Allen Brothers Houston Real Estate

Pricing A FSBO To Save On Commission And Sell Faster

June 3rd, 2011 12:24 PM by AllenBrothers Realtors

 

In a typical FSBO transaction, the owner is selling without an agent to retain the 6% sales commission, and this sum, if applied to the asking price, will make their property the most lucrative deal in the region based on all market comparables. These properties all sold with the 6% commission included, so buyers will gravitate to this new lower $/sq. ft. investment in the same area and negotiations will be practically unnecessary. In fact, a common strategy for a FSBO owner is to split the saved commission with the buyer by cutting 3% from the comparative market value (CMV) of the property. The buyer saves 3%, the seller saves 3%, and everybody wins.

Many earnest investors will never even be aware that the FSBO exists; much less that it is 3% below the CMV of properties in the neighborhood.  The majority of investors who do locate the FSBO and make offers on it will have been deliberately looking for FSBOs. Historically, these buyers are looking for an exceptional deal, and for them this means automatically offering 6-10% less than the posted asking price. If the CMV of the home is $500,000, the owner has taken 3% off this price to save on commission ($485,000). The FSBO buyer then arrives with an automatic low-ball offer of 10% less ($436,500). FSBO sellers may then counter at full price or sometimes raise the asking price to compensate for the buyer’s low-balling. Usually, the FSBO buyer moves on because getting a bargain is more important to them than buying a home.

The irony is that many times FSBO sellers are so caught up in “saving” the commission that they lose thousands of dollars. They are stepping over a quarter to pick up a dime and then think they’ve come out ahead – while simultaneously doing all the work themselves just to get to that point of loss. Perhaps even more ironically these sellers unfortunately hurt the values of the surrounding homes by selling for less than the home was actually worth. All the area homes now have been hurt by that one comparable low FSBO sale. Instead of helping the neighbors, the FSBO seller hurts them all.

Posted in:General
Posted by AllenBrothers Realtors on June 3rd, 2011 12:24 PM

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