Developing Your Marketing Plan

FSBO Marketing 101

Published 3:02 pm PST Friday, November 19, 2004 The Sacramento Bee, Sacramento, California

Most sellers think of marketing as a nebulous, hit-or-miss proposition. Most know they need a sign and an ad in the paper. Aside from that, they don't really know what to do.

In fact, selling real estate is an easy-to-learn process! What follows is a formula, which, if used correctly, will absolutely optimize your chances of selling a home. Although most of these rules apply to both FSBO and "listed" homes (homes marketed by real estate agents), some of this information would surprise even the most experienced realtors.

How did I get this information? In fourteen years of helping sellers and buyers actually complete their transactions, I have developed a keen sense of what works and what doesn't. I actually ask all of our FSBO sellers exactly how they found their buyers, how long it took, and what did and didn't work for them. The processes used by successful sellers are very clear.

KNOW YOUR CUSTOMER

As with all marketing, the key to success is understanding your customer. For example, I know why you are reading this article - to sell your home and save thousands of dollars of commissions! In order to give you what you need (information), I have produced a result you desire (this guide). Who, then, are the people who buy FSBO homes? In my experience, they fall into the following, general categories:

People Looking For a "Good Deal"
It's true that certain buyers are always looking for a cheaper-than-usual home. Since you do not have an agent, they will offer you a price that is less than market value. Some sellers don't mind being part of this game. After all, there is an unbeatable competitive advantage to doing this when your competition is a full-price, listed home. In my experience, however, most FSBO sellers do not lower their prices. Instead, they keep more money in their pocket. It is rare for a home sold "by owner" to appraise for more than its sales price.

People Who Do Not Want to Work With Agents
There are always a few people who are disenchanted with real estate agents. However, these are not very common. After all, it costs a buyer nothing to use an agent to buy a home.

Local Buyers
A large number of potential buyers are simply people from your town or city who happen to be interested in living in your area. Not only do they know the general vicinity they want to move to, they may have a particular subdivision, neighborhood or street that they're watching. If a sign goes up in your yard, it will attract immediate attention from this crowd.

Another large group of potential buyers is your neighbors. Even if you have never spoken to them, all of your neighbors will take an interest in the fact that your home is for sale. There is an amazing network of friends and acquaintances that we all have. In just a short period of time, your entire neighborhood, as well as persons in each of your neighbor's networks, will be buzzing with information about your home. I see friends, neighbors, relatives, and tenants buying homes from sellers all of the time.

Don't forget either that there are probably dozens of real estate agents showing buyers around your neighborhood on a daily basis. If you have any listed homes in your general vicinity, the chances are good (especially on days when open houses are being conducted) that buyers will become interested in your home if a sign is put up. After all, just imagine being an agent with a buyer in your car. Your choice is simple: either tell your buyer that you cannot show them FSBO homes (in which case the buyer will go to the sellers anyway), or try to set a showing with the seller yourself, praying that the seller offers a commission. There will be more on this later. Finally, beware of "investors" (which really means people who watch late-night real estate "infomercials" on television) who use forms they bought in a kit. The chances of those forms being fair to a seller are slim to none!

People Reading The Newspaper
A large number of people read the real estate classifieds. Even people who have hired an agent may peruse the paper if their agent is busy. Others may be in town for just a few days and want to get a sense of what is available and for what price. More and more people are relying on the Internet and the Sacramento Bee has a special section for people selling their own homes. To sum it up, I have seen about 55% of FSBO buyers attracted by "drive-by" traffic, and about 45% from newspaper and Internet ads. The secret to an effective marketing plan is to appeal to both groups equally. What follows is a discussion of how to appeal to each in the most effective way.

HOW TO PLACE GREAT NEWSPAPER ADS

To write an effective ad, you must give buyers the information they want. Unfortunately, many sellers write ads like the following:

"Fabulous home in established neighborhood. Great mountain views! School District XX, 4 bedrooms, 3 baths, $149,000. Best deal in (your city)! Pre-qualified buyers only. Call after 5pm for a showing."

