The FSBO Blog

News: Expedia Founder Sold on Real Estate Idea

In case you were worried because no big-name companies have yet jumped on board the alternative real estate bandwagon, it just happened. Or, at least it just became public. Some big players and big money are jumping in to start assisting in the real estate revolution, including the founders of Expedia, as you can see from this article by the Seattle Post-Intelligence: http://seattlepi.nwsource.com/business/219877_zillow13.html.

~Robert Creek

A good subtitle for this entry would be “You Get What You Pay For (Almost)”.

It’s my job to understand the real estate market, and more specifically the For Sale By Owner real estate market. As a project for my company, we compiled an exhaustive list of all the FSBO advertising websites we could find - a list which ended up being over 400 names long.

That’s 400+ different websites you could use to advertise your house. Those were all sites advertising multiple properties - it doesn’t even count the people who started their OWN websites to sell just their own house.

With all those options, how do you choose what company to use to advertise your home for sale??

I had a few observations that could help you in answering that question.

Free websites are probably more trouble and effort than they’re worth.

Our list includes both free and fee-based advertising websites (there are several free ones out there). As a rule, the free sites all looked just that - free. Additionally, they ALL had major “update issues” - they had lots of stale listings that were no longer for sale. Additionally, we started out with the easiest sites to find, and went from there - putting progressively more effort into actually searching for the websites. Nearly all of the free websites were found late in our search - meaning that if you just want exposure on the internet, a free advertising website is probably not going to get it for you. We also used tools, such as Alexa, to objectively measure the actual traffic received by websites. This measurement verified our theory.

Websites dedicated to a specific property are pretty much a bad idea.

We found very few websites dedicated to a specific property. This is more significant than it may seem at first: A glance through the classified pages of your newspaper will reveal a large number of people got smart and decided to create their own website. They’ve missed the point of internet advertising. The amount of search engine optimization that goes into getting the good, professional advertising sites up in the top of results is impractical for an individual to do himself. So most of the traffic these dedicated websites receive is due to other marketing efforts by the seller - such as advertising in the newspaper. If these sellers are just getting the word out about their website in the local newspaper, they’re totally missing the huge market of buyers who are moving into the city and searching online from their own home state.

You CAN overpay for internet advertising.

While there were a couple, the best representative example of a website/company that charges too much for their advertising is BuyOwner.com. This company showed up almost NOWHERE in search results, yet they charge nearly the most of any company on our list - starting at a whopping $1500.

The best mix between service, features and exposure seems to cost around $199-$399.

Generally speaking, the less a company charged, the harder it was to find them online. Their websites were generally worse and harder to use, as well. The more a company charged, the more valuable services they started including. Their websites were also nicer and easier to use.

If there’s a site with a local presence and decent number of listings, use it.

Another factor to take into consideration when choosing an advertising company is local presence. We couldn’t tell from our internet search what kind of “real” presence each company had in local markets, as far as brand recognition or marketing. But we could make guesses based on the numbers we saw. These companies seem to be better options than some of the large national companies with no local presence. Sure the national company showed up in search results, but so did the local company. And generally speaking, the national companies have far fewer listings in an area served by a local company, as well as far less traffic in that section of their website. The national internet-only companies are only good for you if you don’t have a local company in your area.

Your BEST option is to use a national company with a local presence.

There are very few of these around, but right here I’ve got to plug my company - FSBOzone.com. Our company is one of the few who mix together the web traffic/exposure national companies can get and the local exposure and service provided by local companies. It’s taking some time for companies to roll this model out because of the resources it takes. But it’s well worth it for the consumer.

To go back to my intro, you ALMOST get what you pay for. The only exception to that seems to be BuyOwner.com, which charged $1500 for basically no exposure. Free is pretty much a bad option, and the more you pay, the more service and exposure you get. To find out if you have a local company in your area, search Google for “{your city} fsbo” or “{your state} fsbo.”

Happy selling!
Robert Creek
The FSBO Blog

The Motley Fool has been a tremendously helpful resource for years to individuals investing in the stock market. Even though their primary focus is on stocks, they bring common-sense perspective and analysis to wisely managing all aspects of personal finance. One of these is real estate, and your home.

