had a couple of properties I no longer wanted to own. I decided I could list them with my broker, or I could have a little fun and try to sell them myself as an unrepresented seller -- a FSBO, as is known in popular jargon.
I opted to become a FSBO for three months. Just for fun, you understand.
Well, the fun went out of it real, real, real fast. First off, I never did successfully sell either of the properties as a FSBO seller. But I sure learned a lot about the problems FSBO sellers must overcome when working with buyers who don't have real estate agents.
I found out that there are some pretty sophisticated, professional buyers out there -- and they have no mercy when it comes to buying property.
These buyers often use two pretty harmless sounding techniques to get sellers to lower the price. I think they all went to the same "home buying seminar". I call the first technique the "yes but" approach, and the other I call the "poor-old-boy-sob-story" ploy.
The "yes but" approach is used after the buyer has walked through the property and given it a nice inspection. He may even engage you in friendly conversation to build rapport. Eventually he will ask the price.
"My asking price is $225,000," I'd say.
"Yes, but what will you take for it?" (It's funny how these buyers can draw out that word "take". It becomes "taaaaaaaaaaakke for it". They must teach that inflection at the seminar.)
Well, this is just an attempt to get you, as the seller, to bid against yourself. The buyer has not even made an offer and the seller is already being asked to lower the price. The seller is bidding down his own price! Don't fall into that trap.
Here's the second ploy used by buyers. Let's say that you, as the seller, manage to avoid the first attempt by the buyer to get you to bid against yourself. Beware of the "poor-old-boy-sob-story" approach. Essentially, the buyer starts off by telling you how much they like your property and how much they want to live in your neighborhood and how much they love what you've done to update the kitchen and blah, blah, blah. All good things. All things to make you feel warm and fuzzy toward them. All things to make you want to sell the house to these nice, friendly folks.
Beware! Here it comes.
The next thing the buyer will say will always -- repeat, always -- begin with the words "but" or "there's". It never fails. It will be something like this ... "blah, blah, blah but (insert sob story), so we need to know your rock bottom price." Or, "... blah, blah, blah there's just one thing (insert sob story), so we need to know the lowest you'll take."
If you, as a seller, say anything other than your original asking price you are likely going to sell your house for less than you want, and maybe less than it's true market value. FSBO sellers seem to fall into these two traps with some degree of regularity. Weak negotiating skills are one of the reasons why FSBO's end up selling their propery for an average of 16% less than comparable properties sold by a real estate agent.
So, here's a tip: When negotiating with buyers who do not have a real estate agent -- and even those who do in some cases -- make sure the buyer presents an offer in writing that fully spells out the amount of money they are offering and all the other terms under which they are willing to buy your property. Period. Until then, don't budge a dime off your original asking price. Don't even indicate that you're willing to negotiate on price.
Remember, when it comes to negotiating price, he who speaks first looses.
I opted to become a FSBO for three months. Just for fun, you understand.
Well, the fun went out of it real, real, real fast. First off, I never did successfully sell either of the properties as a FSBO seller. But I sure learned a lot about the problems FSBO sellers must overcome when working with buyers who don't have real estate agents.
I found out that there are some pretty sophisticated, professional buyers out there -- and they have no mercy when it comes to buying property.
These buyers often use two pretty harmless sounding techniques to get sellers to lower the price. I think they all went to the same "home buying seminar". I call the first technique the "yes but" approach, and the other I call the "poor-old-boy-sob-story" ploy.
The "yes but" approach is used after the buyer has walked through the property and given it a nice inspection. He may even engage you in friendly conversation to build rapport. Eventually he will ask the price.
"My asking price is $225,000," I'd say.
"Yes, but what will you take for it?" (It's funny how these buyers can draw out that word "take". It becomes "taaaaaaaaaaakke for it". They must teach that inflection at the seminar.)
Well, this is just an attempt to get you, as the seller, to bid against yourself. The buyer has not even made an offer and the seller is already being asked to lower the price. The seller is bidding down his own price! Don't fall into that trap.
Here's the second ploy used by buyers. Let's say that you, as the seller, manage to avoid the first attempt by the buyer to get you to bid against yourself. Beware of the "poor-old-boy-sob-story" approach. Essentially, the buyer starts off by telling you how much they like your property and how much they want to live in your neighborhood and how much they love what you've done to update the kitchen and blah, blah, blah. All good things. All things to make you feel warm and fuzzy toward them. All things to make you want to sell the house to these nice, friendly folks.
Beware! Here it comes.
The next thing the buyer will say will always -- repeat, always -- begin with the words "but" or "there's". It never fails. It will be something like this ... "blah, blah, blah but (insert sob story), so we need to know your rock bottom price." Or, "... blah, blah, blah there's just one thing (insert sob story), so we need to know the lowest you'll take."
If you, as a seller, say anything other than your original asking price you are likely going to sell your house for less than you want, and maybe less than it's true market value. FSBO sellers seem to fall into these two traps with some degree of regularity. Weak negotiating skills are one of the reasons why FSBO's end up selling their propery for an average of 16% less than comparable properties sold by a real estate agent.
So, here's a tip: When negotiating with buyers who do not have a real estate agent -- and even those who do in some cases -- make sure the buyer presents an offer in writing that fully spells out the amount of money they are offering and all the other terms under which they are willing to buy your property. Period. Until then, don't budge a dime off your original asking price. Don't even indicate that you're willing to negotiate on price.
Remember, when it comes to negotiating price, he who speaks first looses.
-30-
posted by Terry Ward at 8:24 AM
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