Ads are written this way in order to impress potential buyers. The only problem is that a buyer does not want the type of information this ad conveys. Here's why:

• Terms like "fabulous home," "established neighborhood" and "best deal" do not really tell a buyer anything. In fact, the latter term is actually dangerous to use. Does it mean best cost per square foot, lowest total price, or something else? Please do not invite a potential lawsuit!
• This ad limits buyers to persons who have been pre-qualified. Not everyone has had the chance to speak to a lender yet, including many very qualified buyers. You can lose a lot of potential buyers this way. Instead, invite any interested persons to view your home and feel them out as to their finances. If things appear to be good, you can always write a contract, which requires the buyers to be pre-qualified in a short period of time after it is signed (e.g., three days or less).
• Limiting calls to those after 5 p.m. will just about kill your sale. Most people will not call back later. Why not just install an answering machine instead?

In short, an ad that tries to impress buyers usually does exactly the opposite. What makes an ad successful? To be blunt, it's the basics. By "basics," I would advise that every advertisement include the following information:

• Number of bedrooms, baths and garage spaces.
• Square footage of your home (available from your builder or county records).
• Phone number. 
• Your price. 
• Your address. 
• Whether you will hold an open house and when.
• Whether you will offer a real estate commission or deal with agents.

Although the first four items in this list are self-explanatory, the last three require additional discussion.

Your Address
A fundamental fact of human nature is that most of us would rather not deal with people we don't know. As a result, most buyers would rather not call someone in the paper without knowing more about the house. If a buyer can drive by your home, they will be more inclined to call you. An address in the paper is therefore crucial to your sales success.

Don't forget that most ads are placed under general geographical headings in the paper. Examples might be "East Side" or "North Valley". With thousands of homes in these areas, a buyer can't possibly figure out from the ad where your home is, or whether it might be of interest. An address lets the buyer look on a map, determine your precise location, and easily find you. After all, this should not be a game of hide-and-go-seek!

Open Houses
A fundamental difference between selling your home and using an agent is that open houses really work for FSBO sellers. While only about 3-5% of listed homes sell on open houses, we estimate that 40% of FSBO sellers find their ultimate buyer that way.

When you think about it, it just makes sense. Understanding that most people are a little shy, an open house is the most neutral setting a buyer can have with a FSBO seller. The buyer knows you'll be home to answer questions. He knows you won't be feeding the kids that you'll not be sleeping, and that the home will be in a presentable condition. He also knows that he can get in and out quickly if he is not impressed. Finally, he can act quickly to consummate the sale if you are actually there.

It's really that simple-hold open houses and triple your chances of selling! Don't hold them and give up your best chance of meeting a buyer.

How often should you hold an open house? As often as you can stand it! My best recommendation is every Saturday or/and Sunday from 1 to 4 p.m. There is a good reason for this: most agents hold open houses for listed homes at that time. You might as well take advantage of their traffic for no additional charge.

I have often heard the claim that you can "overdo" open houses and that your home will become "overexposed" or "market worn" if you do it too often. This is ridiculous, a bit like telling someone that they make too much money. You can never have too much market exposure, since the people who came last time will probably not be returning this week (and if they do, you will probably sell your house to them). You might as well show your home to everyone who wants to see it.

Even a great open house will only produce a handful of lookers. Don't be disappointed if only a few people show up, leave quickly, and don't come back. That's about as good as an agent would do under the same circumstances.

The key to a good open house is to be friendly, but not overly anxious-looking or talkative. Let the buyer explore the home without interference. It's OK to follow at a distance. It's not OK to be "in their face," aggressive, or surly (remember the salesman the last time you bought a car?). Hand out your brochure, a cost sheet on your utilities, loan options, and let the buyer tell you if they like your home.

DEALING WITH AGENTS

 One of the biggest decisions you will have to make when selling FSBO is whether you are open to paying a selling agent a real estate commission. This is not an issue of listing your home with an agent, rather, whether you will pay an agent who brings a buyer to your door.

Your natural inclination will be to refuse to "co-op" with any agent. The reason is simple: why pay any commission if you are selling FSBO? It's like asking a Kings fan to root for the Lakers! Further, most agents will be asking you to pay them a commission of 3% of the sales price. They ask you to pay these amounts since they can generally be paid that by the seller of any listed home.

