Offer real estate incentives without going FSBO

REThink Real Estate

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Sep. 22, 2011

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REThink Real Estate

Tara-Nicholle Nelson
Inman News™

Q: We have a dilemma. Should we "FSBO" our home and give an $8,000 credit to the buyers for closing and whatever else their lender will allow, plus offer 3 percent to the buyers' broker? Or should we list our home with an agent/broker for the 6 percent commission and forgo any incentives to help the buyer? We noticed that the $8,000 credit worked well last year and thought it might help us sell.

A: I understand why you're stuck! If you've read many of my columns, you know that I'm generally pretty anti-FSBO (for sale by owner), primarily because I believe FSBO homes don't get marketed nearly as well as homes listed for sale by an experienced, local agent.

Often, the money saved on commissions is an illusion, because the home doesn't sell at all or sells for less than it might have had it been represented by a strong local broker or agent. (This is not the case 100 percent of the time, mind you, but it is the case more often than not with FSBO properties.)

On the other hand, I'm very pro-incentives for buyers, especially in a tough-to-sell market climate like today's. There are very few things that are totally within a seller's control these days, and it's tough to differentiate your home from all the others that are sitting on the market.

But offering a strong buyer's incentive like a closing-cost credit has been proven time and time again to do just that: Make a home stand out against other homes at the same price point with the same features, increasing the likelihood that it sells.

So, to the extent that the only way you can offer a strong buyer's incentive is to go FSBO, that does create a big conflict. My gut reaction, though, is to encourage you to avoid taking such an all-or-nothing point of view, which might require you to revisit some of your assumptions.

You don't say what your home will be priced at, so I can't do complete math here to determine, for example, whether the 3 percent you would hope to save by going FSBO is truly equivalent to the $8,000 you want to offer buyers.

But I do know that many great listing agents in many areas of the country list homes for a total 5 percent commission, not 6 percent, and I know that commissions are negotiable everywhere.

I'd love to see you talk with agents who would consider listing your home at a lower commission level, so that you can offer some cash to the buyer without forgoing the marketing, contract and negotiations, and transaction-facilitating benefits of having your own broker or agent.

These listing brokers may also have other insights and ideas about how to effectively distinguish your home from the competition in this market, like offering a small incentive to buyers' brokers, which is another less costly, proven, effective strategy that gets homes shown and, thus, sold in a flooded market.

I want to urge you to be open to these sorts of creative strategies, even though you have seen the effects the $8,000 homebuyer credit had on buyers when it was offered by the federal government. Your credit, even if it is at that $8,000 range, has some key inherent differences from that governmental credit.

Because that $8,000 was a blanket credit that would benefit buyers to whom it applied no matter what home they bought or where it was located, it actually pulled would-be buyers into the market sooner than they might otherwise have purchased a home.

Because your credit or incentive will apply only to your home, it will not have the same power to make buyers buy sooner who would otherwise be waiting and still saving; rather, it will simply differentiate your home compared to similar homes at the same price point in the eyes of the relatively small number of buyers who are already actively house hunting in your area.

The fact is, most buyers who are qualified and urgently interested in buying homes today are represented by an agent. These are the buyers you may miss as a FSBO, even if you do offer a buyer's broker commission. (Many buyer's brokers are hesitant to work with FSBOs, because it can create much extra work for them.)

If you do decide to go the FSBO route, it is essential that you at the very least retain a limited-service broker or MLS listing service, which will ensure your property is listed for sale on your area's multiple listing service.

Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

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