You’ve seen these signs all over town and in every town – For Sale By Owner. But what does this really mean to you, as an investor who’s looking for deals to fix and sell or (rent)?
For Sale By Owners (FSBO’s) or fizzbos are homeowners who market and sell their house without using a realtor. They simply sale or attempt to sale their place on their own.
Why would they opt out of using a realtor? Usually to avoid paying agent commissions of 3% – 6%. That’s right – if a homeowner sales their own place, without any realtors, and their house sells for $100,000, that’s a savings of up to $6,000! Sometimes a homeowner does this because they just don’t agree with a realtor’s assessment of what their place is worth so they attempt to sell on their own.
Last I checked, FSBO’s accounted for 9% of homes sold in 2013 in the U.S. Their main marketing methods are:
- For Sale By Owner sign in their yard or bandit signs in and around the neighborhood
- They can even list on free sites such as Zillow or Trulia and FSBO websites
What’s important to note in the context of you, the investor, is that a FSBO’s average sold price is lower than when sold using realtors. Thus FSBO’s represent a potential savings to you – the investor. A word of caution – some attempt to sell at higher prices either because they are keen on what the market really is or just think (e.g., pride of ownership) they can get more.
So while scouting out areas to invest (or anywhere that makes sense for that matter), always note and call FSBO’s. Uncover their motivation and property details. See if the house lines up with your investment goals, run the numbers and if it makes sense, negotiate your direct deal.