FSBO Deals Have More Flexibility

Whether you are buying or selling, this can be a very tough real estate market. You need to look for an edge and FSBO real estate deals may be the answer given their flexibility.

The real estate market earlier this decade was one of those magical times when all the stars aligned. Money was incredibly cheap and easy to get. This, of course, spurred people to buy real estate like mad. The massive demand drove prices up, which resulted in staggering appreciation rates such as 26 percent a year in Las Vegas. 26 percent!

The current real estate market is much the opposite of the one we saw in the early decade. Money is still fairly cheap as far as interest rates go. The bevy of bad loans, however, has led to a credit crunch. This means there isn't a lot of financing out there, so buyers are handcuffed. With a drop in demand, there are too many homes on the market. Prices drop as do home values. This leads to people being upside down on their homes. Foreclosures and distressed sales occur, which starts the process over again.

The current real estate market is complex and challenging. Objectively, it is a good time to buy because home values will rebound. Are we at the bottom of the market? I don't know, but neither does anyone else. Prices may continue to drop a bit, but it is hard to imagine them dropping much more. So, buying makes sense.

The problem, of course, is how you put a real estate transaction together given the difficulties out there. Well, you need as much flexibility built into the deal as possible and FSBO properties supply this for both the seller and buyer. Let's take a look.

As a FSBO seller, you have a built in negotiating advantage. Why? Well, you are not paying the 6 percent real estate agent commission. This gives you wiggle room to undercut comparable home listings in your neighborhood. If the comparables are selling for $400,000 on average, you are saving $24,000 in commissions. This means you can list or negotiate down to $390,000, which gives you an advantage and still lets you come out ahead with more money in your pocket then someone using an agent.

As a buyer of a FSBO property, you also have an advantage. Simply put, you know the savings the seller is getting from selling their home for sale by owner. While you might want to use this to negotiate price, a better option may be to ask the seller to finance your down payment or a small part of the loan. This can help you get financing in a tough mortgage market. It can make the difference between getting you into a house or not.

At the end of the day, FSBO properties tend to be very popular because of the natural flexibility built into the deal when real estate agent commissions are eliminated. In this market, flexibility is everything!