They hint at the analogy of selling “By Owner” (and some of the FSBO assistance companies out there) doing for the real estate industry what E*Trade did for the stock-trading industry, which is pretty accurate. Here are some links directly to pages on The Motley Fool’s website (www.fool.com) which are very relavent to you if you’re in the market to buy or sell a home:

• Buying Without An Agent - http://www.fool.com/homecenter/find/find01.htm
• How The Law Protects You** - http://www.fool.com/homecenter/find/find07.htm
• ‘Find a Home’ Center - http://www.fool.com/homecenter/find/find.htm

** I would like to personally add a note of strong agreement with the premise of this page: the government really does look out for you in real estate, these days. It used to be that you had to use an agent to avoid “being had” on a real estate purchase, or getting sued on a real estate sale. However, that was a long, long time ago. As in decades. There is so much built-in governance from mortgage companies and lawyers these days, along with new legislation, that today you have to pretty much TRY to “be had” or get sued.

Michael Poythress
The FSBO Blog

News: Limited Services Real Estate Bill Hangs in Wait
News: US DOJ Urges OK State Legislature to Reject SB 673

If you live in Oklahoma, you should be outraged at some of your state representatives!

The proposed Senate Bill 673 is a step towards removing any choices you as a consumer have in determining for yourself what services you want and want to pay for when choosing a method to sell your house. It’s essentially a mandatory tax for buying or selling real estate. No, you’re not paying the government, but you have no choice whether or not to pay it - the state senate is trying to take that choice away from you - so it accomplishes the exact same thing as a tax.

Is it not reasonable to expect that a person - an Oklahoma citizen - can do at least enough research to find out what services are being provided or not by a particular company?? Let’s be serious. To the Oklahoma legislature: start treating your voters like the adults they are.

I suggest any readers from Oklahoma contact their state legislators (http://www5.lsb.state.ok.us/legislators/lsbaddress.asp) and a) let them know you want to make your own choices about real estate representation and b) ask them to pledge to vote against Senate Bill 673.

This is just another example of the realtor special-interest trying to protect their own pocket book, at your expense. They can’t win in the marketplace, so they’re trying to get laws passed that put their competition out of business. Despicable.

~Robert Creek

News: Doing Their Own Homework (April 11, 2005)

Despite the fact that this article starts with the same boring, totally uncreative sentence used by almost every other newspaper journalist who writes about real estate, this is a pretty good article looking at some of the resources available to “By Owner” buyers and sellers in a specific, local market - Madison, Wisconsin. (http://www.madison.com/wsj/home/biz/index.php?ntid=35566&ntpid=1)

~Robert Creek

The Professional Investor’s Plan
The art of using high-leveraged activities

Strategy as defined here would be the science of planning and directing exactly how you intend on proceeding to maximize your profit potential through investing in real estate. Without a sound strategy and consistently executable tactics you may find that the result of the long, hard efforts have only led you to frustration and a less than sought after result.

Here I would like to make just a few suggestions that will hopefully save you from wasting years of hard effort only to learn in the end that had you invested using a better strategy, you would have realized more profit, happiness, satisfaction, control and free time as a result.

I’m not going to make you wait to find out the secret, so here is the crux of this technique. FIND’EM, DON’T FIX’EM! It sounds easy, doesn’t it? Please continue reading to get the full flavor of this topic. There are a few steps to follow if you are to succeed in using this method and you will really need to understand before you go and do it. I need to stop here and take into consideration the new investor who doesn’t have a war chest of greenbacks to get started with.

If you’re just beginning or starting out with a small amount of capital then you will most likely have to find’em and fix’em on the first one or two properties. By finding them and fixing them, then selling on your own, you will limit the amount of initial expense that you incur. Naturally you will keep more of the profit as a result. The trouble with this technique is that you eat up valuable time that could be more profitably spent on finding more great deals!

