If you are a buyer and want to make an offer on a home that is For Sale By Owner (FSBO), there are several things you should consider.
For a little background, homeowners that choose to sell their property without an agent usually do so for a variety of reasons, but for the most part, they don’t want to pay a real estate commission. Many sellers are under the impression that they save themselves a lot of money. While this is not necessarily true, as many FSBO are underpriced, I always suggest that buyers do careful research when buying directly from a home seller.
1. Find what comparable homes sold for BEFORE you make an offer. Don’t look at active listings, but only recent sales. Active listings don’t mean that this listed price is what a home will eventually sell for.
2. Make sure you build contingencies in your bid as you will need a way to cancel the contract if everything is not satisfactory to you. The last thing you want to happen is losing your earnest money deposit.
3. Get an inspection! Many FSBO sellers will present a home inspection that they initiated prior to putting their home on the market. While that is helpful, a buyer should always hire their own professional inspector to conduct a thorough investigation. Make sure you find one that has an excellent reputation and that you walk around the property to ask questions. Again, and I can’t stress this enough, don’t rely on the seller’s inspection only. Protect yourself and your bank account.
4. Spend the extra money and hire a real estate lawyer! Plan on spending up to $500 for a lawyer to review your contract and give you some advice. This is very important as you want to make sure you completely understand what you are signing and that everything is on the up and up.
5. Ask the seller, or pay yourself, to make sure you are in possession of a title insurance policy so you are assured your home is clear from liens.
Of course, there are always risk when buying a FSBO. And I’m not saying this because I am a real estate agent. While there are agents out there that only care about the bottom line, the vast majority are in this business because they really enjoy what they do – which is providing quality service to their clients and saving them as much money as possible. But not using an agent to buy your home, means the following:
1. A buyer must handle their own negotiation. Buying a home is not the same as purchasing a car. This may be the most expensive purchase you ever make, and if an agent can successfully whittle down the price of a home by thousands of dollars, they can literally SAVE you money!
2. By not using an agent, you are only saving the SELLER money, not yourself. You don’t have to pay agents, but the seller does pay a commission.
3. Not using an agent means you don’t have a neighbourhood specialist. Buyers, especially those new to an area, often rely on their real estate agent to answer specific questions about the neighbourhood, schools, local shopping and entertainment, crime rates, etc. They can also let you know if the area you are searching is considered good or bad. Buyers should know everything they can about a community they are interested in, and not everything can be found on the Internet.
4. If you don’t use an agent, then you may not receive all of the disclosures you are entitled to. While homeowners may not intentionally withhold this information, you may not know what to ask for, yet your agent will. This can save you thousands of dollars if you later discover that there is a roof leak, mold or any other issues that a home inspection doesn’t discover.
5. Having an agent provides peace of mind. With an agent, you know that every “t” is crossed and every “i” is dotted. You can rest assured that as long as you have a professional, dedicated real estate agent representing you, that you have paid the least amount in closing costs, the paperwork will be explained and thorough and you will have good recommendations for finding a lender, home inspector and any other help that is needed.
So again, who is really getting the better deal when a buyer decides to by FSBO without a representative? It’s not the buyer. And most of the time, it’s not the seller either. And while there certainly are successful transitions of this sort, there are those that have turned out to be nightmares.