Profiting From For Sale By Owners

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1 Profiting From For Sale By Owners If you are going to successfully market to FSBOs, it is imperative that you demonstrate patience and restraint in your interactions. 210 Barton Spring Road Suite 275 Austin, TX

2 Profiting From For Sale By Owners At some point in every agent s career, they will prospect for sale by owners (FSBOs). Ninety percent of agents will abandon FSBOs due to unexpected low conversion rates and frustration. It only takes a few FSBOs to rudely tell you they are not interested, then to see a competitors sign is in their yard a week later to realize these leads require different rules. Most agents do not anticipate the amount of patience and resiliency required to successfully convert FSBOs. However, if you adopt the right mindset and learn the proper techniques to prospect FSBOs, you can capitalize on this highly-desirable market and significantly increase your business. The FSBO MINDSET To successfully market to FSBOs, it is imperative that you demonstrate patience and resiliency in your approach. Appreciate their mindset by taking a walk in their shoes: As a homeowner, you have decided to sell your home yourself. You reason that it s not that difficult to sell your home or you desire to save thousand of dollars in commissions. You invest a few thousand dollars fixing up your property; perhaps new paint or landscaping. You visit your local home improvement store and for a few hundred more you purchase a FSBO website and yard sign kit. You run a newspaper ad in the Sunday real estate section. You ve spent the time to stage your home and take dozens of pictures. You ve spent dozens of hours and thousands of dollars on this project. Your ad hits. Fifteen agents call you before 10AM. They all tell you they are taking a survey or they have a buyer for you. They immediately segue into asking you for your listing. After having just spent a significant amount of time and money preparing your home to sell yourself you become annoyed that full-service real estate agents are calling you. A likely scenario when agents call you: You politely say no to the first agent. You tell the second agent if you wanted a real estate agent you would have called one. You begin to feel aggravated with the third agent. You become downright angry with the fourth agent. The Agent MINDSET You ve got a list of FSBOs. You ve put yourself in a positive mindset; perhaps you ve said some affirmations and role played your script. You firmly believe, and accurately so, that you are helping the FSBO by increasing their net take home money. You make your first call. The odds are the FSBO reacts negatively. Well, why wouldn t they? If you put yourself in their mindset, you realize if they wanted a real estate agent they would have called one. After all, they want to see if their advertising and hard work pays off. Since you were treated poorly, your mindset goes south. After several failed attempts, you decide prospecting FSBOs is not for you. Seasoned agents use the FSBOs mindset to their advantage. They know the seller is going to be initially resistant; so they expect a negative reaction. They know they must first earn the FSBOs trust; so they build a relationship. They know the FSBOs resistance lowers over time, so they are persistent.

3 Points Of Differentiation: Know Your Facts The truth is that a home listed by a full-service agent nets more money for the seller than if they sell it themselves. Conveying the facts assists you in building trust with the FSBO and inspires them to make a better decision. By having a firm grasp on the following facts, you will be able to handle objections confidently. According to the 2008 NAR Profile of Home Buyers and Sellers: A home listed FSBO sells for 27.5% less than if listed with a full-service agent. The average FSBO home sold for $153,000 compared to $211,000 for agent-assisted homes. A home listed FSBO takes three times as long to sell. 86% of homebuyers found their home through a full-service real estate agent. 50% of the sellers who successful listed FSBO said they would not do it again. In order of difficulty, the most challenging tasks were: 1. Selling within the planned length of time 2. Getting the right price 3. Preparing/fixing up home for sale 4. Understanding and performing paperwork 5. Having enough time to devote to all aspects of the sale Additional reasons FSBOs will not net as much money on their home sale or be as effective as a professional real estate agent are: FSBOs attract bargain hunters and investors who are highly skilled negotiators. Most agents will not show FSBO homes, limiting the FSBO s exposure. 33% of FSBOs sell to a referral. Homebuyers who are not familiar with the FSBO do not feel secure in purchasing homes from owners. Agents have up to 1 million dollars in error and omissions insurance, not available to FSBOs. This insurance protects the seller s assets for years after the sale. FSBOs are not able to screen or prequalify buyers. They do not know who is coming into their house and may present a potential danger to their family. Identifying The FSBOs Personality Increases Your Conversion Rate If you can identify the personality of your prospect and adapt your presentation to fit their personality, you have a greater chance at converting the lead. This approach generates greater results versus approaching all FSBOs the same. Four archetypal personalities: 1. Analytical: Not physically demonstrative. Slow to make decisions and requires proof and details to substantiate claims. Appears to be quiet and in control. 2. Dominant: Not physically demonstrative. Quick to make decisions, controlling, concerned with the bottom line. Appears to be hurried. 3. Likeable: Physically demonstrative. Agreeable, team player, empathetic. Appears to be easy going. 4. Expressive: Very physically demonstrative. Outspoken, animated, and constantly physically moving. Desires to be the center of attention. Appears to be multi-tasking. Of these four personalities, the vast majority of FSBOs are analytical with the remainder being dominant. Analytical types possess a primary motivation to save money. They are wrong. Statistics prove that homes sell for 27.5% more if listed by an full serviced agent, so even after paying your commission the seller nets more money.

