Buying an FSBO Home - A Good Idea?
Buying an FSBO Home - A Good Idea?
A For Sale By Owner (FSBO) home is a home that is for sale by the owner. This means that the owner is selling the home without the help of a real estate agent.
A seller will put their home on the market, but not usually through the traditional multiple listing service an agent might use. They will find another platform, usually suited to FSBO sales. They will write up the listing and post it all without the help of a selling agent, also known as a listing agent, to try and save money. Not having an agent means no need to pay the agent's commission.
There are online services that list FSBO homes exclusively and many buyers consider buying a home through FSBO sellers if the home fits their criteria but is that a good idea?
It depends.
Pros of buying an FSBO home.
A more personal approach to selling and buying a house.
When dealing with a For Sale By Owner home, buyers will be able to get a more down-to-earth description of the house and good knowledge of what it's like to live in the home.
Beyond just the features, the owner can let the potential buyers know about the best spots in town or the neighbourhood quirks. Things that a buyer would usually find out after signing a purchase contract.
FSBO sellers, having personal contact with the prospective buyers, can also be more amenable to some buyers depending on the circumstances they find themselves in. With an agent involved, the home buying process can start to feel less personal and more about property taxes and closing costs than the transfer of the seller's house and the creation of the buyer's own home.
Cons of buying an FSBO Home.
Lack of due diligence.
FSBO homes are often sold as-is and home sales done this way can lead to some bad surprises down the line.
An owner may not have done their due diligence when it comes to properly evaluating their homes' need for repairs before a real estate transaction can take place.
An FSBO deal may sound too good to be true only because a home inspection hasn't happened. Going too far down the process for an FSBO house that is then deemed to be a money pit means that critical time is lost by both the buyer and the seller.
Lack of professionalism.
There are many things owners do not consider during the sale. It's not because of malice or ill-will but simply a lack of knowledge.
After all, being a professional real estate agent is a full-time job.
This lack of professionalism can manifest in several ways for home sellers. Listing agents will often create the best possible environment to showcase a house during an open house, they are also bound by rules and regulations that prevent them from vastly overselling a property. They also need to remain ethical and negotiate properly when the time comes for that.
A home sale is an emotional process and the home value can be greatly overestimated. An inflated sense of value is almost to be expected. In a buyer's market, this can mean that the seller can become jaded and too guarded for their own good.
When emotions get in the way, the sales price of a home can skyrocket and price out buyers that could have been making perfectly reasonable offers.
Lack of information.
The transfer of home ownership is not the simplest thing when it comes to real estate.
There are a few options available to buyers and sellers involved in a sale-by-owner situation so that they can gather all critical and other documents needed to validate the sale of a home in a timely manner.
An FSBO transaction can be shaky and take longer than if real estate agents were involved.
However, it's worth noting that something that happens often is the involvement of a transactional agent that is hired during the selling process to look over the legality of the purchase agreement. It's cheaper than hiring an agent to help with the whole process but it does involve paying a fee.
Considering the amount of money changing hands during real estate transactions, it's best to have a real estate professional involved at some point. Every real estate sales contract should be verified by a real estate lawyer to certify its binding nature and fairness.
Can a buyer still hire a real estate agent?
Whether a buyer needs some reassurance or they came across an FSBO home that fits their criteria, it's perfectly legal and reasonable to have a buyer's agent present during an FSBO transaction.
The key point to discuss for the potential buyer and the seller is who will pay the agent's commission. It's typically the seller in traditional scenarios. In the case of an FSBO sale, smart sellers will be more willing to foot the bill for the buyer's agents if they found a good deal. However, it's vital to discuss that part of the transaction in clear terms to prevent it from causing the deal to fall through.
What else should you keep in mind for an FSBO sale?
As a buyer, it's critical to do the usual things when it comes to an FSBO. If you're working with an agent they can let you know, depending on market conditions and a comparative market analysis if the home is worth the asking price.
Should you be curious enough, a home inspection is essential for an FSBO since you do not want to be saddled with repairs for the property that the seller did not see fit to mention or genuinely missed.
A home loan, or mortgage, will also be necessary unless you can cover the purchase price in cash outright. This means that an FSBO is not a way to circumvent the need to deal with a mortgage lender.
Lastly, as potential buyers, remember that you need to be careful with any home that seems attractive. The purpose of every listing is to attract buyers and when those listings are written by the homeowner, they are not held to the same standards as a seller's agent in a typical sale.
FSBO homes can be a great way to save money but without proper care and precaution, this could cost far more in the long run than it saves in the short run.
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