How to Buy For Sale By Owner Properties
Five Compelling Reasons to Consider FSBO Houses in Michigan
“Buying real estate is not only the best way, the safest way, but the only way to become wealthy.”
What is a For Sale By Owner or FSBO?
A FSBO is a property for sale that is offered for sale directly by the seller.
There is no real estate professional involved in the offering of the property for sale.
There may be an attorney that helps make sure the paperwork is reviewed before the closing.
A private sale between family, friends or neighbors is a form of a FSBO.
Why For Sale By Owner Properties?
There are many reasons to consider buying FSBOs:
• According to the National Association of realtors, FSBOs represented 7% of the houses for sale in 2020.
• At that time, the typical FSBO sold for $260,000 compared to $318,000 for a home represented by a real estate professional.
• The typical FSBO sold for 17% less than a home listed with an agent.
• Thus, there are good opportunities buying FSBOs in any market.
What are the Disadvantages of Working with a FSBO?
One disadvantage of working with an unrepresented FSBO is they are more personally involved in the transaction and negotiations.
This means they may be more emotionally involved than being represented by a real estate professional.
Another disadvantage of working with a FSBO is they may put a greater value on features of the house than true market value.
Sentiment or emotion may have them value the property or feature higher than reality.
Not all FSBOs will work with a real estate professional.
A FSBO seller may want to eliminate both the listings agent commission and the selling agent’s commission even though they may sell for considerably less.
FSBO’s may take longer to close or may not close at all.
Getting required disclosures or documents in the due diligence process may cause delays or complicate the closing timeline.
How do you Work with For Sale By Owner Sellers to Buy Well in Any Market?
There are many ways to work with FSBOs to buy well in any market.
1. FSBOs will generally be happy to work with a buyer’s agent as they are trying to save on the commission of the listing agent.
2. Many times FSBOs need to be educated on the market and closing process.
They are not actively buying and selling properties like a real estate professional. This includes providing accurate, recent, comparable sales for their property. Many times FSBOs will try to compare their property to another property that is not a true comparable to theirs. Finally, explaining the timelines for inspections, financing and closing will need to be done for sellers as well.
3. Often FSBOs are not familiar with the disclosure requirement for selling their property.
This includes providing a seller’s disclosure and a lead based paint disclosure.
4. If a FSBO does not receive an offer in the first 30 days, they generally become much more interested in entertaining offers and working with an agent if they were reluctant to before.
Your best deals with FSBOs is after a little time has passed. Follow up with them weekly.
5. FSBOs typically have to take less for the sale of their property.
One reason is the buyer figures they should also save some money because there are fewer agents involved the transaction.
How Can a Real Estate Professional Help You Buy For Sale By Owner Properties Well in Any Market?
A real estate professional should know how to work with FSBOs.
They should be aware that FSBOs require more education than working with a property represented by another real estate professional.
The real estate professional will have to have the seller sign they understand that the agent does not represent them but the buyer and is only acting as a transaction coordinator for the seller.
How To Buy For Sale By Owner Properties Well in Any Market
• Considering working with FSBOs is important in any market because they represent about 7% of all properties actively for sale.
They also typically sell for less then properties represented by an agent.
• Working with FSBOs requires more education on the market, disclosures and the closing process.
• Finally, a real estate professional can help you buy FSBOs well.
This is true in any market because FSBOs are generally looking to save money by not using a listing agent and don’t mind working with a buyer’s agent.
Want to learn more? Contact us.
Disclaimer:
Always speak to your CPA, investment advisor and attorney before making any investment decisions. Past performance does not guarantee future returns. Arbor Advising seeks to educate and does not endorse any specific product, service or investment.
