Here is a list of 11 tips when buying a FSBO. Today’s housing market is hot, hot, HOT. Homes that are in decent condition are flying off the market at warped speed because they are priced right. To say that now is a great time to sell your home is an understatement.
In addition, the percentage of homes on the market being sold by owner sits at around eight percent nationwide. Which means that buyers who have been burned in bidding wars are tempted to pursue FSBO’s.
But while buying directly from an owner may seem attractive, there are very real problems that commonly occur when the seller (and the buyer) isn’t represented by a real estate agent. Here are some things to look out for:
1. The paperwork
The National Association of Realtors’ Profile of Home Buyers and Sellers shows that “paperwork” is one of the most challenging aspects of selling a home without an agent. A Google search of What forms do I need to sell my house garners approximately 118,000,000 results.
The FSBO’s challenge is knowing which forms are required. And unless the seller is a lawyer or a real estate agent, or is knowledgeable of state law, understanding the paperwork is going to be quite difficult. So be overly cautious about assumptions made by a legal and real estate novice when buying something as expensive as a home.
2. The money
During a FSBO purchase process, you’ll require the services of an attorney. It’s far too dangerous to proceed without professional consultation. This means a “for-sale-by-owner” is going to cost you far more than if you were working with a real estate agent.
Next, negotiating a sale price is also going to prove tricky. Most homeowners haven’t a clue as to the true market value of their homes. Even if the homeowner has employed the services of an online discount broker or a for-sale-by-owner company, there’s no guarantee that he or she will have accurately priced the home for the market. In fact, many of these companies aren’t even run by real estate professionals, there’s a very real possibility that the homeowner received bad advice and that home you’re contemplating making an offer on is overpriced.
This brings up the third money issue…how will you know that you aren’t overpaying for the home? There is a common assumption that since the seller is saving money by not having to pay a real estate commission, he or she will pass some of that savings on to the buyer. In reality, the buyer’s goal is to same themselves money, not their potential buyer. So don’t count on getting a discount.
3. The integrity
Nationally, sellers are supposed to disclose the presence of lead-based paint in their home if it was built before 1978. Sellers are required to disclose any material defects concerning the property, as well. However, the proviso to this disclosure is that the seller is only required to disclose items that are within his or her knowledge.
An unscrupulous or ignorant seller may see this as an opportunity to “fudge” on the details. Sellers represented by professional real estate agents, on the other hand, are warned that anything less than complete honesty is not in their best interests.
If it’s too late, and you’ve fallen in love with a FSBO home, take the following precautions:
- Get everything in writing.
- Do not sign anything until you’ve run it by your attorney.
- Deposit your earnest money deposit with a neutral third party (ask your lender how to set this up) – never give it to the seller.
- Never waive the home inspection and be willing to pay for additional inspections if conditions warrant.
- Ensure that the seller actually owns the home and that no-one else has a claim to it by ordering a title report.
Protect yourself before looking at FSBO’s by communicating with your real estate agent. He or she can approach the homeowners to determine if they are amenable to paying the agent’s commission. This way, you are represented and protected, and at no cost to you.
4. The documentation
The best advice is to get everything in writing. Do not sign anything until you’ve run it by your attorney. Deposit your earnest money deposit with a neutral third party (ask your lender how to set this up) – never give it to the seller.
Never waive the home inspection or be willing to pay for additional inspections if conditions warrant. Ensure that the seller actually owns the home and that no-one else has a claim to it by ordering a title report. Protect yourself before you sign on the dotted line and end up with a “money pit.”
5. The loan approval
Before you even tread into the FSBO pool of home sales, make sure you can even qualify for a mortgage. If you found a seller that your are confident with, don’t lose the bidding war on their home because you are not pre-approved. This way, when you find the house you want, you are ready to move on the sale quickly.
6. The contingencies
You’ve found a home you really want, make sure your offer doesn’t have too many contingencies. Offers with too many demands and lengthy contingency periods will most likely end up at the bottom of the FSBO’s pile. All homeseller’s want top dollar, so naturally the offering price will be the first place in the contract they look. Be reasonable. The buyer that wins the home won’t ask the seller to purchase a home warranty, pay for closing costs or get nit-picky on repairs he wants the seller to either make or pay for.
7. The cash
Cash is just is “king” in real estate. The all-cash buyer have an enormous advantage over buyers who need financing to buy the home. If you can’t pay cash for the home, a larger down payment will be attractive to the seller. Some sellers are impressed with a large earnest money deposit and that strategy just might give you an advantage in a bidding war situation.
8. The homework
If you lose the bidding war it’s because your competition outsmarted you. They hired the right real estate agent who painstakingly researched current market value in the neighborhoods so their clients knew exactly how high to bid and when to stop. Do your homework — find out what the seller’s motivation is for selling and what you can do to help the seller reach his or her goals. Then, structure your offer to purchase accordingly.
9. The timing
If you’ve missed out on a number of homes by not being among the first to view them, it’s because time is of the essence in a sellers’ real estate market. It may be challenging to create time in a busy schedule to tour homes for sale, but it’s a must if you hope to be competitive in a multiple-offer situation.
This is where an agent is comes in handy. They will vigilantly seek listings that fit your criteria and will notify you of new listings as soon as they hit the market. Hone your tactics and strategy and enlist a battle-hardened real estate agent and the chances are good you’ll prevail.
10. The marketing
Pay close attention to how an FSBO markets their home. Do they have it listed online or just with a homemade sign in the front yard? If it’s a sellers’ market, a FSBO may just opt for the latter strategy to sell their home. But be wary of such laid back techniques. It could be a symptom that they just want to unload their home in the quickest way possible. A seller that markets online or in weekly flyers knows that their home is worth taking a look at.
11. The photographs
In the real estate industry, nothing sells a home better than photographs. Obviously, when you start looking for a new home to purchase, your first tool is the internet. Homes that are photographed by a professional net the owner more money and sell faster than those that were marketed using photographs snapped by an amateur.
The Non-Negotiable List For First Time Home Buyers via Frederick Franks
10 Low-Cost Tips to Sell Your Home Fast For Top Dollar via Maria Mastrolonardo
Improvements That Will Boost Your Home’s Value via Bill Gassett
Tips For Buyers and Sellers – A Roundup of Top Articles via Joe Boylan
Wendy Weir Relocation – Real Estate Agent, Relocation Specialist, Birmingham, MI
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