If you implemented the simple plan outlined in Part One, your buying machine should be coming to life. Now… let’s add some momentum and kick it into overdrive…
FSBOs
FSBO is an acronym and means “For Sale By Owner.” These are the people who choose to sell their homes by themselves (without the help of an agent). This half of the market, as a general rule, is not as sophisticated or knowledgeable as the agent side. The reason is simple. Most people don’t have the need to buy and sell very many houses in their lifetimes. As a result, they’re not up to speed on all of the changes that have developed in the marketplace. They have made the decision to go it alone without the guidance an agent could provide.
Since FSBOs are not as sophisticated, your skills as a problem solver becomes extremely important. The sellers often don’t know and don’t care about what’s involved in the transfer of real property. Sometimes they can be very unrealistic. The key to dealing with FSBOs is to quickly determine their motivation and design an offer that not only solves their problem… but can be explained easily.
So… how can you tap into the FSBO market? Well, there are many different ways. You’ll want to start with a simple, easy to use system. Take for example the…
Classified ad method
This is a basic method taught as a way to get started buying property. Start with a copy of your local Sunday paper. Toss everything but the Real Estate Section. Look at the “Houses for Sale” section. This section is generally broken down into areas of town. Pick one or two areas where you would like to buy. Then sit down with your telephone and a spiral notebook and start calling ads.
Dialing for dollars
Your first step should be to gather information. The purpose of this step is to determine if it is necessary to go to the next stage in the process (negotiation) or to reject the prospect all together. It’s a culling step. A filter. Part of the qualification process.
The beauty of working over the telephone with FSBOs is you can quickly determine whether you would be interested in buying. If you have thought through your buying criteria, you will know what you are looking for and under what price and terms you will buy.
One of the more important questions is: “How much do you owe on the property?” Free and Clear property ought to be high on your list. After all, the larger the equity, the more flexible a motivated seller can be.
The big three
When you talk with a potential Seller on the phone, concentrate on these three things…
The seller
Are the sellers motivated by something other than profit? Don’t be concerned with how motivated they are; you can test their degree of motivation later. Find out why they’re selling. If they’re not motivated, reject them and go on to the next seller. Motivation is what qualifies the seller. Deal only with motivated sellers.
The property
This is subjective and will be determined by your intended use of the property. There are three main items to consider:
1) Amenities. How many bedrooms and baths? Is there a garage, carport, etc.? Type of heating and cooling, if any? Appliances, fireplaces, fenced yard? That type of thing.
2) Condition. What type of repairs does the property need? Are they cosmetic or structural? (All property needs some type of repair!) Has the home been well maintained? Are there any recurring problems?
3) Location. Do you buy property in the flood plain? Corner lots? High traffic areas? Property that backs up to a shopping center? High crime areas? Rural property? If the property does not meet your intended use, reject it and move on to the next property.
The financing
Ask about the existing financing. Is the property free and clear, or is it encumbered? Is the existing financing desirable? Assumable? Prohibitive? Generally speaking, the larger the equity, the more room to negotiate. Free and clear provides a lot of opportunities, but maybe you’re looking for assumptions. Can the property be delivered with acceptable financing or discounted for cash? If not, reject the financing, and try again on the next house.
Remember, you are gathering information. Ask qualifying questions. Develop your own style. The point of the whole exercise is to find the “good deals” as efficiently as possible. If a property does not meet your criteria, move on to the next.
Back to the classifieds
Keep track of who you’ve talked with in a spiral bound notebook. Qualify on “The Big Three.” See if you can talk with 100 sellers before going to look at the first house. If you haven’t developed your buying criteria, get started. Remember, the skills and techniques you’ll learn with the classified method will carry over into the more advanced systems later. Don’t be surprised if you find a deal too good to pass up.
By the way, you can also find some great buys hidden in the “Houses for Rent” section. You might even find other investors who will buy wholesale from you.
Cruising for the dog
Now here’s a method of finding good deals you’ll use the rest of your life. It’s easy, inexpensive, and takes very little time.
Take your spiral notebook with you everywhere you go. As you travel about, pay attention to any “For Sale By Owner” signs. Write down the phone number and address. Call them and use The Big Three to qualify just like the Classified Method. Keep a record. You may want to call them back sometime in the future to see if they have ripened.
Here’s the real kicker. Start paying attention to the way people keep their yards. Tall grass is one of the first signs a problem exists. Look at the roof and the exterior. You can tell how people keep the inside of their homes by the way they maintain the outside. You’re looking for the dogs. The uglier the better. They might be vacant and/or vandalized. These houses can be in any neighborhood. Remember…the worse they look the better. These are the houses nobody else wants.
These houses won’t have a “For Sale” sign in the yard. My theory is these people have given up. They have either abandoned the property or don’t really know what to do. They have a problem and have chosen to either run from it or ignore it.
Find the owners of these properties. They are motivated. If the owners have disappeared, you may have to contact the lender. This is where knowing your way around the courthouse pays big dividends. All of the information you need is a matter of public record.
These dogs can be some of the best deals you’ll ever find. Start paying attention to the property you drive by every day. Change your route. Drive down different streets. Cruise your favorite neighborhoods on a regular basis. Keep good records in your spiral notebook. And start cashing in on some bargain properties!