Working for the Enemy?

A Look at Four In-House FSBO Programs

June 1, 1998

With the proliferation of FSBO Web sites and the strong economy making more consumers think they can sell their homes on their own, brokers are scrambling to get a piece of the FSBO pie.

Bucking the industry impression that FSBO is a four-letter word, some full-service brokerages have recently started in-house programs to profit from the needs of the lone sellers and to position the company for the first crack at FSBOs who decide to list with a professional.

The programs are as varied as the people who run them, but Today’s REALTOR® found a few that seem to epitomize the trend toward FSBO-friendly brokerages.

Many Services, One Fee

FSBOs who drop $600 at Century 21-Coventry Real Estate, Sandy, Utah, get a lot for their money: a yard sign, a listing on the company's Web site, an MLS listing, all the forms they’ll need, a booklet on selling, and marketing and disclosure tips. For an additional 1 percent of the sales price, a practitioner will write the offer, review the documentation, and attend the closing.

What they don’t get are things like advertisements, caravan tour attention, or a practitioner's brain to pick.

“It’s about as close as FSBOs can get to having a real estate company on their side without having to pay the price,” says principal broker Steve Fairbanks.

During the program's first five months, about 30 FSBOs signed up. Two-thirds or so have closed or accepted offers. Four have moved up to a traditional listing agreement with Coventry (the FSBO program fees are prorated and applied against the eventual commission).

Contrary to Fairbanks’ predictions about whom the program would appeal to, most of the FSBOs come from upscale neighborhoods, with homes in the $250,000–$450,000 range. “It dawned on me,” he says, “that these owners have the most to save.” The program also attracts sellers who don’t have enough equity in their homes to cover traditional commissions. “For these sellers, the program's a godsend,” he says.

But every new idea has at least a few wrinkles. For example, Fairbanks tells of a time a FSBO negotiated a price with a buyer who appeared to be without representation. The buyer then returned with a salesperson who wanted a share of the commission. When the seller balked, the salesperson's broker complained to Fairbanks.

“It was a matter of miscommunication that probably wouldn't have happened under a traditional listing,” he concedes. Now the FSBO program includes contact cards that ask potential buyers whether they’re represented, so sellers know before settling on a price.

Despite such occasional glitches, “we’re not going to tell people they’re stupid for wanting to sell their houses by themselves,” says Fairbanks. “We want to offer them resources that will give them the best shot at success.”

A Controversial Precedent

Thomas Schueller, broker-owner of Buyer's Resource Bay Realty, Tampa, Fla., claims to be the first to broach the veil that once kept FSBO listings off MLSs. Taking advantage of changing state laws, he realized back in 1995 that by entering into an exclusive nonagency agreement with FSBOs, he could offer them access to the MLS without representing them in any way.

Money wasn't the motivating factor in opening up the MLS to FSBOs; Schueller did it “primarily to find out what properties weren’t on the MLS that our buyers should know about,” he says.

Then, as now, the company charged sellers a flat $250 to put their properties on the MLS. “We don’t offer advice or signs or brochures,” says Schueller, “just an MLS listing.”

Roughly 100 FSBOs use the service annually. About one-third wind up asking for a referral to a listing salesperson. If FSBOs use Schueller's company to buy their next house, the $250 MLS fee is deducted from the eventual commission.

The Commission Route

Until recently, FSBOs would go to Independent Brokers Realty, Naples, Fla., to rent yard signs ($45) and have brochures designed ($100). Finding this à la carte approach too labor intensive, owner Cathy Gallus dropped the program in January 1998 for one that FSBOs preferred, anyway: Help getting to the closing table for a reduced commission.

For 2 percent of the eventual sales price, the 12-salesperson office pulls out all stops, giving the seller yard signs, brochures, print ads, advice, an MLS listing—everything a traditional seller would get. The only catch is that the FSBO must agree to pay an additional 3 percent to the buyer's representative, if any.

In an area where 75 percent of home sales are through builders or FSBOs, the strategy has caught on. In the program's first six months, 40 sellers have enlisted in the program, with 15 making it to closing so far.

“Sellers love it because they get services they couldn't get on their own, and for a better-than-fair price,” Gallus says. “Salespeople love it because FSBOs are coming to them bearing commissions. I haven't heard one complaint yet.”

Not Everybody's Happy

It can’t be news to anyone that in-house FSBO programs have their dissenters. The fear is that giving away tools of the trade could render practitioners obsolete.

Far from hurting the profession, counters Fairbanks, “the practice broadens the services we offer, and if FSBOs choose later to list with a professional, the first person they’ll think of is the one who helped them when they tried to do it on their own.”

Schueller says he hears complaints mostly from buyer's agents who believe they end up doing the work of both listing and selling salespeople when the former are absent from the equation. “But it’s no different from working with FSBOs who aren’t on the MLS,” he points out. “Putting FSBOs on the MLS does nothing but help buyers and their representatives know what inventory is available.”

“Times are changing,” says Dan Connor, whose London Properties, Fresno, Calif., offers a cafeteria-type plan of FSBO services. “Brokers need to be innovative about how we address the evolving needs of consumers. People want to save money and know they’re receiving value. Helping them sell their own home is one way of doing both. They're happy, and we stay in business.”

The FSBO Program That Took Over a Company
Attorney and REALTOR® Kirk Wickersham found assisting FSBOs so profitable he eventually phased out his law practice and traditional real estate business.

His Anchorage, Alaska, company, The For Sale by Owner Assistance Program, does nothing but put selling and marketing tools and expertise into the hands of FSBOs. Wickersham also teaches other practitioners to do the same.

In 1997, 156 FSBOs paid $985 each to get a market analysis of their property, yard signs, open house signs, brochures, disclosure and transaction documents, and presentation and negotiating tips. An additional $198 buys a listing on Alaska's MLS.

He claims stunning results based on MLS Inc. Alaska figures: On average, his clients sell their homes in 29 days, compared with 64 for area practitioners; closing takes only 40 days, instead of the 56 when practitioners are involved; 72 percent of his clients make it to the closing table, whereas only 62 percent of practitioners’ listings do.

“That’s not a reflection of local practitioners’ skills,” he says. “It’s just that homeowners can be more aggressive in their marketing,” such as holding an open house seven days a week.

For about $1,000, practitioners can buy a home-study course in working with FSBOs and marketing their services, a consultation, and a license to use his program and materials.

To maintain professionalism, Wickersham insists that trainees be licensed and members of their local board of REALTORS®. So far, he says, 13 practitioners in 10 states have signed on.

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