Are you certain you want to buy (or sell) FSBO?
Ask yourself if it's worth the risk......
Over the weekend, I had a client contact me to let me know he decided to pursue a home purchase being offered "FSBO," otherwise known as 'For Sale By Owner.' Of course I didn't take this as the best of news. I responded by saying I respect whatever decision he chooses to make yet I'm here to help regardless and thanks for the opportunity to be of service. In addition, I felt obliged to bring a few things to his attention, to help him make an informed decision, which is part of what being a good Realtor is all about. Admittedly, I continue to hope he will decide after processing the things I've shared, to come back to me. At any rate, this experience has served as inspiration for publishing this hub.
Now unless a person is a Real Estate professional, someone who works in an associated industry such as title and escrow, an Attorney specializing in real estate law, a seasoned investor to possibly include builders and developers -just to name a handful - I wouldn't suggest purchasing a property through a For Sale by Owner scenario. If you have - or are currently considering going this route - below are a few things to ask yourself and keep in mind.
1. How will you be arriving at what is a fair price for the property without the assistance of a professional, as well as will you be able to negotiate for yourself the best possible deal for you? I know with us being in an age of computers, pulling flyers from other properties in a neighborhood, as well as even consulting comparables listed in local newspapers, savvy people may be able to get an idea regarding fair market value. If one isn't a professional however, my experience w/ sellers in particular utilizing such tactics is they often are unrealistic about their price. As a seller, what's the time frame/how soon does the property need to sell? If one doesn't have a Realtor heavily marketing and drawing traffic to the property, resulting in a good and acceptable offer coming to the table in a timely manner, will the additional months of mortgage payments being made justify the savings of not employing a Realtor or offering a commission in the first place?
2. For any sellers considering offering your property FSBO, websites like Zillow are more often than not, WAY OFF with their 'zestimates' of fair market value for properties. Now if I had contact w/ a seller who was considering this route, I'd of course be happy to prepare a CMA (competitive market analysis) and even visit their property to point out things which would help them succeed with their efforts to sell 'For Sale by Owner.' I hope that if they did not sell on their own, they would do the honorable thing when (and if) it comes time to list w/ a Realtor, giving me the opportunity. I'd also encourage them to offer a commission to a buyers agent to attract increased activity and also get some added protection and guidance since when I've represented buyers in the past on FSBO transactions, there are indeed duties I've performed which would have been part of the listing agents duties, had the seller had one. If a seller does succeed w/ their FSBO efforts, I'd hope they'd remember to refer me to others they know looking for a Realtor based on an appreciation of my contribution, recognizing the value added to their success and or experience.
3. It's not uncommon for people to list w/ companies who basically only put a property on the local Multiple Listing Service (MLS) and then let them fend for themselves...this is a better alternative in my opinion in comparison to a seller and a buyer trying to strike a deal together on their own....you won't get much in the way of service and aside from being on the MLS, there won't be much if any marketing (if any, I can guarantee it would be from another party). With the market being what it is today, I believe marketing is necessary and important.
4. Sometimes there are things on a title report, unless you are familiar with what they are and what they translate into for you as a buyer, there's a good chance you may get yourself into something you could regret. Now laws vary from state to state but on the federal level, they are the same. I've done business in both Hawaii and Washington (and I know Hawaii laws are modeled after California). Based on these experiences, our contract forms are designed to hold sellers accountable and more often than nought, to protect a buyer. Without using state association approved forms, a seller is not as at risk for liability. I would definitely question where the seller is headed....if they are leaving the state - for a buyer working without a realtor, I'd see this as a red flag. At the very least, you will want a real estate attorney to review everything. For me personally, I have an escrow company I like to work with who also specializes in real estate law....even though escrow is to be a neutral third party, this is a nice 'perk' for me and my clients.
Here is a first hand, true life example to support why one would want to use a Realtor. In January of 2006, I wrote an offer on a new construction home on 2.8 acres (approx 120,000 sq ft) in Monroe. Once I received and reviewed the title report, I noticed ALL but less than half of one acre (approx 20,000 sq ft) of the property was NGPA or "Native Growth Protection Area." Legally, for my buyers, this translated into them not being able to landscape, ride ATV's, have grazing animals etc on the majority of this property. Once I brought this to their attention, they decided they didn't want the property and were able to back out, based on the contingency time frames (another reason for working w/ a Realtor, to know what needs to happen when so as to not be out of contract). Anyway, back to my example. So my clients backed out, got their earnest money back and we were done w/ the seller and his agent and that property.
A year later, another agent from my office got a new listing and I noticed it was the same property I had rescinded the contract on for my clients a year earlier. The seller of that property had decided to not work any longer w/ real estate professionals and to attempt selling FSBO. Obviously, there are rare occasions, these attempts do actually succeed. So my fellow Realtor friend w/ her new listing, her client had bought the same property through the seller not knowing the issues regarding the majority of the property being NGPA. As it turned out, there were also issues regarding placement of the septic system which I hadn't yet discovered since with my experience with this property, I hadn't yet pulled the county "as built" for the septic system design....the NGPA issue was enough to know it didn't make sense for my clients to go any further. So anyway, her client ended up buying the property thinking it was a great buy and he was going to "flip it" for a profit and so employed her to be his listing agent. Having bought it FSBO, he was unaware of these other issues and he still has not been able to sell the property, a year and a half later. As far as I know, the FSBO buyer of this property (who has tried to sell) has not been able to pursue any legal recourse.
5. Lastly for a buyer to keep in mind, sometimes a Seller who has decided to try and save on commissions but has not listed through a discount company (who basically only lists property), some sellers may still be willing to pay a Realtor a commission. If they aren't offering what is known as "courtesy to broker" (willing to pay a commission to a Realtor), usually they will if the offering price reflects it (if they won't, I'd question if they might have something to hide!).
I'm not attempting to intimidate or scare any readers but to make people aware that there are benefits to employing an ethical Realtor, who will "have your back" so to speak when it comes down to purchasing (and selling) a property. As stated in the example, someone who is not working w/ a Realtor could be attempting to hide something and a buyer who is not experienced w/ the process or what to look for could be putting themselves at financial risk.