Many real estate experts thought the Internet would result in more people being able to successfully sell their home for-sale-by-owner. Despite the lowest interest rates in 30 years and one of the hottest sellers' markets in history, the number of FSBOs who ultimately list their house with an agent has increased from 76% to 80% (CAR study January, 2001). Inman News Features reports that ForSalebyOwner.com experienced a 7% decline in traffic during the month of June alone. When the real estate market shifts from a sellers' market to a buyers' market, these numbers will probably be even higher. There are a number of reasons for this trend.

A primary reason people list their homes for-sale-by-owner is to save the commission. Marketing research has repeatedly demonstrated that maximum exposure produces maximum sales price. With over 50% of all buyers now using the web as a pivotal part of their search process, FSBOs will have even less opportunity for buyers to find their listings. In the past, newspaper ads would produce a fair number of calls on most FSBOs. Today, a three line ad in the local newspaper has little chance of competing with a full blown 360 tour. As a result, the FSBO now has an even smaller pool of buyers with whom to work. This translates into less exposure and lower purchase prices. Furthermore, given that most buyers who look for FSBO's automatically deduct 6% from the sales price, the FSBO can often net less than if they had listed with an agent.

The second factor creating a challenge for FSBOs is the "needle-in-the-haystack" nature of the web. There are millions of web sites including the hundreds of thousands of real estate web sites posted by individual agents. Without home page optimization, meta tags, and a host of other branding strategies to achieve high web placement, the probability of the web buyer finding the FSBO's single listing on the web is virtually non-existent.

A third problem for FSBOs is that people who surf the web usually are seeking instant gratification. In fact, most visitors only will visit a web site once and stay for approximately 60 seconds. If the FSBO has no strategy for capturing the lead's contact information or for immediately following-up, the lead moves on to the next web site. Instant gratification also translates into producing the highest number of potential houses to see in the shortest amount of time. Consequently, buyers will search those sites that have the greatest number of potential listings. The latest statistics from Realtor.com show that they have 4.5 million web visitors per month. With the advent of IDX and VOWs, a buyer can see all listings in a given service area at a single stop on the web—how do they normally choose which web site to visit when the buyer is searching using IDX or VOWS? Usually through name brand recognition or from the broker who has the most signs in their area. This need for instant gratification works directly against the FSBO who only has one listing to offer a potential visitor.

Over the last few years, there are a number of companies who will post the FSBO's listing to the MLS. This gives the FSBO exposure when the MLS has an IDX arrangement with its members or when one of the Internet real estate companies uses VOWs. The fallacy here is the mistaken belief that posting a listing to the MLS automatically translates into a closed sale. What these sellers fail to realize is even more Internet buyers use agents than do traditional buyers. As a result, while their listing may be posted on the MLS, the agents who are working with web buyers won't show it. Consequently, advertising on the MLS does little to successfully market their home to the web buyer.

An additional challenge for Internet FSBO companies is how to find them. I recently received an email from the owner of one of these companies and searched his company's web placement on Google.com by typing in "For Sale by Owner." His site did not come up on the first 50 listings I searched. Thus, even if I was listed with his company, it would take a very motivated web visitor to search through all those FSBO listings to find the right one for me. My Google search also turned up another interesting fac—Homegain.com and Zip Realty, on-line brokerages who do take listings at reduced fees, showed up in the first two positions. Both these companies display all the MLS listings in the areas they service. As a result, the FSBO is now buried not only among a host of "FSBO companies," they are also usually buried in a sea of listings. Consequently, instant gratification and the "needle-in-the-haystack" nature of the web works against not only these sellers, but against the FSBO companies as well.

Another issue FSBOs must face is that most Internet buyers are reluctant to provide contact information to a stranger, especially during the search process. Instead, buyers identify homes they want to see and then normally contact a single agent who can show them all the homes they want to see-not just one home.

Finally, FSBOs usually do the best in a seller's market where there is a shortage of inventory. Given that the percentage of FSBOs who ultimately list with a broker is increasing during one of the strongest sellers' markets in history, it seems safe to assume that an even greater percentage of FSBOs will ultimately list their properties with agents when the market conditions shift to a buyers' market.

Want to learn more about capitalizing on the FSBO market? See our next issue of RealClues, Prospecting FSBOs from the Web.