I recently had a very close encounter with a FSBO here in Mammoth. The experience reaffirmed some of the old axioms of the real estate business and specifically sellers representing themselves. This seller approached and solicited numerous local agents and brokers and made an earnest attempt to sell his property by himself. He was even offering to pay the agent representing a buyer a fair commission. But I ended up being the lucky one, I think. It may have been a first for me. Mammoth Lakes, being a primarily second home marketplace, doesn’t see too many FSBOs.
Somewhere along my career I learned the lesson of “a fool for a client.” The phrase is most often attributed to Abraham Lincoln. Lincoln was a lawyer before he was ever President and the complete phrase is “He who represents himself has a fool for a client.” It is largely considered a psychological issue, but it is a practical one too. It certainly pertains to fields like the law, medicine and accounting, but can and should be applied to real estate too.
I met Mr. FSBO a last Fall when he came into my office and introduced himself and gave me some of his flyers. We chatted about the market, and skiing, and his property. I gave him my business card and I told him to keep me in his email loop. He said he was going to make the rounds to all of the local real estate offices, and I’m sure he did. A couple of days later I received an email from him that he had reduced the (his) asking price by $20,000. I got the sense that the local real estate agents beat him up on his asking price, and he listened.
Mr. FSBO proceeded to “market” his property; he placed large hardware store-type For Sale signs blazoned with his phone number on his deck and in the hallway. Now this property is located in one of Mammoth’s quality condo hotel properties. This also happens to be one of the premier units in the project. Mr. FSBO thought plastering crappy For Sale signs all over the property in a more-than-tacky manner including duct taping his flyer to the front door was effective marketing. Why the Homeowners Association even allowed this is beyond me. No Realtor would ever be allowed to do anything like this. But I got the strong impression the HOA couldn’t wait for the unit to sell and say adios to this owner.
Mr. FSBO held diligent open houses during the Christmas/New Years holiday and other winter weekends. He apparently had plenty of looky-loo traffic. And apparently no serious buyers. Meanwhile, I met a qualified buyer who had been renting in the project and was looking for a nice unit. Soon enough, Mr. FSBO emailed me and said he was giving up doing it himself. I told him I had an buyer that might be interested. And we ended up putting a transaction together.
So here are some of the classic mistakes Mr. FSBO made, and we can all learn from them;
1.) Like so many sellers, he had no clue how to prepare the property for the market. That is a critical role for the listing agent; an unbiased (and experienced) set of eyes looking at the property the same way a potential buyer will. It is one of the “fool for a client” moments. Sellers often can’t see their own junk. And these are condo hotel units, so it is especially important. Buyers want to walk in and see the property the way it would appear upon walking into a paid rental—clean and inviting and clutter free. Not full of the owners personal skis, jackets, boots, knick knacks, etc.(I can even imagine Mr. FSBO’s dirty dishes in the sink and crumbs on the counters during open house). Most sellers get my “de-crappify” lecture prior to bringing a property to the market. First impressions are lasting ones. Very few sellers get it. You’re planning on moving anyway, so get moving. Everything that isn’t necessary should be gone. This is a critical part of bringing a new listing to the market. And the junky For Sale signs really didn’t help the appearance either. This isn’t a swap meet.
2.) The best negotiating does not happen in a vacuum. The best negotiating always happens when experienced people can discuss issues and strategy. And have the greatest amount of information. That is the value of a true real estate brokerage. A FSBO often operates in a vacuum, or even worse they are operating in a state of heavy prejudice. Every seller has “the best” property in the best condition. This is classic “foolish” psychology. Mr. FSBO was even trying to establish a higher value because a “$900 bedspread” that was included with the property. Conversely, I told him the furniture was “trash” and he was insulted. And the carpet (15 years old) isn’t much better. But he never retorted that the unit is probably the second best unit in the project (it is). He missed plenty of opportunities to negotiate his position in a positive way. The buyer and I collaborated to negotiate the best deal.
When negotiating it is critical to hammer issues and not people and personalities. Most neophytes don’t understand this. Mr. FSBO wanted to take the negotiations personally. Ultimately, in taking things personally, he exposed his weaknesses. A smart listing agent would never have exposed those weaknesses. And once we had a “meeting of the minds” he told me “you’ll earn your commission.” I did earn it, but gladly. But I was forewarned.
3.) More foolishness; Mr. FSBO really thought somebody would purchase his property without the normal due diligence of a real estate transaction. The seller was fully aware of a leaking faucet and a broken thermostat but didn’t choose to repair them before marketing or before an inspection. He quote “didn’t see the need.” Along with de-cluttering a property prior to marketing (see part 1), making miscellaneous repairs is important. Smart sellers want their properties to be “defensible” against any claims that there is anything wrong, or could be wrong. Buyers are entitled to inspections. No property is perfect, and good inspectors will kind all sorts of things. It was the “I knew that” items that weren’t disclosed. Unless buyers are standing in line to purchase the property, all this does is allow the buyer to re-enter negotiations and grind the price some more. Or at least ask for concessions. The non-repair or nondisclosure also makes the buyer look even more closely at the property. Sometimes the seller’s attitude (not the person) does become an issue. It did in this transaction, and he didn’t have anybody to rein him in.
4.) Ultimately, Mr. FSBO had difficulty controlling his emotions. Real estate transactions can be full of emotions. Mr. FSBO wanted the control and (perceived) savings of being a for-sale-by-owner but he wasn’t emotionally prepared. Again, here’s another role of the professional agent; smoothing out the emotions of the transaction’s participants. As the transaction proceeded he became increasingly bitter about everything; and for whatever reason his “new job” was one. The real problem was that he had convinced himself that he sold too low (and it was my fault, but I wasn’t representing him). He purchased the property in 2009 and was selling for slightly less than he paid for it. I guess his agent back then told him that the property would only go up in value. Or he forgot about all of the priceless times he was able to ski with his daughters before they went off to college.
Later in the transaction I also sensed that Mr. FSBO was talking to and seeking advice from other agents in Mammoth. Maybe he wasn’t such a fool, or maybe a bigger fool. I eventually had confirmation. He probably thought he could “string them along” with the hopes of a commission down the line if this transaction fell apart. But it confirms that he wasn’t independently secure enough to complete the deal. He probably wasn’t aware that those agents wouldn’t give him advice to his best benefit, only to their own. I’ve supervised dozens of agents over the years, I know.
There are other things; a FSBO operates without the refined real estate documents we use here in California. They are proprietary to Realtors and are result of great effort and experience by our Associations. They are designed to keep everybody out of legal trouble. And we are taught how to use them properly. They just aren’t “a bunch of boilerplate.” And they are ever changing to the whims of the market and laws. The other thing a FSBO loses out on is the online exposure offered by most brokers. Once a property listing is placed in the local MLS it is broadcast to a myriad of websites (from Zillow to realtor.com to remax-mammoth.com) that all have millions of viewers. “All around the world” as I like to say. This is where the buyers are looking. It is invaluable exposure.
For someone who didn’t value the role and expense of a quality real estate agent, Mr. FSBO sure became the epitome of why most people need our service and expertise. I’m sure he thinks some nonsense; like I took advantage of him, or I didn’t “play fair.” But I think I was completely professional. I stuck to the issues and never concerned myself with the personality or personal issues.
The ultimate satisfaction and the good news for Mammoth is that the buyer and new owner is a wonderful gentleman; successful businessman and family man. You can tell a lot about people when you work with them on a real estate transaction. He’s a class act. He and his family plan to have years of enjoyment and be part of the Mammoth experience.