Why FSBO Sellers Don’t Sell for Less

Why FSBO Sellers Don’t Sell for Less

Sellers choose the FSBO route for a variety of reasons, but one of the most common motivations is to save on real estate agent commissions. However, the notion that this translates into a lower price for the buyer is misguided. Here's why:

1. Sellers Aren’t Losing Money; They’re Keeping More
   Sellers who go the FSBO route aren't necessarily discounting the home price to compensate for the lack of commission. Instead, they're keeping the portion of the sale price that would have gone to an agent. In fact, many FSBO sellers don’t reduce the price at all; they simply pocket the commission (which typically ranges from 5% to 6%). So, in many cases, the sale price remains the same as it would with an agent.

2. The Seller's Perspective:
   Selling a home is time-consuming and complex. Even with the goal of saving money, sellers have to invest significant time, effort, and expertise into tasks that a seasoned agent usually handles. These include:

   • Market Research: Sellers need to understand the local market and comparable sales (CMA reports) to price their property correctly.
   • Marketing & Exposure: Effective marketing includes online listings (MLS exposure, which FSBOs typically lack), staging, professional photography, flyers, social media campaigns, and the like.
   • Showings & Open Houses: FSBO sellers handle every showing themselves, which means they have to vet potential buyers, maintain the property in a constantly “showable” state, and be available for last-minute appointments.
   • Negotiations & Contracts: FSBO sellers must navigate the often-complex negotiation process, deal with counteroffers, and eventually ensure they have the correct legal documentation to close the deal (sometimes hiring an attorney).

3. Why Would FSBO Sellers Cut the Price for a Buyer?
   Sellers don't want to lower their price unless they have to. Most sellers going the FSBO route do so to avoid paying commission fees to an agent, which they view as an expense to avoid. If they were willing to sell at a lower price, why would they take on the added stress, risks, and financial burden of managing everything themselves? The seller's goal is generally not to lose money but rather to retain more from the sale by cutting out agent fees.

The Buyer’s Perspective

Buyers often believe they’re getting a better deal by bypassing agents and going straight to the seller, based on the assumption that without a commission, the seller will lower the price. However, in reality, many FSBO buyers still end up paying the same price or more for the home. Here’s why:

1. Market Pricing:
   Sellers price their homes based on the market value, not the commission they're saving by selling without an agent. The sale price is determined by local market trends, comparable properties, and the buyer's willingness to negotiate.

2. No Built-in Negotiation Advantage:
   Buyers might hope to negotiate down the price by claiming the commission is being saved. But sellers rarely lower the price for this reason. Buyers and sellers still negotiate the price, but the absence of an agent doesn’t automatically lead to a discount. In fact, FSBO sellers may be less inclined to negotiate because they feel they're already saving by not paying an agent’s fee.

3. Higher Risk and Uncertainty:
   FSBOs often lack the benefit of professional guidance during the process, and the lack of an experienced agent representing the buyer increases the buyer's risk. For example, if issues with the home arise during inspection, a buyer without an agent might not know how to best handle negotiations or ensure repairs are done correctly. They may also miss red flags in the home-buying process, such as zoning issues or problems with title.

4. No MLS Access for FSBO Listings:
   FSBO listings often don’t have access to the Multiple Listing Service (MLS), a critical tool for selling homes in many markets. MLS exposure typically leads to greater visibility and competitive offers. Without MLS access, FSBO listings tend to attract a smaller pool of buyers who may not be as knowledgeable or committed.

The Bottom Line

• Sellers who go FSBO are typically trying to keep more money from the sale, not sell for less.
• Buyers think they’re getting a deal by negotiating with the owner directly, but often they pay the same or more for the property, all while missing out on the advantages of having a skilled agent on their side.
• The most likely scenario is that many FSBOs end up involving a real estate agent anyway, either during negotiations or to finalize the sale. In fact, around 33% of FSBOs end up listing with an agent during the selling process because of the complexity, negotiations, and the need for professional advice.

Why Buyers Should Be Cautious with FSBOs:

1. Lack of Representation: Without an agent, buyers may miss out on important insights or market intelligence and may not know how to effectively negotiate terms or pricing.
2. Potential for Overpaying: Without proper market analysis, a buyer could end up paying too much for a FSBO property, thinking they’re getting a deal, but the price may still be set at market value.
3. Legal and Transactional Risks: FSBOs often require more oversight. Missing out on contractual details or failing to properly negotiate terms could lead to future legal or financial issues for the buyer.

Ultimately, agents are trained professionals who add value beyond just their commission—especially in terms of pricing, marketing, contract negotiation, and transaction management.