December 25, 2018
To Buy or Not to Buy: For Sale By Owner?
In the hunt for a home it is not uncommon for potential buyers to encounter a home that is for sale by owner (also often referred to as FSBO for short). There are a number of pros and cons to such a transaction, which may be worth keeping in mind when deciding whether to buy a FSBO listing.
The pros of such a transaction from the buyer’s perspective may include a directness of information coming from the seller, who will sometimes know things about a home’s intricacies or location that may have escaped the notice of a third-party agent, who may not even know to bring them to bear in the sale. The contract in such a sale may also be less likely to be formulaic—which is only a good thing if it also meets the requirements set by lenders and regulations for the process. And, given that the seller is not on the spot to pay any listing agent’s commission, the cost of the home purchase for the buyer may be lower in the end.
That said, it is not unheard of for a seller in a FSBO situation to fail to lower the cost to take account of their paying fewer fees. They may even include sentimental value in their valuation of the property, which a listing agent will almost always act to mediate in their position as reasonable arbiter of market value. Sentimental value can also cause a seller to react from a place of defensive emotionality to requested concessions, repairs, and payment of buyer’s agent fees.
If a buyer or a buyer’s agent decides that a FSBO home is the one for them, they will still need to go through the standard steps in the purchasing process designed to protect their interests. It’s always a good idea to hire a buyer’s agent for the benefit of their expertise, even if the buyer “finds” the home on their own—because that’s only the beginning of the process. A buyer should get mortgage pre-approval, to ease the speed of the transaction and to assure the seller that they would in fact be wise to accept an offer. The buyer should ensure that the purchase agreement contains a provision for an attorney to hold earnest money in escrow, since a FSBO’s seller doesn’t possess an escrow account for that purpose the way a listing agent would. Moreover, a buyer in such a situation will want to request from the seller a Comprehensive Loss Underwriting Exchange (C.L.U.E.) report in addition to the usual property inspection, so that they can know about any insurance claims made on the property over the prior five years and thereby suss out any hard-to-see potential issues of water damage or structural troubles.
Buyers will also want to have a closing attorney present, like us here at Topouzis & Associates, P.C., to ensure that title is passed free of defect—and it’s also a good idea to purchase title insurance, to be sure that nothing nasty from the property’s past shows up to affect the buyer’s ownership rights. At Topouzis & Associates, P.C., not only do we offer the services that ensure your title gets conveyed clear of defects, we supply purchasers with Owner’s Policies of title insurance. Contact us if you want your FSBO property transfer in Cranston, Rhode Island; Springfield, Massachusetts; or Miami, Florida to go through without a hitch—both before and after closing.
