For Sale By Owner

For Sale By Owner (Source; theprovince.com)

Are you a real estate investor ready to purchase homes in the current market?   Would you like to get an under-priced home?

Well, you might be in luck since according to 28% of the For Sale by Owner homes are under price according to National Association of Realtors.   Those are decent odds considering the challenges facing the owners who are trying to sell their own house.  The main challenges facing these owners are:

1) Marketing:  It’s hard to compete with the marketing exposure homes get when they are listed on MLS.  In fact, when we were selling REOs, it was one of the critical requirements of any home to be listed on MLS for at least 2 weeks to generate significant traffic and interest in the property.    So, as an investor you might have a better chance of getting your offers accepted since For Sale by Owner homes will typically have less exposure and consequently less competition.

2) Valuation:  As a real estate investor, you might have advantage of dealing with home owners who have not priced their home properly.  Pricing a home is not a trivial task when it comes to For Sale By Owner transactions.  Part of the reason is that finding identical sold comps  will be difficult without access to MLS.  And when you finds comps that are similar in size, age, floor plan, functional utility requires industry specific  knowledge.

Finally, most home owners either under value their home or over-price it where it does not generate interest and stays on the market too long.   In both of these cases you have the upper hand to negotiate a better deal and purchase the home without facing much competition.

3) Disclosures:   Developing a comprehensive disclosures package is not simple task since most home owners are unable to determine what is considered “material”information that must be disclosed to home buyers.   And with every fiscal year, these disclosure requirement change.   For instance, effective January 1, 2014, there are new disclosure requirements for Water and Energy usage depending on the size of the building.   Also added recently is a Gas and Hazardous Liquid Transmission Pipeline requirement that most agent miss to disclose let alone for sale by owners.

4) Legal Terms:  Another challenge for the owners who are trying to sell their own home is finding and completing the right legal and binding contracts for their state.  Contract language used in Real Estate transactions is very specific to each state and requires expert knowledge of Real Estate law and Civil code governing that state. In fact, these owners would be well advised to retain a California attorney to help you with the purchase contract.

Finally, challenges of buying a for sale by owner home, you might be negotiating directly with the seller who is not an expert negotiator.   And that is reason alone to target for sale by owner homes.


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