For most people, being a property owner is one of the biggest investments they could ever make. When it’s time to sell investment properties, the standard practice is to hire a real estate agent. However, some real estate investors decide to sell the investment properties as FSBO homes.
What Are FSBO Homes?
In the simplest words, For Sale By Owner (or FSBO, for short) is a method of selling investment properties without the use of a real estate agent. In general, real estate investors, or home owners, decide not to use the services of a real estate agent to avoid paying a large commission for the transaction. Most real estate agents typically charge 4%-6% of the sale price as a commission; thus, by not hiring one, real estate investors would be saving big bucks.
That’s not the only advantage – when selling FSBO homes, the property owner gets the chance to control negotiations, instead of having them filtered through a middleman. While real estate agents can certainly help with negotiations, closing the transaction, in some cases, may be more important to the real estate agent than getting the property owner the best price.
However, when the property owner foregoes a real estate agent, he/she assumes all responsibilities of completing the transaction. Therefore, when selling FSBO homes, real estate investors must have sufficient experience in the selling process, be a good negotiator, and be able to handle the process with clear eyes, without emotions. Otherwise, they’ll find the process of selling FSBO homes very stressful and will fail to sell the investment property. In fact, national statistics show that over 80% of home owners end up listing with a real estate agent after attempting to sell the investment property as a for sale by owner.
When selling FSBO homes, real estate investors should be well prepared and willing to invest a significant time and effort. Below are the steps the property owner must follow to successfully sell FSBO homes:
Selling FSBO Homes Step #1 – Prepare Your Home for Sale
The first and most important step when selling FSBO homes is getting the investment property ready for the market. Real estate investors want potential buyers to love the property. You can help in this regard by fixing and taking care of any major issues that you might find before putting the property on the market for sale. Get your home inspected to help you recognize hidden issues that you may not be aware of which could stop a sale. Little repairs can make all the difference!
These issues can include things like pet damage, carpet stains, and damage to the yard, etc. Moreover, it’s wise to conduct improvements that add value to the investment property such as a kitchen remodel, new carpets, and landscaping. Before putting the “For Sale” sign out, clean the house from top to bottom and keep it that way throughout the selling process.
FSBO homes’ buyers have high expectations, and the last thing they want is purchasing a home that requires a lot of improvements. Thus, the fewer repairs found in FSBO homes, the more potential buyers and offers you’ll receive.
Selling FSBO Homes Step #2 – Price Your Home
By far, overpricing the home is the number one reason why most FSBO homes fail to sell. Home owners find it difficult to price their property due to the personal attachment. Not having a second voice to speak reason is a mistake FSBO homes’ sellers make.
The best way to correctly price the home is consulting experts like real estate agents and appraisers; they have been in the real estate business for a while to have the expertise to correctly value investment properties.
Furthermore, don’t underestimate the importance of real estate market analysis! FSBO homes’ sellers need to conduct a thorough real estate market analysis to get an idea of selling prices for similar homes (both that have already been sold recently, and those under contract) and then set their selling price accordingly. For example, if comparable homes in your area are selling for $200,000, then pricing the investment property at $250,000 is not a wise move as it will most likely prevent potential buyers from even considering it.
Selling FSBO Homes Step #3 – List Your Home
In a traditional real estate transaction, a real estate agent would be responsible for this task. When selling FSBO homes on your own, the property owner has to research to find a few websites which allow posting homes for sale online. Typically, these types of websites charge a flat rate, plus the cost of essential services, such as listing photos and a yard sign.
The best and most comprehensive list of real estate investment properties for sale in the US is MLS, “Multiple Listing Service”. It is available to realtors and, in some areas, potential buyers. However, only licensed real estate agents can list properties on MLS.
Selling FSBO Homes Step #4 – Market Your Home
The next step is to advertise the investment property and expose it to as many potential buyers as possible. Most home owners don’t have an established network of contacts to spread the news, and putting up “For Sale” signs is not enough. Home owners can market their FSBO homes by creating brochures, putting ads on Craigslist, and building a website for their investment properties.
