Today I’m answering your questions about FSBO real estate, explaining the challenges and risks involved and providing you with solutions.
The topics I’ll be covering in “FSBO Real Estate: For Sale by Owner Real Estate Investing” are:
- What is a FSBO and is It a Good Idea?
- A Strategy to Buy and Sell Properties
- The Challenges of Selling Property Without a Realtor
- The FSBO Process is Not Simple
- The 2 Most Important Things a FSBO Seller Must Understand
- Successful For Sale by Owner Advertising Methods
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What is a FSBO and is It a Good Idea?
A lot of people ask me, “Can I sell my house without a realtor?” So, let’s talk about what FSBO real estate entails. In the instance of FSBO, the seller is taking responsibility for the whole process. That’s called For Sale by Owner.
Everyone wants to save money, and some choose to do that by not having to pay real estate commissions. I’m not sure this is the best way, or the fastest way, to sell property. However, I’m going to give you some insight into selling FSBO real estate. I’m a little bit contrarian on this, but I believe you should know how to do it. So let’s talk about it.
FSBO real estate means the seller will assume all the responsibility for the sale. The seller is going to take over the whole process and do everything, for example, determining the selling price, researching the comparables (comps), and knowing and understanding the neighborhood.
The seller will be prepared to put the documentation into the MLS (Multiple Listing Service) or anywhere else that sellers list property. The seller is going to show the property to prospective buyers and maybe even stage the property, make it look the best it can under the circumstances. A FSBO real estate seller is going to do just about everything.
The sticky part for many FSBO real estate sellers is that they don’t know exactly how to prepare the paperwork when working with the title company. If you want to sell FSBO property, you need to stop by a title company and find out how to do that before you get started.
A Strategy to Buy and Sell Properties
I’m Ted Thomas. I’ve been involved in real estate for a long time, but for the past 30 years, I’ve been investing in tax defaulted real estate. So I’m in a non-traditional part of the real estate business. With tax defaulted property, we actually do sell the properties ourselves, but we also use brokers. We use everything that’s available to us, and I’m going to talk a little bit about this.
I buy and resell real estate that’s auctioned by the county because the property owner had not paid the property tax. In these cases, the county will confiscate the property from the tax delinquent owner and sell it for pennies on the dollar.
These defaulted properties are out there, and they’re for sale. The starting price is usually somewhere very close to the back taxes, 10 or 20 cents on the dollar of the assessed value. When the county auctions the property, the treasurer will actually wipe out the mortgage, and they’ll wipe out the deed of trust.
What do we want to do with those properties? We want to try to buy them low and sell them low, and we’d like to do that ourselves as a For Sale by Owner would like to do. However, there’s a little bit of work involved in this.
The Challenges of Selling Property Without a Realtor
Let’s concentrate on For Sale by Owner selling. There are a lot of pros and cons to that. Usually the seller has some difficulty handling the contract, so first of all, you need to go to a title company and figure out how to handle that. You might want to talk to an attorney about the same thing if your state requires that.
Where the big breakdown usually comes for the FSBO seller is they don’t understand the media. It’s important to understand media. I don’t mean just printing up one little white sign and sticking it in the front lawn. You’re going to have to do something to really let the world know that the property is for sale. Many sellers fail to think that over, and they don’t get it done.
Many sellers also forget that when people buy property, they negotiate back and forth. That means you have to document each one of those negotiations correctly. Nothing can be done in real estate unless it’s done in writing. It’s not just showing someone around the property. It’s making sure that you do all the paperwork right.
Selling can be an adversarial process with offers, counter offers, and a lot of emotions involved there. If you’re not ready for that, then consider hiring a broker to handle it.
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The FSBO Process is Not Simple
How hard is it to sell your own house? The For Sale by Owner process is not the simplest process in the world. Being a seller without a realtor is a bit of a risky thing to do, unless you’re going to really spend time on learning.
