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They can't afford to hold on to unsold homes.

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In my area the break even point for a builder on a single family home is 12 months. The builder can afford to build a spec home and carry it for 12 months to break even. Any longer than 12 months, and he loses money. I don't know any commercial builders that develop large condo projects, but my guess would be that the cost per unit is much lower in a condo development, and thus, the developer can afford to carry the units longer to break even. I'm sure that the carry time to b/e varies with location, as well as other market factors such as the availability of credit, etc.

Also, I'd bet that 20% of the condos in a new development generate the profit for the project. So really, the developer only has to sell 80% of his project to break even. The rest he can afford to hold indefinitely as long as the taxes don't kill him.

Fundamentally that builder is looking to sell those homes though. If he's having a hard time moving his last 20% and making his profit, surely he'd start to make some decent deals with bargain-conscious buyers. See he's not attached to those homes at all. He is only trying to make money. So if you bring him a deal that makes sense, he'll probably take it.

Now, contrast that with the FSBO old lady. First, she's a penny-pincher that is too cheap to hire an RE agent. Or she could be a person that took out a 100% LTV loan two years ago and doens't have enough equity in the home to be able to pay an agent. Either way, there won't be much room for negotiating.

Also, that old lady probably THINKS she knows how much her home is worth. The problem is that the average FSBO seller isn't privy to information like the # of similar homes on the market, the # of recent home sales, etc. She has NO IDEA whatsoever (generally) the condition of the current market. So she'll stubbornly hold onto her price.

Plus, that FSBO seller gets very emotional during negotiations. She'll get insulted when you low-ball her, and she'll feel that your low offer is a reflection on HER rather than her house in the current market. Last week I had a FSBO seller literally start shaking he was so mad at me and my offer. Needless to say, that deal didn't work out.

I think that a lot of the time inexperienced RE investors think that FSBOs just don't really know anything and they can get a great deal. Well, in my experience you're MUCH more likely to get a great deal from another investor, a developer, or a bank than from a FBSO seller.

Just my two cents.