Here is what I am saying. If you spend your day painting a property, how much have you saved or earned? Let’s say a painter at $30 an hour multiplied by eight hours equals $240 dollars a day. You, in effect, have given yourself a new job that pays $30 dollars an hour. Instead of painting, let’s say you hire the painter so that you can go hunt down another bargain property with a $20,000 margin of profit. Let’s also assume that it takes 100 hours of effort to find, fix and sell this property; $20,000 divided by 100 hours equals a $200-per-hour rate of pay. Don’t do $30 when you can do $200!

By doing the first property using your own time and labor, you may get most of that $20,000 dollar profit when you sell, but it will generally take you an average of three months to do it, or 480 hours. That boils down to $41.66 an hour and you can’t look for more great deals. What this will do is give you the capital to pay someone else to do the labor on the next one. Once you have your nest egg you can begin to pay up to $5,000 for the labor to include materials. Now you let the lower wage scales do the dirty work of cleaning, repairing, painting and installing new fixtures and you no longer spend your more valuable time doing the low paying labor jobs, so now you can quite feasibly make $20,000 and spend $5,000 to do it. This leaves you with $15,000 profit divided by 100 hours, which equals $150 an hour or five times the pay of the painter! Don’t be a laborer if you don’t have to be.

I hope you see how it pays to find them rather than fix them. Granted your going to have to learn this higher skill of finding and evaluating good deals, however, throughout “Magic Bullets” I’ve given you at least 150 ways to find those deals, such as from bandit signs, newspaper ads, bird dogs, professional search services and so forth. You have the ammunition to launch a campaign that will yield plenty of these deals.

Once you find what appears to be a motivated, distressed or disinterested seller, your next skill set will be to evaluate the property to insure that a profit will result if you do proceed. Here again, you’re focusing on plumbing, electrical, foundation, structure, roof and location, as the rest will generally be cosmetic repairs that can be done quickly and inexpensively in an effort to realize the true value without going broke!

Once you have some accurate figures concerning a probable sales price, the cost of materials, labor, marketing time and transfer costs you can project your profit. Will it yield $20,000 or more in 90 days? It should! If not, then you may consider passing on the deal and continue the hunt for another property that does satisfy your strategic objectives. Side note here: Often when you walk away from deals like this, they end up coming back to you later when the sellers can’t sell. You’ll have an opportunity to lower your offer to an amount that will satisfy your objectives and it will usually be accepted at that time.

Let’s assume that you have found and evaluated the property. Now you will need to negotiate the sales contract and buy this property for the lowest possible price. By having your own offer sheets, sales contracts and financing in place, you can move swiftly to acquire these moneymaking assets. As there are so many creative ways to finance real estate, I’ll only touch on a few here: owner financing, subject to existing loan, leases w/ option to buy, H.U.D. 203k rehab loans, conventional bank loans, assumptions, all cash, etc. You will see what type of financing can be used as the deals begin to take shape. Just be prepared to use the method that will work when you make your offer. Hint: It helps to be pre-qualified and if possible to have equity lines available to tap into if necessary.

Now that you have found, evaluated and acquired the property, you will have to affect the repairs. I did not say you would have to do the repairs yourself, remember? Here is where you play Mr. or Ms. General Contractor; by hiring licensed and bonded professionals who come highly recommended you begin to pass off the labor issues back to the lower earning wage scales so that you can get back to finding more good deals.
Note: One trick to getting good workers and companies is to ask appraisers who they would recommend for certain jobs if they needed work done. Appraisers know a lot about value, folks! They seldom steer you wrong so build your network through their referrals.

Another way to save money is to begin getting familiar with local suppliers of all types of construction materials. I’m not talking truss members and cinder blocks but you will have to create your repair list often, otherwise known as a punch list. You can create this list of items that you will need to fix or replace in a few short hours. By using your notes from your initial evaluation, you’ll be half way home. These items may include tile, vinyl, carpet or wood for floors, toilets, faucets, sinks, tubs, vanity cabinets, mirrors, towel bars, light switches, electrical receptacles, light kits, ceiling fans, knobs, handles, locksets and paint to make the property look and smell new again. Now you can spend another eight hours shopping for and scheduling the dates of delivery and installation for the larger items but that is where your labor ends and you revert back to the supervisory role of periodic inspections to insure the laborers and contractors are getting the job done on schedule.

