Benefit #1: You are the negotiator
As I mentioned on my previous post, the most important benefit of selling a house on your own is that you talk to the potential buyer directly. Some sellers will accept buyers who are working with agents since they still save 3% by only paying a buyer’s agent commission. The buyer’s agent may or may not want this direct contact. They may not want it because they lose some degree of control over the transaction. Why do I think think talking to the other party is so important? Please keep reading.
When I bought my first house I was glad that my real estate agent did all the “negotiating” on my behalf. I was literally scared to death to meet the sellers,which by the way I thought I had to. I felt that once I met them I would not be able to offer them less for their house than what they were asking. Silly me, right? Now that I am an investor I’m yet to buy a FSBO (for sale by owner) since all my properties have been forclosures. However, I have talked to several owners that have listed their homes on their own and it is amazing how much information they will give you. I had a lady down the street tell me: “We’ve had a lot of showings but not a single offer yet. We bought it for $130,000 so we’ll probably reduce the price to $145,000 within a week or two. Our loan balance is about $117,000 right now.” They had it listed for $153,500 and it was priced according to recent comparable sales. It had been in the market for maybe 6 weeks. If I was dealing with a real estate agent I would have never been able to get this information. I knew that they had to get at least $117,000 to cover their mortgage. The lady also told me that they were eager to move since they wanted to be close to family. They had recently sold a restaurant they owned and were basically unemployed.
Had I made an offer it probably would have been in the $120,000’s an not in the $140,000 had I not had this information. In my case I needed to purchase this home for about $127,000 to be able to make it cash flow as a rental. I had a better option at the time so I didn’t make this
When I bought my first house I was glad that my real estate agent did all the “negotiating” on my behalf. I was literally scared to death to meet the sellers,which by the way I thought I had to. I felt that once I met them I would not be able to offer them less for their house than what they were asking. Silly me, right? Now that I am an investor I’m yet to buy a FSBO (for sale by owner) since all my properties have been forclosures. However, I have talked to several owners that have listed their homes on their own and it is amazing how much information they will give you. I had a lady down the street tell me: “We’ve had a lot of showings but not a single offer yet. We bought it for $130,000 so we’ll probably reduce the price to $145,000 within a week or two. Our loan balance is about $117,000 right now.” They had it listed for $153,500 and it was priced according to recent comparable sales. It had been in the market for maybe 6 weeks. If I was dealing with a real estate agent I would have never been able to get this information. I knew that they had to get at least $117,000 to cover their mortgage. The lady also told me that they were eager to move since they wanted to be close to family. They had recently sold a restaurant they owned and were basically unemployed.
Had I made an offer it probably would have been in the $120,000’s an not in the $140,000 had I not had this information. In my case I needed to purchase this home for about $127,000 to be able to make it cash flow as a rental. I had a better option at the time so I didn’t make this
offer.
Now, this was an advantage to me as a buyer. However, the seller can also learn similar information from the buyer. He or she may learn what the buyer’s situation is. Maybe the buyer cannot afford the house because the bank will not lend them enough money to buy it. If this is the case and the seller has enough equity maybe the seller can hold a second mortage. For example, the seller wants $150,000 for the house. His mortgage balance is $80,000. The bank will only lend $100,000 to the buyer. The seller can take the $100,000 from the buyer. $80,000 pays off his loan and the $20,000 is a downpayment. He then creates a real estate note for the remaining $50,000. More on private notes on a later post.
The benefit of face to face interaction between buyer and seller is that you can negotiate things other than price. You can negotiate terms. You can negotiate possesion. You can negotiate the down payment. Maybe the owner of the house is willing to take the buyer’s SUV as a downpayment. Personal interaction develops relationships that can make the transaction a win-win. In order to really benefit from this you’ll need to be willing to ask the questions. Keep in mind that you want to sell and the other party wants to buy, so the parties can help one another to achieve their goal.
The benefit of face to face interaction between buyer and seller is that you can negotiate things other than price. You can negotiate terms. You can negotiate possesion. You can negotiate the down payment. Maybe the owner of the house is willing to take the buyer’s SUV as a downpayment. Personal interaction develops relationships that can make the transaction a win-win. In order to really benefit from this you’ll need to be willing to ask the questions. Keep in mind that you want to sell and the other party wants to buy, so the parties can help one another to achieve their goal.
Thanks,
The Housing Ecologist
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