Talk to any group in your community you are part of and share ads on social media such as Facebook, Twitter, LinkedIn, etc. as over 90% of buyers find their investment properties online. You never know where your future buyer will come from!
Every property has some quality that is worth emphasizing to potential buyers. Highlighting these qualities when marketing FSBO homes will lead to success. Write about everything that could make someone interested in buying your home: school district, neighborhood, nearby restaurants, open spaces, etc. Moreover, post pictures of the property that capture its essence to further attract potential buyers.
Selling FSBO Homes Step #5 – Show Your Home
After listing and marketing the investment property and the calls start coming in, home owners will need to set aside time to show the home to as many potential buyers as possible. It can be difficult at times to schedule a showing to see FSBO homes. However, real estate investors must keep in mind that every viewing they miss is a lost opportunity. Make sure you can be around to accommodate the buyer’s schedule, NOT yours!
The fact thatFSBO homes should be clean has already been mentioned before, but it is worth saying again. Make the home appealing and set a good atmosphere that will keep people relaxed and happy while showing the home. These good feelings can actually make a difference.
In addition, avoid any negative talk. Don’t focus on the home’s flaws, but don’t lie about them. The last thing the property owner wants to do is misrepresent the home to a potential buyer as this could lead to getting sued.
Selling FSBO Homes Step #6 – Negotiations
In real estate, negotiations take the form of a contract submitted to the seller. An FSBO seller can accept this offer, or review the contract and submit it to the buyer. This process continues until both parties come to an agreement and sign the contract. In most states, home owners would be able to find a standard contract for the transaction. If you’re not familiar with the contract, you should have it reviewed by a real estate attorney.
In some cases, real estate agents like to close deals quickly so they can get their commission, even if this means not receiving the best price for the seller. Therefore, doing your own negotiating when selling FSBO homes ensures that you get the selling price you desire.
Selling FSBO Homes Step #7 – Close the Transaction
Making sure that a potential buyer is qualified to purchase the investment property is a critical part to succeed when selling FSBO homes. This is another role that real estate agents play when representing sellers in the transaction – i.e., tenant screening process.
In the case of for sale by owner, the property owner must take on this responsibility and recognize that not all potential buyers will be prepared or have done what is required from their part to buy an investment property.
Before closing the transaction, home owners need to ensure that a potential buyer is capable of affording the home. The best way of doing this is through making sure the buyer is pre-approved for a mortgage or running a credit check.
Finally, when home owners receive an offer, agree on the price and terms with the buyer, and ensure that the buyer is qualified for purchasing investment properties, an escrow, or title company, is needed to take care of the closing process since a real estate agent isn’t hired to do so.
Additional Tips and Tricks When Selling FSBO Homes
- Every real estate market is a little different, but some things are pretty consistent like the fact that people like to buy homes in warmer weather. Therefore, the best time to consider selling the home is typically spring.
- Typically, you’ll get an offer in 30-45 days (if your home is priced right). If you don’t receive any offers within that time, or if a buyer refuses to pay your price, you might want to lower the price.
- If you got an offer when you still haven’t found a replacement home, consider asking the buyer for a contingency offer. This ensures that you won’t end up homeless.
- As when selling FSBO homes, you won’t get a real estate agent’s assistance, the best thing to do is to find a real estate attorney to take care of the legal details of the transaction.
FSBO Homes: Conclusion
Many real estate investors are attracted to selling their investment properties as FSBO homes considering the great financial rewards they could enjoy. However, this approach is not for everyone. The property owner might not have the time, patience, or experience to conduct the transaction without the help of a professional real estate agent.
This step-by-step FSBO homes selling guide is a general overview of the process. Keep in mind that each state has slightly different laws and customs;, thus, you need to do your own homework before deciding whether or not this is the best approach for you. Visit Mashvisor for more tips and step-by-step guides to empower you throughout your real estate investing career!