First Deal 20k Hoarder House, First time Selling FSBO vs Relator

Buying & Selling Real Estate
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First Deal 20k Hoarder House, First time Selling FSBO vs Relator

Alyssa K.
Member since 2018 · 156 posts · 106 votes

Little backstory...my husband and I bought our first home in 2015. When we started trying for a family in 2016, my husband got into all things bigger pockets, and read/listened to everything he could get his hands on. When we got pregnant, we knew we’d like for me to stay home with the baby if possible, and so we started putting my entire paycheck (I made good money working for a large university) into savings to make sure we could live off just his income. We figured we’d need to save for quite awhile to get our first property, but were still driving for dollars, running numbers, going to tax auctions etc. to see if we could find anything we had a chance of getting. I drank the kool aid around this time, and started reading/listening to podcasts as well.

A week after reading rich dad poor dad I happened to meet a lady in our neighborhood that was getting ready to loose her house for back taxes. She had completely let it go, hadn't mowed the yard in a decade (no HOA rural neighborhood), and we could see the garage was packed to the brim with boxes. We bought it for 20k cash (sfh, slab, 1400 sq ft, 1/2 acre lot, 3/2). Got in and confirmed what we expected, it was a hoarder house; exactly like the tv show. We flipped it on no interest credit cards, did a cash our refi (147k), paid off the cards before interest was due, and put 70k (20%) down on a new live in flip.

Rented out the hoarder house, and decided to also rent out our current house in the same neighborhood (1 story, slab, 4/2, 2000 sq ft). It's now been a year since we moved into the new flip, both rentals are doing good, cash flowing about $400 and $500 each. However, we need more money to finish the current flip, and will most likely keep it our homestead for a few more years because we really like it and the area, and it will give us a great opportunity to HELOC. Our level "comfortability" has also gone up with the kiddo.

Our goal has always been for long term wealth over immediate cash flow, and the plan has been to buy new rentals every 2 years when the previous rentals fall off the w2. My husbands w2 isn’t as strong as it was a year ago, lots of factors with the business that are thankfully just growing pains, but we’ve decided to start flipping to get extra cash in hand to scale more quickly, and eventually allow my husband to leave his w2 job. To get the cash to do this, we are going to sell our old homestead. Because it wasn’t intended to be a rental, while it’s cash flowing well, it’s “too nice” to be a rental and has a lot of features a buyer would appreciate more than a renter, and would be costly to repair if damaged by a renter. We bought it for 185k, put around 30k into it renovating/updating. Current loan is 153k.

We’ve had great success listing and managing our own rentals, however I’m aware selling is another ball game. My husband, with the recommendation of his mentor (mortgage broker), and considering how confident we are in self managing rentals, would like to give selling the property by owner a shot. Comps put the property at 285-295k. While I’m confident I can sell it, it’s a highly desirable area, I worry about the perception of fsbo driving away qualified candidates, managing multiple offers, logistics of coordinating option money etc. I’ve identified a realtor who is also an investor, she wants to list at 290-295, but wants to pay 2500 in staging (which I’m sure would help but don’t feel would be necessary is our rural market, she specializes in Austin TX, our property is a suburb of Austin), and after all is said and done, we’d walk away with the same as if I just “cheap” sold it for 275k. I’m not worried about the investment of time if I were to sell myself, I’m still home with the kiddo and managing our rentals, and my husbands schedule is flexible enough to watch her on short notice if need be for showings etc.

All of this to say, I’m curious of others experiences selling by owner, and potential hurdles/pitfalls I should be aware of. Or for the sake of ease of transaction/paperwork, would you always recommend using a realtor? I fully believe the Relator we would use is worth the money, however if we have the opportunity to walk away with more cash, it would put us leaps and bounds ahead as we begin flipping. As always, I appreciate yalls insights, advice, and experiences.

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David M.
Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
6y

@Alyssa K.

Even as a Realtor, I have to honestly say it doesn’t seem to look like you need one. If you can handle rentals all by yourself, why not the sale? You’ve purchased multiple times so you already know the transaction process

At a minimum, list on something like Zillow. I’d recommend at least offeroring to cooperate with realtors who want to bring their buyers, unless you want to try to save that commission as well.