4 Dominant types believe they can sell their own home easily. They do not understand or appreciate the work that goes into a home sale, from listing to closing. Selling a home is not just about marketing the property, holding the sale together after acceptance is more challenging than ever. The analytical FSBO is going to require that you show them physical evidence of why you will increase their net on their home sale. They are likely not going to list with you immediately as they are slow to make decisions, so you are going to have to exercise some patience. The dominant FSBO believes they can easily sell their own home; they also possess a secondary motivation of saving money. They likely made the decision to list FSBO as an experiment to see if their home would sell on its own. Dominant personalities represent the listings you may be able to obtain on the initial meeting or early in the process. Properly Gauging and Increasing the FSBO s Motivation Whether you sell widgets or homes, all successful salespeople are efficient. Consider the efficiency model: Efficiency = Effectiveness/Economics Efficiency is the key element to your real estate success. If you list a home with a highly motivated seller and price it right, you likely will sell it quickly with minimal marketing dollars and time invested. Conversely, if you list a home with an unmotivated seller and price it too high, you will wish you had not even taken the listing. You may have either spent considerably more money on your marketing or time pacifying the seller relative to your net commissions, or simply never sold the listing. You must properly gauge the FSBO s motivation so you do not become susceptible to becoming inefficient. To properly gauge the prospect s motivation you have to ask the right questions. Saving money is the primary motivation with an analytical FSBO. So you must address return on investment in a quantifiable way. How can I exceed the FSBO s expectations on meeting their needs? Possessing the belief that the FSBO is capable of selling their home themselves is the primary motivation of the dominant personality. So you must expose the challenges of selling a home to them without belittling. What problem is the FSBO trying to solve? Why would hiring me versus going alone or hiring my competition benefit the FSBO? The scripts provided in the Arch FSBO module, will assist you in specifically addressing the above motivations. Because the prospects motivations are different, SCRIPT II branches to emphasize different values. The analytical script provides you with proof to convey to the FSBO concerning why they will net more money on their home sale if they list with you. The dominant script provides you with solutions to common challenges faced by the dominant FSBO. The quicker you increase the FSBO s motivation and earn their trust, the sooner you will be able to obtain their listing. When evaluating the FSBO s motivation, consider the following model: Motivation = Attention + Relevance + Confidence + Satisfaction Attention: in the first thirty seconds that you are addressing the FSBO, you need to capture and sustain their attention. Relevance: once you have obtained the FSBO s attention, the FSBO is going to wonder how your message pertains to their interests and goals.

5 Confidence: the FSBO has to be confident that you can complete the task. They understand that success is not a guarantee, but they must believe you are up to the challenge. Satisfaction: if the outcome of what you say is consistent with or exceeds what the prospect expects, they will be satisfied and list with you. A Step-by-Step Process to Converting FSBOs into Listings There is no magic pill to converting FSBOs. Some FSBO strategies instruct agents to simply call the FSBO one time, the moment their advertising comes out, with the belief that the first agent to call the prospect has the best chance to earn the listing. The approach is to coerce the FSBO into a decision to list with the agent on the first call; if the FSBO does not list immediately, the agent is to disregard the lead and move on down the list. This strategy incorrectly assumes that the FSBO lacks sufficient motivation and is a waste of any additional time or effort. After consulting with hundreds of agents who have used this method, it s clear that this method, for most agents, does not produce results. The agents we interviewed who have used this method report that they converted one FSBO out of twenty. According to the NAR, over 72% of FSBOs will eventually list with a full-service agent. So why be satisfied with 5% of the market share? To increase your conversion rate embrace a multi-step system. Converting the FSBO in 5 Steps or Less: 1. Identify FSBOs in your target area and/or supplement your FSBO list. 2. Call or knock on the door of the FSBOs. Use SCRIPT I to identify their personality and gauge/increase their motivation. Close for a preview appointment. Note: The NAR says FSBOs listed on the National Do Not Call (DNC) List are protected from telephone solicitation unless you have a buyer interested in their property. The Arch FSBO service will automatically query the FSBOs against the national DNC list. If you desire a FSBO listing, but it is listed on the DNC, it is advisable to visit in person. 3. If you do not obtain a preview or listing appointment, subdivide your FSBO list into those who you feel that you will eventually obtain an appointment with and discard the rest. 4. Call or visit the FSBOs in two days using SCRIPT II. Close for a listing appointment. 5. If you do not obtain a listing appointment, call or visit the FSBO using SCRIPT III in two days. If you are successful with SCRIPT III, you have a very powerful reason to maintain contact every few days; to keep them up to date on the leads. Continue to close for a listing appointment. Note: Whatever time frame the FSBO gives you, whether it s how many days until they are ready to list or how many days until you should contact them again, cut it in half.

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