FSBO, or For Sale By Owner, vs. Using a REALTOR®

This has implications from both side so we will evaluate the selling side and the buying side of a FSBO property. This account will take broad statistics into account and not necessarily local ones.

From the Selling side

As a seller of real estate, it is often considered to sell your property FSBO instead of using a knowledgeable agent in an effort to save money. The statistics are everywhere that proves the undeniable fact that agents command a higher selling price and even after their commissions are accounted for, still net sellers more money. So what is the real reason?

Well, many sellers are more in tune with market conditions now. Many will just ask an agent for an opinion of market value. Then, they will attempt to market it as FSBO at the agent listing price. There is nothing inherently wrong with this and is a reasonable strategy. The problem comes in when you get to service providers and buyers.

Service providers (mostly FSBO sites trying to get $$$ to list the property on the local MLS) do not care if your house ever sells. The only thing they care about is getting the $$$ from you as marketing expenses. They will take your $400-$800 and pay an agent in the area to list it on MLS (which is most areas is against MLS by-laws as the agent is not in a fiduciary relationship with you in most cases).

The next part are the buyers. If a buyer comes to you off the street so to speak, they still have to get a loan and you need to be prepared to point them in the right direction. Most buyers who do not know the ins and outs go straight to a real estate agent for help who will inform them (if they are doing their job correctly) of the actual market value of your home. They will then add in their commission, typically by way of an exclusive buyer order, and are going to offer you fair market value LESS the commission you would have normally paid a selling agent. You will also often times get less than favorable terms in the transaction as the professional representation is all in favor of the buyer.
On the other hand – if the buyer knows what they are doing, they will often low-ball you in an effort to get the best deal. Their thought-process is they can get a MUCH better deal if there is no real estate commission. Why would they pay the same price for a house that is FSBO as they would if it were listed?

Expect to sell your home for 5-13% below market value if you sell FSBO.

Buyers and FSBO

Many times FSBO sellers are not in a position to sell their home for what it is worth. If they are not represented by an agent, then they are probably not familiar with options available to them such as short sales.

If the seller is able to sell at market value (with or without commission as market value for a FSBO is different than market value for a brokered transaction), then FSBOs are great for you to look at. If you see a FSBO that you want my opinion and expertise one, I will gladly assist you as my commission is almost always covered just by the money I will save you in the deal.

Conclusion

Sellers: Unless you have vast real estate experience, it is almost never in your interest to try to market and sell your home yourself. There are thousands of case studies you can look up online to prove this. While it does occasionally work for some, the overwhelming majority of sellers come out at the bottom by doing this.

Buyers: Look at FSBOs but contact your agent/broker. Their expertise will guide you to get the best deal and protect your interests.

I represent both buyers and sellers in their real estate needs. Contact me to see how I can help you with your needs.

In this real estate climate, especially over the past few years, it is not uncommon for people to owe a little, or even a lot more than their home is worth. I recently had the opportunity to discuss this with a potential seller a few days ago who had questions about their options and had another comment that she could not list her home without raising the price (which the market would not substantiate) over her FSBO (For Sale By Owner) pricing.

The good news is that there are options.

Short Sale

This is when the bank negotiates to take less than what is owed on the property in an effort to get the house sold in lieu of foreclosure. There has to be a hardship (unable to afford, job loss, moving to another state with good reason, etc). The reason of the hardship often dictates how willing the bank is to work with you.

The general process of a short sale is to contact the bank for a short sale packet. This can generally be received through a loss mitigation department. Fill out the packet and send in with your hardship letter. Go ahead and list the property if it is not listed. Be sure to put “subject to short sale” or “subject to approval of short sale from lender”.

Know that choosing the right agent to represent you is crucial. Not any agent can handle short sales effectively.

Most of the process will play out as a usual sale. Where it gets time consuming is that there will be additional documents you will be required to submit to the lender and the buyer will need to understand that in some cases, it can take months to get a final approval to sell and close a short sale.

Short sales may come with credit consequences and potential tax liability. Feel free to contact me and discuss as every situation is different and regulations change frequently.

Owner Finance

You owe more than the house is worth and can’t sell it and don’t want to do a short sale for one reason or another. You could rent the house but that would more than likely be at a loss and you would be responsible for fixing things that tenants break.

Why not owner finance? Take a little money down and finance directly to buyer. A buyer who cannot easily get a loan through conventional means may be willing to pay more for a home if you will finance it to them. In an owner finance situation, it is often the buyer’s responsibility to fix things when they break.

Contact me for more information as I can list your property and market it to buyers that need this type of financing.

Other Options

Depending on your unique needs, the property, and other variables, there may be other options. Talking to a knowledgeable broker can be the difference between finding a solution and ending up in foreclosure.

Contact me to discuss.

I often find that I try to stay on top of trends so much that I miss basic things that people are looking for. I must admit that the thought of putting together information on Owner Financing did not really cross my mind until I decided to put my personal residence up for sale and offer an attractive owner financing package.

In the late 80’s and early 90’s, owner financing and owner-held seconds were very popular because of the high interest rates, typically in the double-digits. Since rates dropped into the 7% range, then 6, 5, and even into the 4% range, owner financing was not really needed, especially when anyone with a heartbeat could get a loan. Now that underwriting guidelines are much more strict, it can be difficult for people to get a bank loan even with 20-25% down. This means owner financing is coming back into style and as a seller, if you are not offering it – you are potentially losing a large chunk of the market.

