What is a Financial Stability Score and Why Should a RE Investor Care?

Financial Stability Score (FSS)  allows the real estate investor to target homeowners who are likely to be struggling financially in their mail campaign.

In a nutshell, FSS offers an additional level of pressure for your motivated sellers list.

The FSI model was originally developed for companies selling high-ticket items where customers will probably take out a loan. For example, window replacement companies and car dealers only want to mail to people who are likely to qualify for a loan. It keeps them from wasting postage and salesman’s time to bring in tire-kickers with low scores. The fact that FSS takes hundreds of data points and lifestyle factors into account, it is a much better indicator than income alone.

RE Investors that are in search of “motivated sellers” can utilize the lower end of the stability spectrum for their seller lead list. The good news is that this can be applied to various lists including Absentee Homeowners with Equity and Seniors with Long-Time Ownership (ready for downsizing)

The Financial Stability Indicator is a 2-digit score on a scale of 1-30 that is assigned to households. A score of “01” indicates the households at the top - very financially comfortable. A score of “30” would be people who are really struggling. While financial data was used in building the model, the ranking does not directly correlate to the credit scores. There are very few homeowners with a score under 20, as most of those would never have been able to qualify for a mortgage.

New and experienced investors alike should consider testing FSS on their next direct mail campaign. This is especially true in competitive markets because it allows you to target groups who aren’t getting offers from a lot of other investors.