However, before giving a knee-jerk answer of "no" to any agent, I would ask you to think more deeply about this issue. First, you can be sure that agents will approach you whenever you put up a FSBO sign. Just figure it out -- you are letting the world know that your home is for sale, and that you have no agent. That's exactly what the typical agent wants to hear! Second, you can be sure that most buyers will be contacting an agent before buying a home. After all, it costs nothing for a buyer to hire an agent, since the seller pays all commissions on a listed home.

These things being true, you will miss contacting most of the potential market (perhaps up to 80-90% of potential buyers) if you state in your ad "no agents" or "no commission paid." As a plan to save money, you will win by adopting this strategy. As a plan to sell your home, you may be hurting yourself badly.

I would instead advise the following strategy:

• State in your ad or recording, "agents welcome," or "X% co-op to agent."
• Advertise your home at its highest reasonable price (as established by an appraisal or a CMA). Most appraisers and agents will tell you that your price is somewhere in a certain price range, e.g., $300,000 to $315,000. In this case, the highest reasonable price is $315,000.
• Stick to your price if an agent is involved in the transaction.
• Tell the agent or buyer something like this: "I will gladly pay a commission of X%.

However, I will need to get every last dime of my sales price. If you want to give me a lower offer, I cannot afford to pay the agent."

This method of bargaining is very effective. You can also use this strategy to discount your sales price by the amount of the commission for a buyer without an agent, e.g., "If you use an agent, my price is $315,000. If you don't use an agent, my price is $305,000." Or better yet, offer the difference in closing costs.

Whatever you decide to do with agents, be clear about it in all of your advertising. Unfortunately, it is still legal for an agent to call you even if you advertise "no agents."

HOW TO ADVERTISE TO DRIVE-BY TRAFFIC

Drive-by buyers (as opposed to newspaper readers) will be as much as 75% of your target audience. It never ceases to amaze me, therefore, how badly most sellers handle their "curb appeal." By curb appeal, I mean two things: signs and brochures. My best advice as to both follows.

Your Sign
How many times have you seen a really bad-looking FSBO sign? It's not unusual to see a flimsy, white plastic sign on coat-hanger wire with a smeared phone number in black marker. The problem with this type of sign is that it conveys a very bad message about your home. Buyers have been trained by real estate agents to expect a nice sign, brochures, open houses, etc.

At a minimum, your sign should be as good as any agent's sign. By that I mean a metal frame, pre-printed lettering on both sides, and a brochure box. This type of sign will cost you between $50 and $75 at any sign shop. However, my best advice is that "bigger really is better."

If you truly want to maximize your chances of selling, why not get a gallows-type sign? You know, it's the type that stands 6' high, uses a 4"x4", L-shaped post, and can be seen hundreds of feet away! Surely this will be the first sign seen by any potential buyer coming down your street, whether with an agent or not. These signs will cost you between $100 and $150, but are worth every single dime of extra money you will spend on them.

Brochures
How many times have you stopped at a real estate sign, opened a brochure box and found that it was empty? If you are anything like me, your blood pressure went up 30 points in 5 seconds flat! There is no greater mistake than creating a negative impression before someone even knocks on your door. Most buyers will not come back to your home after an incident like this. The materials you put inside your box are also important. Color brochures are mandatory these days. A nicely typed brochure, with the basic information discussed above, and a nice picture of your home, will create the best possible impression for any buyer.

Color brochures are not hard to make. Simply take a few pictures of your home on any decent camera. Even preloaded cameras that sell for under $15 will do. Make multiple copies of one decent negative, and paste these with rubber cement glue to an 8-1/2" by 11" white flyer. Of course, a high-tech, scanned picture will do the job nicely as well.

No matter what you do, always keep at least 10 to 15 brochures in your box. Fill up the box every morning before leaving your home. Put more brochures in the box on weekends since traffic will be higher, especially with open houses.

CONCLUSION

As with all of your advertising, don't try to overwhelm your buyer with information. Remember that a newspaper ad and brochures are just "teasers." They are not intended to sell your home, only to get people in the door. Once in your home, you will have to "set the hook."