Up to this point we have done four things: We have found, evaluated, acquired and are repairing. With these steps behind you, the next step will be to start the marketing efforts to find a buyer for this beauty. By pricing it right and advertising it for sale to the entire market of potential buyers, the word will get out. You can help that word get around by using newspapers, yard signs, corner signs, word of mouth, flyers, fact sheets, neighbor alerts, network partners and a host of other avenues of approach that can almost guarantee you a steady stream of buyers when the time to sell is near.

So you have found, evaluated, acquired, repaired and marketed the property. Now the final step is to get the sales contract signed and a closing date scheduled. This should all be accomplished in about 90 days and you will have cleared no less than $15,000 as a result. Your results may vary – it could be lower, and quite possibly could be higher depending on how good you are! I’m giving you the overview here. You will be doing many tasks along the way that are not being explained in depth here.

You will have capital gains taxes. However, when you keep every receipt and use a C.P.A. to do your taxes, the process will be fairly painless. This work will pay very well regardless of that fact. By having two or three of these rehabs going on at any one time and having just one closing a month, you should be making over $100,000 a year, after Uncle Sam gets his.

Many highly trained or experienced investors never even touch the property. They simply find great deals, handle some paperwork and sell it for less than they could get if they spent more time on it. These people are leveraging their time and techniques to squeeze out the maximum profit in the shortest possible time with the least amount of effort. I don’t condone being a paper pusher and taking advantage of other people’s ignorance or misfortunes by doing paper trades. I personally have a hard time finding value in deeds done by using such methods. This is why I have given you a value-driven road map to follow in this brief report. I sincerely hope that you will create value for those that depend on you to deliver in an honest and caring professional manner. Happy hunting!

Dan Auito

Dan Auito is a dual-licensed real estate agent and appraisal assistant. Founder of a
non-profit drug prevention corporation, a real estate consulting group and is the
author of “Magic Bullets Real Estate.” This 300-page power-packed book comes
with a website that further supports its readers at www.magicbullets.com.

A common question people have about Buying or Selling “By Owner”, particularly first-time home buyers/sellers, is “Who do I talk to when I have questions?”

Anyone wondering that will be glad to learn that there are MANY sources for getting your questions answered quickly, easily, and free. With this list of suggested resources, I hope to remove some of the intimidation factor of Selling or Buying “By Owner” by showing you several options available to you.

If you have questions about Buying or Selling a home, here are some people to talk to for free answers:

• Agents - The first and most obvious resource is a real estate agent. Most people have at least one friend who’s a realtor they can call and ask questions without feeling any pressure. Any good, professional agent will gladly answer your questions and help you out in your efforts, knowing that if at any point you decide you want the professional assistance you’ll use him/her because of the goodwill they’ve established. However, let’s face it: some agents have sour grapes about FSBOs altogether, and become very hostile and threatened by you. These agents won’t give you the time of day (which is big mistake on their part…), so one of the other options may be more suitable to you.

• Mortgage Loan Officer - It warmed my heart to read this recent article by the owner of a mortgage company: http://realtytimes.com/rtcpages/20050408_understanding.htm. It illustrates how helpful most loan officers are willing to be. If there’s any individual who sees as many real estate transactions as a realtor, it’s a loan officer. So in some cases, they may be even MORE qualified to answer questions for you. They know the process inside-out, and it’s in their best interest for you to understand everything - they want you to be able to buy/sell that house so they get the mortgage business out of it! An additional plus to this source is that sometimes you’ll get more objective information, since they’re not tempted by the potential for a huge commission.

• Closing Attorney / Title Insurance Company - Another individual who sees as many real estate transactions (if not more) as a realtor is a closing attorney. Real estate agents actually depend on these guys a LOT - more than you may realize, so don’t be afraid to go straight to the source. Finding a good closing attorney is usually as quick and easy as opening the phone book to “attorneys” - if they do real estate closings, they’ll advertise it. And if you’re concerned about working with a reputable attorney, just pick one of the bigger, more expensive looking ads - that’s usually an indication that they’re pretty good.

