October 2007

Investment Exchange

An educational real estate newsletter

Investing in For Sale By Owner Homes

First, let's state the obvious: For Sale By Owner (FSBO) homeowners are going at it alone.

These homeowners think it's possible to sell their properties without the professional help of real estate agents and net more proceeds at the closing table.

While commissions vary, the nationwide standard is often somewhere in the neighborhood of six percent. For example, a broker or agent would likely receive about $18,000 if he or she lists and sells a home for $300,000.

Clearly, that's a big expense that takes away from the net profit of the sale. Therefore, when the time comes to sell the property the homeowner will more than likely factor that figure into the negotiation process.

However, this thought process on behalf of FSBO sellers creates amazing real estate opportunities for savvy investors.

That's because most FSBO sellers don't know how to accurately price their properties, are not experts at marketing them, and more likely than not don't even know where to start with the required legal binding contracts, as well as the required contingencies that need to be met for successful closings.

As an investor, you can quickly spot these FSBO properties via the "FSBO" tab on Foreclosure.com. Search through these properties quickly and find properties that look like good investment opportunities.

Then, it's important to contact a local real estate agent or broker because real estate transactions can be complex, especially for a person with no previous experience. There are forms to fill out and papers to file — important tasks that are often completed by an experienced professional.

In addition, a real estate agent can pull comps of other homes in the area, providing you with a "true" market value of the property. The good news is that most real estate agents will help you with the purchase process at no cost as long as you give them the listing when it comes time to sell or rent the property.

Therefore, in this edition of Investment Exchange, we will share several pros and cons of FSBO homes. Make no mistake, FSBOs represent tremendous value and opportunity; however, these types of deals can be tricky without the involvement of a broker or agent.

The key is to play it smart with FSBO homes. Let's get started.

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Site feature spotlight

Get smarter
with e-Books

Foreclosure.com offers the largest and most reliable nationwide database of distressed real estate listings on the planet. We provide first-time homeowners and experienced investors alike with amazing opportunities to make and save money in real estate.

Do you know how to make cash with all this valuable property information?

If the answer is "no" then we can help you get started. If the answer is "yes" then we can help you make more.

Of course, our online Webinar real estate training series has been a huge hit with many of our readers. In fact, just check out this positive feedback from one satisfied participant:

"I have done real estate investing for several years and found that one must adapt as the real estate environment changes. Foreclosure.com has recognized this need and stepped up to identify experts willing to share their knowledge and expertise through your Webinar seminars. This is truly an efficient and economical way to learn from the experts and become financially independent."
 — Jim Landis, Naples, Florida

One of those Webinar experts was none other than nationally recognized author and successful entrepreneur, Elaine Zimmermann. She has received glowing endorsements from prestigious sources such as The New York Times, MONEY magazine and others for her sound real estate investment strategies.

Foreclosure.com offers her e-Book, "The Secrets of Foreclosure Millionaires" in our e-Book section, which is packed with easy-to-understand tips and guides from successful investors. Elaine's e-Book reveals five secrets that will help you become successful in the real estate market, from how to buy foreclosures with no money to how to make your first million.

It's a fantastic read and one of the many educational resources that we offer to ensure that our visitors — current and future investors — have all the tools to achieve success in the real estate market.

Indeed, Foreclosure.com offers more than just the best real estate property information available anywhere. To check out our expanding e-Book library right now click here!

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Web site search tips

Help at your fingertips

Don't understand a listing notation or abbreviation on Foreclosure.com? Need to know how the various property search functions operate? Want to find amazing deals FASTER?

Find the answers to these questions and more with the "Search and Terms Help" button on Foreclosure.com.

Sure, we have an onsite professional staff of courteous customer service professionals who each log more than 40 hours per week, Monday through Friday, 8:30 am to 5:30 pm ET diligently answering all your calls and emails.

"Search and Terms Help," however, offers our site visitors another layer of assistance. This comprehensive, page-by-page breakdown provides descriptions and solutions for every stage of the search process on Foreclosure.com.

The "Search and Terms Help" button can always be conveniently found in the upper right-hand corner of the screen during property searches. To check it out right now and search for deals click here.

We are proud of our tagline, "We Make Searching Easier," because a tremendous amount of work and effort goes in behind the scenes to ensure that current and future investors like you don't have to jump through hoops to find great deals.

In fact, just two clicks from our homepage can take you right to fantastic real estate opportunities in your own backyard or desired neighborhood.

Having said that, there are certain abbreviations that we use on our site that could be foreign to a first-time investor. For example, "DOS " (Days on Site), which appears on our results pages, describes the amount of time that a listing has been available in our database.

So while we hope you never have to use the "Search and Terms Help" button, it is important that we point it out just in case. And if you really get stuck, remember that our customer support team is just a phone call or an email away.

Helpful tools and great customer support: More reasons Foreclosure.com is the place to search for the best deals in real estate.

