Are you hooked on the idea of buying a house that’s ‘for sale by owner (FSBO)? What is stopping you from doing it? Perhaps you’re not entirely comfortable with the idea or have heard horror stories of what can go wrong.
Well, like other decisions of life, the FSBO option has its pros and cons. Despite any hesitation, you may have, if you are committed and invest time in doing your homework ahead of time, you can effectively mitigate the risk.
Here is a Guide to Help you out:
As the phrase suggests, an FSBO transaction occurs when the owner has decided to sell the home without the help of a real estate agent. The decision is personal and could be fueled by various reasons, but most of the time sellers want to save the money they would have paid on an agent’s commission.
Still, other sellers might not fully trust an agent to have the seller’s best interest in mind. In FSBO situations, the owner does the work of getting the house listed and, ultimately, sold.
FSBO extends a unique set of problems, but if properly managed, this method of selling can prove to be extremely beneficial for both the seller and buyer.
For any number of reasons, a potential buyer may be skittish about buying the property directly from the owner. One of the most common myths about FSBO is that owners who go that route aren’t really serious about selling their property.
Instead, the owners have only listed their homes to check the pulse of the market and see how much they could profit from selling their houses. This is not true at all. While some may think that way, the majority of sellers who list their homes as FSBO intend to sell their property.
Another myth is that homeowners who manage their own listings aren’t flexible in setting the home’s sales price. This isn’t necessarily true since most FSBO properties sell under market value.
But most, if not all, homeowners who are managing their own home sale are willing to negotiate with potential buyers, although it’s probably not their forte.
One reason that often keeps buyers reluctant to buying FSBO is that some homeowners don’t accurately reveal the conditions of the house. However, sellers have a legal obligation to reveal material facts about the house to potential buyers.
Some may also think there is no need to get pre-approval before buying a property that’s FSBO. Pre-approval is always a good idea of whether you are buying traditionally or through FSBO. Sellers appreciate the idea of knowing the buying capacity of the potential buyer.
The seller is responsible for paying the commission to the buyer’s agent. Even if the homeowners decide not to hire an agent, most sellers will be more than happy to pay the buyer’s agent commission. You may find an agent by yourself and let the seller know about it.
Generally, agents aren’t excited about their client opting for a property from FSBO as it runs the risk of losing commission. Therefore, they rarely recommend such properties to potential buyers even if they know there are some FSBOs on the market. And most agents don’t want to manage the workload of both the seller and buyer.
This should always be Step One. Reach out to lenders to see if you qualify for a home loan and, if so, how much you’re approved to borrow. You will need to provide certain documents that provide proof of your income such as pay stubs and tax returns.
Getting pre-approval will also give you a ballpark price range for the homes you can afford based on the amount of money you can borrow. Getting pre-approval gives sellers the impression that you are a serious buyer.
Before placing an offer, you need to visit the house. Homeowners usually like to keep home inspections short and simple and, when there is no agent involved in the deal, chances are you will be visiting the home alone with the owner while conducting the inspection.
Do not underestimate the inspection process and pay full attention to every detail in the house. Do not hesitate to check the doors, basement, or closets if you feel like it.
You need to be careful with your offer. In a real estate deal, prices tend to go up during the negotiation phase.
To be in a good position, consider making an offer that’s less than the market rate so that you can gradually increase the amount and hopefully land as close as possible to the market value when all is said and done.
It is always a good idea to build a contingency plan when you don’t have the assistance of a professional. It will give you an option to walk away if you feel unsatisfied with the deal.
Don’t hand your earnest money directly to the homeowner. Instead, transfer it to a third party or into the escrow account. This way, you will not run the risk of losing earnest money if the deal falls through.
As a buyer, you should adopt certain legal and professional practices before striking any real estate deal even if the seller has not hired an agent.
Even if there is any risk involved in buying a home for sale by the owner, consulting with the agent or attorney effectively reduces the risk.
How Much You Can Afford to Spend Buying a Home
Complete Guide To Buying A House In NYC 2022
Should I Buy a House Without a Realtor?
Can You Buy a Home That’s Active Under Contract?
How Long Does It Take To Buy A House? A Step By Step Guide