Buyers Guide to For Sale By Owner Homes
Everyone knows that looking for a home, if it’s your first home or your tenth, it is a daunting experience. Sometimes buyers would prefer taking matters in their own hands. Sometimes they don’t know where to begin or want to have control over the buying process. Occasionally this means looking for homes without a real estate agent, and less paperwork. At times buyers will only seek out, or stumble upon For Sale By Owner, or “FSBO’s” for short.
Just like everything else in life, buying a For Sale By Owner home has its pros and cons. No matter what your home buying experience, there are still plenty of things to consider when you buy a For Sale By Owner house.
Most people who choose to sell a home on their own without an agent, are doing it just to save on the commission (paying a real estate agent). They don’t want to be tied to an agency and owe them a commission. This should mean that the home is less expensive than if a real estate broker had the listing and sold it. However, this is not always the case.
One of the major issues with FSBO’s is that they have no way of doing proper comparables, or comps of the area. Comparables are homes that have sold in the area and have very similar amenities to the subject property. The FSBO’s asking price might be astronomically off of the comps that the neighborhood suggest. If you hire a real estate agent, they can pull comps for you, and together determine the true market value of the home, and together you can submit an offer to the For Sale By Owner.
Normally when you list your home for sale, your real estate agent will be the one scheduling showings. They will also instruct the home owner to leave the home so that prospective buyers can look at the home in peace. With For Sale By Owners, they are almost always there and hover around you as you look at the home. A lot of them have a tendancy to try and oversell the home. Naming every upgrade and tweak they have done over the years. They also don’t have any experience staging a home, most likely. It can be very difficult to look past, and enjoy the potential of the home.
Most states have required forms and disclosures that a seller needs to fill out when they sell a home. These disclosures have the seller fillout any alterations, or defects that might affect the sale. This even includes deaths that have occurred on the property. The problem with FSBO’s is that they don’t realize this and also do not have access to these disclosures. First time buyers usually don’t know this. If you don’t get the information up front, its possible that you could be buying a home that you never would have, had you known of the past issues.
It is always a good idea to have an agent represent you when you want to purchase a FSBO home. The purchase agreement that real estate agents have access to have a lot of ways to cover the buyer and also the seller. Be sure that you are fully aware of what you are signing before you sign it. Make sure that you are comfortable with what you are signing, and if need be, review it for some time. Make any revisions necessary, and then try to negotiate and move forward with the transaction.
When you get an offer accepted on a home, you will need to put down a deposit. This money will hold the property during the negotiations, inspections and the transaction. Most sellers will want the deposit to be about 1% of the total purchase price. If the For Sale By Owner wants a deposit, make sure that the deposit is being held by a reputable escrow company to hold the money. If you want to know more aobut the escrow process, read here.
Just like all homes on the market, it is possible for a For Sale By Owner to get multiple offers on a property. Be aware that unlike when there is a real estate agent helping a seller with the sale of their homes, most FSBO’s don’t feel obligated to keep prospective buyers in the loop. You might be waiting a long time before you hear anything back about your offer, if anything at all.
No matter what, we always recommend having a home inspection. It can also be beneficial to also have a roof inspection and a pest inspection. It is a good idea to have a licensed home inspector check everything in the home to make sure everything is working as it should and make you aware of any potential issues. At this point in the transaction, you still have the right to back out of the deal. You can also negotiate any repairs before you proceed. Something to keep in mind however, is that the wording in the purchase agreement states the home is being sold “as is”. This does not mean however that you are forced to buy it “as is”.
Final Walk Through
This is one of the most critical steps. Its very likely that you fell for the house when it still had the sellers items in it or was cluttered with moving boxes. Once the seller gets their belongings out of the house it is very important that you see it yourself. Check to make sure that there are no new problems with the home and make sure that it is in the same general condition as when you purchased the home.
Is it worth it?
Some people wonder if it is worth dealing with a For Sale By Owner to find your dream home? It is definitely a possibility as long as you are fully aware of what you are getting into. If you have a trusted real estate agent on your side, it could be a very beneficial purchase. Just recently, we helped a couple get into their first home, and it was a For Sale By Owner home. We were able to get their home below market value, and they had instant equity in the home after the purchased it. Contact us today to see how we can make it possible!