For Sale By Owner Property
Investing in for sale by owner properties, that is properties marketed and sold directly by the owner, is worth looking at, as they may provide the investor with some benefits that may not be attainable in a regular transaction in which a realtor is involved.
These benefits may include:
1. Lower price, as the seller now does not have to pay the realtor a commission, which typically ranges from 3-6% depending on property type
2. Direct interaction with the owner, which may allow the investor to achieve:
i. A further reduction in price, and
ii. Reduction of the required down payment and increase of leverage benefits by negotiating and securing seller financing for a portion of the required equity for the completion of the transaction; such seller financing is in many cases necessary for the completion of a transaction, especially during recessionary periods, when credit is tight and financial institutions reduce the maximum allowable loan to value ratios thus increasing equity requirements on the part of investors.
On the other hand, it is argued by some that transactions involving a property agent may not necessarily close at higher prices, all else being equal, because some realtors may be interested in securing a buyer the sooner the possible rather than negotiating the highest price possible.
It is also said that from the owner’s side, the more difficult tasks involve setting an appropriate asking price and putting together properly all the required paperwork.
In any case, investors looking at for sale by owner properties need to thoroughly carry out all the due diligence that is required in acquiring any property whether is sold through an agent or not