• FSBO Advertising / Asssistance Companies - There are several companies who’s entire existence is to help FSBOs market and sell their homes. Some companies are advertising only - either online or in print. But most can answer your questions for free, too - they deal with FSBO customers all day every day, and know the common questions and problems, as well as good companies in their area to suggest to you. If there’s a local company in your area that you know about, give them a call - or you can do a Google search for “< your city or state > fsbo” and find the companies who can help. Some examples of service-oriented FSBO companies with a national presence are ByOwner.com or FSBOzone.com. If there’s no other company with a local presence, these companies are more than likely to be able to help you out and answer your questions with a phone call.

• Are there any more? - If you’ve bought or sold a house By Owner and gotten help from a source I haven’t listed here, leave a comment so we can add it to the list!

Bottom line: if you decide to try selling your house without an agent, don’t be intimidated…you’re not all alone. You’ve got access to the same resources they do. And using these sources doesn’t make it any less “By Owner.” Quite the contrary - you get many of the benefits and guidance without the high commission costs.

Good luck!
Michael Poythress

The truth is shocking. This post (http://therealtygram.typepad.com/realtygram_blogger/2005/03/statistics_reve.html) by Frances Thorsen at The RealtyGram Blogger spotlights some research showing that of 20 professions studied, real estate agents require the LEAST amount of training, with a mere 48 hours education before being licensed to represent unsuspecting buyers and sellers. For comparison, the next lowest profession was esthetician or beautician, who required almost 12 times as much training: 600 hours. (read the entire original article here: http://www.amrealtyla.com/media/2004_nov_yahoonews/)

Is it just me who thinks that’s a little…wrong?

The number of hours required does vary slightly from state to state (it’s 67 hours in North Carolina, for instance), but the ratio stays pretty much the same wherever you go. Why is it that the person who fixes your hair requires exponentially more training than the person who represents you in buying/selling the most expensive purchase you’ll likely ever make?

The answer is easy: it’s not that hard to safely buy or sell real estate.

I do believe that any profession where you’re representing someone else (ie. real estate, stock broker, lawyer, etc.) should require far more stringent qualifications than realtors currently must meet, just BECAUSE you are representing another person - and that should require a large degree of proven professionalism/discretion. Actually, the majority of an agent’s training (and the paperwork you have to sign if you use an agent) is to protect themselves from lawsuit - not you.

It should speak very loudly and clearly that the largest complaint among consumers is a lack of professionalism among agents, not that an agent botched their transaction so bad they ended up in a lawsuit. The root complaint is that consumers want to feel good when they pay their agent $7000+ to sell their home - like they actually got something for the money, and didn’t get ripped off. However, it’s increasingly difficult for agents to provide a perceived benefit that justifies today’s commision rates.

Michael Poythress
The FSBO Blog

News: Major Federal Realtor Crackdown is Underway

In real estate transactions, the majority of an agent’s job is just suggesting companies to the buyer and/or seller to use for certain functions (ie. what mortgage company to use, what closing attorney/escrow company to use, which appraiser, etc.) Many people are under the impression that this advice comes in your (buyer/seller) best interest.

That may be true in many cases, but you can’t count on it. For decades, agents have gotten kickbacks and “thank you” fees from the companies they recommend. The Federal Office of Housing and Urban Development (HUD) has recognized this is likely to skew the motivation for an agent’s recommendation to being based on who’s paying them more rather than what’s in your best interest (ie. is the company safe, legitimate, professional). As a result, RESPA (Real Estate Settlement Procedures Act) guidelines significantly restrict these kickbacks.

The problem: agents have been ignoring the RESPA guidelines, or skirting them underneath the table, initating a major government (HUD) crackdown - including EVERY state - with fines and penalties to agents and their benefactors. (http://realtytimes.com/rtcpages/20050404_respacrackdown.htm)

The moral of this story: when an agent recommends a company to use in the sale process, ask yourself “Why?” Do some independent investigation of the company they’re suggesting. It just may be in your best interest. But it could be in your agent’s.

~Robert Creek