FSBO Horror Story

(some details are changed to protect the party’s privacy) I was acquaintances with a couple that had separated. They had missed some payments on their house and were probably going to be foreclosed on within a few months.  They wanted to sell their house but they didn’t want to pay a real estate agent so they offered it For Sale by Owner. I didn’t even know they were selling their house.   A real estate agent came along and offered to sell it for NO commission to a developer and that he would represent the buyer (the developer).  The agent disclosed that he was a partner of the developer which is why he was doing it for no commission.  They gave the seller $450,000. This gave the couple $10,000 to split after paying off the loan and back payments. The exwife and 2 kids were now looking for low income rental housing.

The developers remodeled the house for $150,000 and built a new house in the back yard. Both houses sold for $750,000.  This means that the developer paid $0.00! for the lot to build on….a value of $175,000 plus made $100,000 on the remodel of the existing house, plus their profit on the new house.   I later ran into the developer and asked him if he would have paid $175k more and he said “absolutely”.

So the exwife got $5,000 and had to find low income housing instead of her share of $185,000. Even if they had paid a full commission to have a full service realtor represent them and list it on the MLS they still would have made around $150,000 to split.