With Owner Financing, you should expect to put 10-25% down, depending on the property and the terms. Often times, the terms are the best with the most money down (not unlike traditional financing).

Unfortunately, there are a lot of people (agents and brokers included) that are nervous about offering seller financing alternatives so there are not many available. For a current list of available owner finance opportunities in the Gulfport, Biloxi, Ocean Springs, and surrounding areas, please contact me.

South Mississippi is home to several very nice lakes, but often times, it is what is built around those lakes that really makes a community thrive. Windance and Lake Village Estates are built around 100-acre Adam’s Lake, a man-made lake back in the 1960’s that has an abundance of large-mouth bass and bluegill swimming around waiting to jump on the end of your fishing line.

While you won’t find any skiers on this lake as boats are limited to 25hp or less, you will find great fishing and an awesome view. There are a handful of very nice homes on the lake with great views, but if you seek something a little more unique to your tastes, there is 1 very nice property, a little over 2 acres, that is perfect for that serene drop for your new home. At $125k, it is a steal for this much property on this highly-desirable lake.

Call or email me and let’s talk about building your dream home on this lot or to inquire about existing homes in Windance or Lake Village Estates.

The guest post below is by Melinda Carter, Guest blogger. I take no responsibility for the accuracy of the information. If you have further questions, I can recommend a local lender. ~Damion Flynn, Broker

No market in the United States has really avoided the issues that have affected many real estate scenes throughout the country. Some areas have managed to take small, steady hits, staying afloat and looking to thrive in the near future.

One potential sign of the future is the dipping mortgage rates throughout the nation, as well as the Southeast. Even though this type of statistic may seem trivial, these decreases could have a long term impact on the buyer’s market in areas such as the Gulf Coast and other southeast cities.
In the Biloxi real estate market, a 30 year fixed rate mortgage is currently at 4.078 percent. With these mortgage rates dipping into the sub four levels, they are tapping record lows in many areas of the country. The levels throughout the country are lower than they have been in a mere 60 years, but what does this mean for buyers and sellers?

Mortgage rates going so low have had a twofold effect. It has certainly played up a benefit for potential buyers but it hasn’t done too much to drive people into the buying market and away from the rental scene. One positive in this area of the country is the fact that record low mortgage rates are combining with continually rising rental rates. This has an effect on those potential first time buyers who are on the fence, deciding whether to keep renting an apartment or look into purchasing their first home.
A good example of this peaking interest is in major cities such as Biloxi and New Orleans. In Biloxi, the average rental rate is between $650 and $750 these days. With the 30 year fixed rate mortgage at 4.078 percent in the area, prospective buyers may choose to stay away from rising rates. New Orleans apartments are sitting between $750 and $900, as 30 year fixed rate mortgages in the area sit at 4.312 percent.

Mortgage rates alone aren’t necessarily set to drive prospective buyers into the market any time soon, but they could play a role as a factor for those interested in purchasing. In the end, most families and potential buyers will make their decisions based on a set of important factors during their own process. Rather than a focus on recent trends throughout the southeast or Gulf Coast, a purchase is more likely to take place today because a house fits a need for that individual buyer. Although they won’t have a huge effect on consumer confidence, the low mortgage rates can have an effect as a small factor for those who are already interested in buying somewhat, especially in areas such as the southeast where rental rates continue to rise.

Since there are numerous foreclosures and short sales on the market, would it be feasible/legal to place offers on multiple properties at one time?

If you plan to go through with the purchase of every property you put an offer in on, then this is a perfectly accepted practice. However, if you only intend to purchase one property, then the answer gets a little more “gray area”.

There is nothing illegal about placing offers in on multiple properties at one time and I have done it in the past with clients, but only under extreme scenarios. Typically, it is best to put one in at a time as placing offers on multiple properties at once with the intent of only buying one, could present potential issues such as:

1. Multiple offers being accepted at the same time:If you place more than one offer and two or more get accepted at the same time, it is possible that you could effectively be under contract for two different properties at the same time. There are contingencies that can be added to the sales provisions that would make it fairly easy to get out of a contract, but you do not want to be under contract with two different properties at the same time unless you are using it as a strategy to lock the property up in a fast-moving area. Doing this definitely needs to be discussed with your REALTOR® so there is no doubt what you are doing and apprpriate measures can be taken to minimize the risk of your earnest money.
2. Asset Manager blocking: If both properties happen to be foreclosures, managed by the same servicing company (Wells Fargo for instance, not necessarily the same listing agent), and you are accepted on both properties but find issues with both and do not end up closing on either, you could actually be blacklisted from putting in offers to other assets (foreclosures) by that company.

There are other inherent dangers in using a practice of putting in offers in on multiple properties, but these are probably the biggest issues. If you are pressed for time on your house-hunt, you could use better strategies. Work with me to find homes you love. We will put in the first offer and if we are unable to make a successful deal, we can have a list of 2nd and 3rd choices. Then, we just move down the line. I can either write the offers and email them to you (you print, sign, and email/fax back). This is the most efficient way of doing things and assures that you do not run into any “sticky” situations.