Using For Sale By Owner Properties

To Acquire Investment Property.

I can't tell you how many times someone came up to me and told me about a house in there neighborhood that is for sale by owner. They would say that I should go and look at it for a rental property. They usually make the assumption that the house will be a better deal because the owner is selling it himself and I will not have to pay a agents commission. Here is where you have to be careful. It is true that you don't have to pay a agents commission but that does by no means mean that the owner is going to try and charge you the full amount that they would get through a agent. Think about it, it is human nature to get the best deal out of the house that they can. Every time I remodel a house I always put a for sale by owner sign on it before I ultimately decide whether or not I am going to sell the property. The price that I ask is usually on the higher end. Like I said in a previous article this also acts as a good advertisement for potential renters. I really don't know why this is but it just seems to work that way for me.

Most people don't just slap a random price on their house and hope that it sells. It has been my experience that they go out and ask some agents what they would sell the house for if they were going to sell the house. Or they take a recently sold property on the street and add a few percent to the price. So basically the act of selling by owner is usually a short term trial period. Most of the time a for sale by owner sign turns into a real estate companies sign within a month or two. There are a few exceptions a high demand property that is very sought after will sell for sale by owner quickly. But the price will be high and it may not make the best rental property. However it may make a decent speculative investment but that is a much more risky way to invest. (I will discuss this form of investing in a future article.)

So basically I have never on a consistent basis had much luck with a for sale by owner property. Where I have had some luck is buying off a private owner when they are just starting to talk about selling. It might be someone that I know personally or someone I hear is thinking about selling. This is the best possible scenario for a for sale by owner situation. You get to go in with all the advantage in the transaction. You can sell the owner on the ease of the transaction with you how they will get there money quickly and without any inspections or anything like that. They really wont have to do anything that a potential buyer will make them do to buy the house. Some owners really like this way of selling because they don't have to do anything. And best of all you can analyze the property and figure out what it would be worth to you. This way both parties benefit and a real estate agent never gets involved. It is in a lot of ways a win-win situation for both parties.

(I would like to include a quick note here about agent pricing. Some agents that I have met will always sell the home owner on the fact that they would sell the property in question for x amount. That amount cannot be to low because the owner will think its worth more and probably go elsewhere to find a agent. However if they sell the fact that they can make the price high through their marketing etc... they will probably get the listing. They also will sign a 3 to six month contract to sell the property. So they know they have time to reduce the price and get it sold before the contract is up. It is not uncommon to see a price reduced sign on a property after a month or so on the market. So what this means is that the for sale by owner price is sometimes a reflection of the high price set by the agent trying to get the listing.)