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Hot off the press

Leverage the FSBO situation

At Foreclosure.com, we're all about connecting investors with the hottest real estate bargains on the market.

And even though our bread and butter involves distressed real estate such as foreclosures, there are other lucrative options on the market such as FSBOs.

FSBOs are great because the homeowner already feels that he or she is saving money off the net profit because an agent or broker is not involved. Therefore, it's often possible to factor that in to the negotiating process.

There are other subtle advantages, too, which come along with buying FSBOs that can really make a financial difference if the right situation emerges.

Consider this from a recent article in the Orlando Sentinel:

"Real estate agents will not show a FSBO because they are afraid of not getting paid and of losing the buyer who might want to do the deal without them."

Indeed, sellers often face a uphill battles when it comes to unloading their own homes — especially if it is new to them.

Case in point: A FSBO seller is at the mercy of everyone who calls or knocks on the door. There is often no way to "qualify" buyers prior to negotiation when it comes to FSBOs, which means the sellers can waste tons of time on deals that will never come to fruition.

In addition, buyers sometimes shy away from FSBO homes because of fear legal problems and intricate paperwork will be too hard to resolve without the help of an experienced professional.

We tend to agree on the last point.

If interested in a FSBO home, it is highly recommended that a lawyer or some other experienced individual is involved in the process to ensure that the deal is done right.

Short of that, the possibilities are endless when it comes to purchasing a FSBO. With patience and the proper negotiating skills, it's possible to land a really beautiful home for less than current market value.

Remember: Leverage the information we briefly mentioned above to secure the deal that is right for you .... this is your time to shine.

Good luck!

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Our success stories

Time to take the plunge

Maria E. Mesa of Orlando, Fla., loves to crisscross the nation, speaking about an innovative weight loss program that she developed for new moms.

The 53-year-old, however, does not confine her ambitions or entrepreneurial spirit to the successful career she has carved out in the nutrition industry.

Four years ago Maria took the plunge into the booming??Central Florida real estate market. It was a bold move, considering she had zero experience buying homes, much less flipping them for big profits.

"I remember??having a??feeling of trepidation when I first got started," said Maria. "There were so many things that I didn't know at first that at times I thought I'd made a huge mistake.??I definitely??felt??the fear of the unknown."

Fortunately for Maria, with the right mix of hard work and dedication, things in this business often have a funny way of working out.

Her first investment property was a great deal on a preconstruction??townhouse in her local neighborhood. The goal was to get in early while the prices were fair, and then by the time construction was complete, capitalize on a hungry buyers market.

Maria's gamble paid off ... literally.

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She purchased the condo for $176,000 and sold it for $259,000. That's a staggering profit of $83,000. Of course, there were holding costs and other expenses, but Maria played her cards right.

"It's safe to say I was hooked from that point on," says Maria. "I was fortunate to be in the right place at the right time.??I took the risk and I haven't looked back since."

Now with years of "on the job" experience under her belt she has moved on to properties that she can flip in areas that are expected to increase in value in the near future. In fact,??Maria is a subscriber to Foreclosure.com because she can find great deals in the specific neighborhoods in which she wants to invest.

"There were some barriers that I had to overcome initially," said Maria. "In this business, being a female,??certain people think that they can get away with things or pull the wool over my eyes. I am a strong-minded woman and have always stuck to my guns,??however, which means that no one really ever gets anything over on me. Besides, I tell myself that nothing is more difficult than taking that first step. The rest is gravy."

Flipping homes is still a part-time gig for Maria. But, when an investor owns??several properties and has flipped numerous others, it begins to reward a person as if it is a well-paying full-time career position.

And at any moment, she can decide to dedicate herself to strictly real estate investments and more than likely create a very comfortable life for herself that??will endure well into the future.

It's good to have options — that's the power of real estate.

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Real estate tax news

Foreclosure relief from IRS

The Internal Revenue Service — the nation's tax collection agency — recently announced that its Web site will now feature a section dedicated to helping distressed homeowners who are facing foreclosure.

This new addition includes a worksheet to help homeowners determine whether any of the foreclosure-related relief provisions apply to them. In addition, the site also provides a form for homeowners who owe additional tax to request a payment agreement with the IRS.

Keep in mind that these are not new programs or policies. On the contrary, the IRS has long provided relief provisions that can often reduce or eliminate the tax bite for "financially-strapped" borrowers who lose their homes.

Now with the new section it just makes it easier to access this important tax relief information.

So are you eligible for assistance? Consider the following:

"Under the??tax law, if the debt wiped??out through foreclosure exceeds the value of the property, the difference is normally taxable income. But a special rule allows insolvent borrowers to??offset that income to the extent their liabilities exceed their assets. The IRS cautions that under the law, relief may be limited or unavailable in some situations where, for example, part or all of a home was ever used for business or rented out."

For more information head over to IRS.gov or contact the local IRS Taxpayer Assistance Center (TAC) in your area and speak with a representative direct about your tax issue.

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