When buying a home, you may occasionally come across a home that is ‘For Sale by Owner’ that seems to be a good deal. If you are in the process of looking for a new home, you might be tempted to look further into this – but what does it mean, and are there any specific problems involved? Surely every house is sold by its owner – who else can sell it except the person that owns it?
What that actually means is that the owner is bypassing the real estate agent and selling it personally. That enables the seller to save on realtor costs. Property prices have not yet recovered, and many people are still in negative equity. Others are just on the cusp of equality between the value of their home and what they still owe on it. Yet others are just on the positive side.
It is difficult to sell a home if you have negative equity, because you must come up with the difference in cash. Those homes on sale by owner are often just over the equity cusp, where the seller want to keep the costs to an absolute minimum. They might also involve sellers that object to paying realtors to do a job they believe they can do themselves – but can they?
For Sale By Owner: What it Means to You
Well good luck to them, but what does that mean to you, the potential buyer? Does the fact that you have no real estate agent to deal with make a difference to you? It is unlikely that the seller will share their savings with you, because they will want to keep everything they save by not using a realtor to themselves.
It might be possible for you to negotiate a slight reduction because you are dealing with an amateur seller, and not a professional, but this is not a guaranteed saving. The seller does not recognize that there is any difference to the buyers whether they deal with them personally or a registered real estate agent.
Here are the main problems you might come across when purchasing home on a ‘For Sale By Owner’ (FSBO) basis. You do this at your own risk, even if you use a solicitor to handle the purchase.
Buying a Home: Disclosure Issues
In most areas, the seller is generally obliged to disclose to the buyer any issues relating to the property. This includes dampness, fungal infection (wet and dry rot) and molds. There might be other issues such as easement on the real estate or repairs carried out that might not have been professionally completed.
All of this is normally dealt with by the real estate agent selling the property. An individual selling their own home might be unaware of this requirement, or simply ignore it. A seller is more likely to ignore or hide any negative aspects of their home than an agent responsible for the sale.
FSBO: Real Estate Agent Problems
Your agent might be reluctant to become involved in a FSBO purchase. Not only will they feel more responsible should the seller hide certain problems, but they might find themselves carrying out work that should have been completed by the seller’s agent. Your agent might refuse to help you purchase under a FSBO arrangement.
Set up an escrow account to hold your payment if you make an offer. This account holds the payment until closing. Never hand the cash over to the seller-you might never see it again. You might also not get the title deeds! An escrow means that the money is not passed to the seller until they sign the title over to you. They know the money is there, held by an independent third party until the deeds have been signed and passed over to you.
These are the main aspects you should keep an eye on if you decide to purchase a home on a For Sale By Owner basis. There are others if you cannot get an agent to help you with the purchase, but at very least make sure you have a solicitor. If you cannot get a real estate agent or a solicitor to help you purchase the FSBO home, then leave it!