It’s a piece of cake to buy because we’re buying at 10, 20, or 30 cents on the dollar at tax auctions, and we don’t have a mortgage or a deed of trust on the property. It’s selling that’s going to be the big challenge.
I’ve been involved in the tax defaulted real estate business as an investor, a teacher, and a guide, and I’m here to show you how to make money. I found out that he biggest problem that newcomers have is not purchasing at auction. That’s the the easy part. The biggest problem is getting the property sold.
The 2 Most Important Things a FSBO Seller Must Understand
What makes the big difference in sales? Number one is location, and number two is pricing.
I’m fond of saying, “You can change the property, but you can’t change the neighborhood.” Location is going to be extremely important. If you’re selling FSBO real estate, what are the comparable values in that neighborhood? You’re going to have to become a mini expert on that. You need to know a lot about that neighborhood.
For Sale by Owner sounds easy, like the broker just walks in, shows it once, and it’s all done. It’s going to be a lot more complex than that. You need to understand the pricing, and not price it out of the market. There are a lot of sellers that don’t have any idea of how to price property, and they have very lofty ideas of what their property is worth.
Generally, the seller is going to inflate the price. When you can’t sell it because the price is too high, how much are you going to bring it down? That doesn’t take just guessing. It really requires some estimating, knowing what comps are, why that neighborhood is in demand, and why your pricing is in demand.
Successful For Sale by Owner Advertising Methods
There’s a ton of competition in real estate. All of this media is out there with other sellers competing for the sale of property. The solution to selling is media. What do I mean when I say media? You need to put this property on Craigslist and know how to use eBay. You want to use Zillow, Trulia, and the MLS. Use every online site that you can find.
You definitely want to have signs on the lawn and throughout the neighborhood. Perhaps, work with real estate clubs. Some people will put up a billboard or use mailers. You need to do all that you can, if you’re going to sell FSBO real estate.
If you check with the National Association of Realtors, they’re going to tell you that less than 10% of properties are sold by the owner. That’s because you have to understand the neighborhood, the location and pricing. However, most of all, you really need to understand what the media is all about.
If you want to be a FSBO real estate seller, there’s nothing wrong with that. Just keep in mind, there is a learning curve if you want to get to the bank with profits. It takes massive media to sell a property, so you’re going to have to think about that.
We’re selling below the market value. How can we do that? We buy for 10 or 20 cents on the dollar with no mortgage or deed of trust, so we’ve got quite a bit of margin in our property. However, we still have to let the world know about it.
The biggest mistake that you can make is not understanding that you need marketing. You have to get out there, and let the world know that property is for sale. The selling process is what’s going to enable you to succeed.
We hope you enjoyed Ted’s lesson, “FSBO Real Estate: For Sale by Owner Real Estate Investing.”
The 2 most important things to understand about FSBO real estate are location and pricing, and both are interlocked. The comparable values of nearby properties greatly affect the value of your real estate. You need to know the neighborhood and understand how much you can reasonably ask for the property.
Selling FSBO real estate is challenging. You can’t sell it if people don’t know about it, and just putting a sign on the property is not enough. Utilize all the tools available to you to sell your FSBO real estate, Craigslist, eBay, Facebook Marketplace, and real estate listing sites like Trulia, Zillow and the MLS.
A big solution to enable you to sell FSBO real estate quickly is to buy it at the right price. Ted and his students purchase mortgage-free real estate at tax defaulted property auctions for pennies on the dollar. When you buy it at a huge discount, you can sell it at a discount and attract bargain hunters for a quick sale.
If you’d like to learn how to reap huge rewards from tax delinquent property investing, Ted Thomas provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops, web classes, and personal coaching with certified coaches.
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Ted Thomas is America’s Leading Authority on Tax Lien Certificates and Tax Deed Auctions, as well as a publisher and author of more than 30 books. His guidebooks on Real Estate have sold in four corners of the world. He has been teaching people just like you for over 30 years how to buy houses in good neighborhoods for pennies on the dollar. He teaches how to create wealth with minimum risk and easy-to-learn methods.