Just because it's free it doesn't mean you can sell it. Be careful when using a reference or photo.
Fan Art is a complicated subject to discuss. Many think they can copy the art of others and use it without permission, even sell it.
It can be tricky when an artist uses references and can't create something completly different from the reference. Making a few changed doesn't make the original art yours.
Many use fan art to build up their popularity. The only way I agree with this is when the artist is able to create something completly new. The artist should shows its own style, should be able to show its own vision of a character, or piece of art and therefore bring something new and greater to the reference piece.
In the comic/ manga world, for instance, making Fan Art will help the artist to show skills and how he/she can get a job and improve the artwork in an awesome way. It's a way to show off skills and creativity.