I assume/hope in Texas you have discount brokers out there who will put your listing on the MLS for a small fixed fee (~$500) but won't handle the transaction for you. At least, all the Realtors will see it, but you will have to offer a cooperation commission.

It sounds like you know what you are doing. Real estate isn’t like law where you really should never represent yourself. You appear to know what you are doing, know your market, and I hope can rationally sell/negotiate the transaction. I’ve heard of one couple who takes the arrangement where one is the “seller” and the other is the “realtor.” Or creates that separation to keep an “emotional barrier” that a Realtor provides.

I will say, security/safety should be something to think about. If you have to show property and you have young children with you, you might want to rethink your plan. I don’t know if you guys also use electronic lock boxes — I hear about how some states are still slowly moving to them. They are expensive, but good to have since only Realtors have the app to open them, and they are satellite tracked so you know when they are opened. That being said, investors fsbo all the time...

In short, what are you looking for from a Realtor, and is it worth it to you.

Just my two cents. Take care and good luck

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  • Angie Shires
    Real Estate Broker · Tyler, TX · Member since 2018 · 193 posts · 143 votes
    6y

    @Alyssa K. Sounds like you and your husband are well on your way to financial security, congratulations on what you've done so far, you should be proud!

    I have to say that they money that you spend on a Realtor's commission is 100% worth it! You might interview another experienced Realtor and get their opinion of price and whether staging is necessary in your area. I'm in East Texas, we are rather rural, as well...but staging helps sell your home quicker and for closer (if not over) your asking price. 

    While you may be able to sell your home FSBO, the question is should you. A good agent will help you price the home, represent, protect, negotiate, take the emotion out and move you smoothly to closing.

    Good luck to y'all! 

    0Reply
  • David M.
    Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
    6y

    @Alyssa K.

    Even as a Realtor, I have to honestly say it doesn’t seem to look like you need one. If you can handle rentals all by yourself, why not the sale? You’ve purchased multiple times so you already know the transaction process

    At a minimum, list on something like Zillow. I’d recommend at least offeroring to cooperate with realtors who want to bring their buyers, unless you want to try to save that commission as well.

    I assume/hope in Texas you have discount brokers out there who will put your listing on the MLS for a small fixed fee (~$500) but won't handle the transaction for you. At least, all the Realtors will see it, but you will have to offer a cooperation commission.

    It sounds like you know what you are doing. Real estate isn’t like law where you really should never represent yourself. You appear to know what you are doing, know your market, and I hope can rationally sell/negotiate the transaction. I’ve heard of one couple who takes the arrangement where one is the “seller” and the other is the “realtor.” Or creates that separation to keep an “emotional barrier” that a Realtor provides.

    I will say, security/safety should be something to think about. If you have to show property and you have young children with you, you might want to rethink your plan. I don’t know if you guys also use electronic lock boxes — I hear about how some states are still slowly moving to them. They are expensive, but good to have since only Realtors have the app to open them, and they are satellite tracked so you know when they are opened. That being said, investors fsbo all the time...

    In short, what are you looking for from a Realtor, and is it worth it to you.

    Just my two cents. Take care and good luck

    1Reply
  • Alyssa K.
    OP
    Member since 2018 · 156 posts · 106 votes
    6y

    @Angie Shires Definitely is the question. I’m confident we’d be able to do all those things for ourselves (we’ve bought every property we have off market and are familiar with the process on the buying side). Thankfully once numbers are involved we are both good at detaching emotionally and just looking at the numbers. If we use a realtor, it will be because buyer perception requires it, not because they would be able to negotiate the deal in a way other than I’d be capable of doing. It would be less of an issue for me if we only had to pay for the realtor who represents us. Subscribing to a system that allows a buyer to choose whoever they’d like to represent them and their interests, and for some reason it’s the norm for me (seller) to foot the bill for them choosing to hire someone seems counterintuitive to me. I’m sure this view is largely because I’ve yet to meet a realtor on the buyer side who is a value add. We’ve made the rule for ourselves to only use relators who are also investors, and this has greatly strengthened the value add of a realtor for us when we are buying, however, even still, we’ve found all our deals off market because we always seem find them before a realtor gets the lead to us.

