| With "FSBO" real estate, or property for sale by | | | | Now, back to the desperate FSBO sellers. Look for |
| owner, do you need to take advantage of the seller to | | | | ads in old newspapers, which you can find in most |
| get a good deal? Absolutely not. It is true that many | | | | public libraries, or look through old classified ads online. |
| who sell their own homes end up selling for less than | | | | Often a seller gives up advertising (at least for a while), |
| they would have gotten through a broker. It is true that | | | | but the property is still for sale. If you call on |
| they often net even less than they would have after | | | | two-month-old ad and a house is still for sale, you can |
| paying a sale's commission. But this doesn't mean that | | | | bet that this is a seller more willing to negotiate. |
| someone took advantage of the seller. | | | | Suppose, for example, that you call on a house for |
| Seller's often think that they can save the commission | | | | sale by owner, from an old ad. The seller sounds |
| and walk away with more money if they sell on their | | | | motivated, so you go to look at the house. The asking |
| own. Some of then certainly do net more money going | | | | price is $136,000, down from $140,000 but you |
| the FSBO route. More often, though, a seller spends | | | | estimate that the market value is closer to $141,000. |
| hundreds if not thousands advertising, misses out on | | | | Your plan is to buy the home cheap and then sell it on |
| most of the market (those looking in the MLS listings), | | | | a lease-option contract to get a higher price, |
| gets only bargain hunters to look at the house, and | | | | somewhere around $150,000. |
| then doesn't know how to negotiate. The result? Lots | | | | You listen carefully to the seller and ask questions to |
| of expenses and trouble and a low sale's price. | | | | get more information. You discover that he has |
| The supposed savings from not paying a commission | | | | already moved, and the house is costing him $1,200 |
| disappear. This isn't the fault of the home buyer or | | | | per month to hang onto. He has been trying to sell it |
| investor who picks up the home cheap. The mistake | | | | for seven months, and he is tired of the process. |
| was made by the seller, the moment he put up the | | | | When you ask what he's planning to do if the house |
| sign in the yard that said "for sale by owner." | | | | doesn't sell (always ask this), he admits that he is |
| FSBO Investing | | | | ready to list it with a real estate broker. |
| Of course this IS an opportunity for an investor. After | | | | After you get the whole story, you tell him up front |
| months of trying to sell a home, and realizing that even | | | | that you are an investor, and so you have to buy at a |
| if he lists the home with a broker he can never get | | | | price that makes sense to you. You agree that the |
| back the time and money spent, the seller may be | | | | home is worth the $136,000 he is asking. You take out |
| happy to sell the home for less. His goal, previously to | | | | pen and paper and write this down. You mention that |
| net more money on the sale, may now be just to get | | | | a 6% real estate commission on that price would be |
| the property sold as soon as possible. Your goal is to | | | | about $8,100 - and you write that down. You suggest |
| help him in a way that helps you. | | | | that an agent might take two or three months to sell it, |
| Before getting into how to find these desperate sellers, | | | | during which time he'll still have the costs of holding |
| I should mention that there is one other kind of FSBO | | | | onto the property. You write down, "holding costs for |
| real estate that can be very profitable for an investor. | | | | two-and-a-half months: $3,000. |
| This is property that is priced too low. Once you have | | | | "So if you get a full price offer," you tell him, "You'll |
| a firm grasp of prices in your area, scan the ads in the | | | | really only get about $125,000." He knows that it will be |
| newspaper classified daily, and watch for these | | | | even worse if no full-price offers come in. You |
| under-priced properties as they come onto the market. | | | | suggest that he can save the months of trouble and |
| This deals won't be common, but it takes little extra | | | | worry and sell it to you for $125,000 this week. He likes |
| time to watch for them. And don't worry about taking | | | | the idea of being done with it all, and agrees. Investing |
| advantage of anyone. It isn't your obligation to educate | | | | in real estate that is for sale by owner can be |
| a seller on pricing, and he may have his own reasons | | | | profitable - and without taking advantage of anyone. |
| for pricing a property low (like needing to move fast). | | | | |