Private Sale / FSBO Advice needed

[BenSanderson]

Hey everyone,

With things tightening up for single family residential investors such as myself, I`m starting to consider looking outside the MLS system for any single detached homes that fit my RTO criteria.

Considering that I`ve been using a Realtor for my first two purchases, what are the pros and cons of buying FSBO properties alongside those bought through the traditional MLS system?

I`ve looked at some of the other threads about this and realize there are a few steps I should take to protect myself:
- I should make sure I use a standard OREA template to make my offer (or something very close).
- I should make sure that my lawyer sees everything before it`s submitted.
- I should have a home inspection performed and have a `backdoor` clause in the offer just in case.
- I also want to make sure I can close before April 15th to ensure I can still finance at 10%.
But is there anything else I`m missing?

The last thing I want to do is step on any toes, but at the same time I want to make sure I explore every option. How forthcoming should I be about this to my current Realtor? Could he help me at all with these types of deals?

Any suggestions or thoughts on this approach?

 

[HeatherBrandt]

We bought 2 FSBO`s last year and each time we had to put a larger down payment when there was no realtor involved. Don`t know if this is relevant if CMHC involved.

I suggest leave more time for everything and don`t assume the other party knows what they`re doing. (they`re probably thinking the same about you).

 

[GaryMcGowan]

QUOTE (HeatherBrandt @ Feb 17 2010, 06:55 PM) We bought 2 FSBO`s last year and each time we had to put a larger down payment when there was no realtor involved. Don`t know if this is relevant if CMHC involved.

I suggest leave more time for everything and don`t assume the other party knows what they`re doing. (they`re probably thinking the same about you).

FSBOs are great way to increase your portfolio,
We closed on a few within the last year. One note, A couple of the lenders we used requested a MLS listing even after our broker explained this was FSBO. (so we got a listing with the help of realtor)

 

[BenSanderson]

Thanks Heather and Gary!

Sounds like they might be worth looking into then.

In my situation, I`m quite happy to give my Realtor more business, but if a great property becomes available outside the sphere of MLS, would he give me his blessing to pursue it?

Any thoughts as to how your typical Realtor views these offerings? When you purchased your FSBOs, was your Realtor cool with it, or is it something they try to steer you away from?

 

[GaryMcGowan]

QUOTE (BenSanderson @ Feb 17 2010, 11:30 PM) Thanks Heather and Gary!

Sounds like they might be worth looking into then.

In my situation, I`m quite happy to give my Realtor more business, but if a great property becomes available outside the sphere of MLS, would he give me his blessing to pursue it?

Any thoughts as to how your typical Realtor views these offerings? When you purchased your FSBOs, was your Realtor cool with it, or is it something they try to steer you away from?

I would say a good realtor would allow you to operate your business they way you want it to. There are some amazing opportunities with FSBOs. Do not let anyone talk you out of pursuing them. I would use the experts on your team to bounce things off of and to walk you through some of the finer points in FSBOs. A good Lawyer can also help you here. As noted in other posts this week it can sometimes benefit you to pay to have a realtor draw up the P&S agreement. If you have bought a property under FMV then paying a realtor a fee won`t seem to bad.

Business is Business I wouldn`t worry about hurt feelings. If you have a good relationship that will not matter.

 

[HeatherBrandt]

QUOTE (BenSanderson @ Feb 17 2010, 09:30 PM) ?

Any thoughts as to how your typical Realtor views these offerings? When you purchased your FSBOs, was your Realtor cool with it, or is it something they try to steer you away from?

We have acquired about half of our portfolio without the assistance of our realtor, our first FSBO was our 3rd property. We didn`t do this on purpose, I just became better at identifying the opportunities. Our realtor would check back with us to see if we were ready to buy our next property, we would tell him we just bought one on our own. I don`t think it`s ever been an issue for him. We had the respect to tell him so he didn`t think we were still in the (immediate) market for a property when we were cleaning up from the last purchase. He had a few really easy deals (we found it on MLS and approached him) and others he had to deal with a dishonest seller or scary druggie tenants.

I should think a good realtor would welcome the chance for every client to buy a FSBO for the "education" potential. Some are easy, most are much more work. Many people might be more appreciative of the service offered.

Make sure your lawyer is aware if a realtor isn`t involved. It allows the spidey sense kick in earlier.

 

[BenSanderson]

Again, thank you both!

I`ll approach the subject with my Realtor and see what he says. I suspect he won`t mind, as I`ve always been honest with him and try to make things win/win whenever possible. In the end, this IS my business and I`m sure he will respect that.

Good points about consulting my other team members sooner rather than later. You can never have too much `Spidey Sense` working on your behalf!

 

[JamesB]

QUOTE (BenSanderson @ Feb 18 2010, 05:54 AM) Again, thank you both!

I`ll approach the subject with my Realtor and see what he says. I suspect he won`t mind, as I`ve always been honest with him and try to make things win/win whenever possible. In the end, this IS my business and I`m sure he will respect that.

Good points about consulting my other team members sooner rather than later. You can never have too much `Spidey Sense` working on your behalf!

Ben,
honesty is the best approach for sure! Also, in many cases, a FSBO seller is willing to pay the comission for 1 realtor. If this is the case, you have have your realtor write up the contract and make sure all the "I`s" are dotted and the "T`s" are crossed and that your "behind" is covered. They can also pull some comps for you to make sure your price is right and should be able to help you build a story that will put you in a stronger negotiation position. (Either that or tell you that your getting the property for a steal which is also great!)

As mentioned earlier in this thread, some banks wont do the financing on FSBO`s. If this is the case have your realtor list the property in the MLS and mark it as sold. If the seller is willing to pay one agent, it should not be an issue for your agent to do this to help the process along. (You will have the property, a solid contract, a happy seller and... a happy bank)

It`s a Win, Win, Win, Win

Good Luck!

 

[BenSanderson]

QUOTE (JamesB @ Feb 18 2010, 11:01 AM) Ben,
honesty is the best approach for sure! Also, in many cases, a FSBO seller is willing to pay the comission for 1 realtor. If this is the case, you have have your realtor write up the contract and make sure all the "I`s" are dotted and the "T`s" are crossed and that your "behind" is covered. They can also pull some comps for you to make sure your price is right and should be able to help you build a story that will put you in a stronger negotiation position. (Either that or tell you that your getting the property for a steal which is also great!)

As mentioned earlier in this thread, some banks wont do the financing on FSBO`s. If this is the case have your realtor list the property in the MLS and mark it as sold. If the seller is willing to pay one agent, it should not be an issue for your agent to do this to help the process along. (You will have the property, a solid contract, a happy seller and... a happy bank)

It`s a Win, Win, Win, Win

Good Luck!

Hi James,

Thanks for the insight and the helpful tips, especially about listing the property as sold in order to qualify with more lenders. I`ll see what I can negotiate with my Realtor - hopefully this can be a success for everyone involved!

Ben

 

[housingrental]

Which banks won`t finance non-mls properties?
Why would this be?