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  • Alyssa K.
    OP
    Member since 2018 · 156 posts · 106 votes
    6y

    @David David This has been my thought as well. I’m completely confident in my ability to negotiate the transaction just as a 3rd party would. In managing the rentals I act as a detached property manager, and refer to my husband as “owner/landlord” if an issue ever arises. This has seemed to serve us well. I am considering getting my license as well, but every time we look into it, it seems it complicates being able to self manage, and we are hesitant to alter a system that is working well.

    My main concern in fsbo is buyer perception. Because our current renters wanted to renew, I offered them first option to buy. They were interested and asked for my relators information, when I explained I wouldn’t be using one if we sell off market but I’d be willing to pay their realtors commission, they dropped off the face of the earth. I have encountered multiple relators who bad mouth owners who fsbo, making it seem as they are doing so because they are trying to hide something or are money hungry. I’m not sure how to navigate around this perception hurdle, but also have a hard time paying 20k in commissions to overcome this one obstacle.

    Safety is something I strongly consider each time I do a showing. When renting I require a pre-approval questionnaire to be completed prior to scheduling a showing, which has given me an idea of who I am to meet, and weeds out the people who are just board and like to check out showings. I think this might be perceived as too much up front effort for a buyer however.

    We are meeting with my husbands mentor tomorrow to really hash out the details, but this group has always given great insights that would be valuable to include in that discussion.

    Thank you for your time and advice!

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    6y

    @Alyssa K.  You've done well so far.  Why not try to sell it yourself giving yourself a time limit and if it doesn't sell within that time, go with a realtor. You may limit your pool of buyers as you will need to do the showings (unless you have a lock box or way to let them in). You said you'd net the same amount of money either way, but it sounds like you want to try to sell it yourself.  I agree with what others posted about not doing showings by yourself.

    0Reply
  • Patrice Boenzi
    Real Estate Agent · Geneva, IL · Member since 2015 · 403 posts · 172 votes
    6y

    @Alyssa K. it doesn’t have to be one or the other, at least in Illinois. We have what’s called exclusive agency which allows the owner to try to sell by owner, but it also gives the Realtor the right to market and sell the property too. The way the commission works is if the agent sells it they get whatever commission was agreed-upon and if the owner sells it they can pay the agent a flat fee to manage and help with the paperwork. Sometimes the agent will charge a flat fee if the owner sells it and they don’t want them to handle the paperwork just to cover some of the marketing cost.  That flat fee is decided upon between the owner and the agent. It’s like the best of both worlds sometimes.

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  • Lynn McGeein
    Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes
    6y

    It sounds to me like you're fully capable and have the time to research things like required disclosures, finding a local attorney to handle contract and closing, so if you're ok showing the property, yourself, or putting on a contractor box and allowing agents to show their clients for a commission, knowing they represent buyer, not you, then it sounds like you're fine to FSBO. I did it myself several times before getting my license.

    If I were in your situation, I'd seriously research whether you want to obtain your own license as if your goal is buying 2 properties a year or flipping, you may find a broker that charges reasonable fees, then save yourselves a lot of money being able to represent yourself in transactions, having access to MLS, and being able to view homes without assistance required. My broker charges a flat rate per year, totally worth it in my circumstance as not only do I save money for myself and my family, but I work with select clients and save them a lot on commissions as well. I use my commissions earned to save up for more rental property. And my broker is very helpful when I have questions, so do your research and don't listen to the ones who say the lower-fee brokers don't offer training or assistance, because many do.

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  • Marcony Simoes
    Investor · Fairfield, CT · Member since 2017 · 43 posts · 19 votes
    6y

    Hi, glad to see this post, im in the process of doing the same. I'm experienced with managing rentals and feel pretty confident that i can handle the sale. The one area however i can use a bit more clarification on are the contracts i need to have ready. Specifically, lets say you have an accepted offer and the potential buyer needs to give you the earnest deposit, who will hold the cash? 

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