Things you Should Know before Buying a Home FSBO
When buying a house there a couple different routes you can take. The traditional way is to simply go through a listing agency. Another option is buying a home for sale by owner (FSBO). Rather than go through real estate brokers or agents some owners choose to list their homes independently. In total, only about 10% of all homeowners choose to sell their home this way. There are some advantages to buying a FSBO, but there are also some things you should be aware of if you choose to pursue this route.
Full disclosure is not guaranteed
When dealing with a licensed real estate agent, there are certain things that they are legally obligated to disclose. Homes that are listed by the owner however, do not carry the same legal obligations. In some cases, the decision by the owner to list their house themselves may be specifically to skirt around these legal disclosures. Information such as whether the house has ever had extensive fire or water damage or if a murder took place inside may not be disclosed by the owner.
Be aware of potential unexpected closing costs
The owner your dealing with may not be working with a real estate agent, but that doesn’t mean you cannot be represented by a buyer’s agent. Particularly in the closing, you will want to have a lawyer and or buyer’s agent look over all documentation to ensure there are no surprise costs. Without doing do, how the costs of closing are divided could get muddied with you shouldering more of the burden. Things such as; notary fees, appraisal costs, transfer taxes, HOA fees, back taxes, etc. are all additional fees to be aware of.
You could pay too much
The main reason anyone chooses to sell their house themselves is to save money on real estate agent commission fees. However, sellers still typically want to get prices that are comparable to what other homes in their area are getting, sometimes even more. Those prices however, usually include commission. What can happen then is not only the seller saving on the commission on their end of the transaction but also adding the commission fee on to the buyer’s end. To avoid this from happening make sure to look around and see what other properties in the area (listed with agencies) are selling for.
You might get stuck in a bad sale
Sellers can get stuck in bad deals if they aren’t careful but so can the buyer. If you’re not using a buyer’s agent or an attorney you may end up missing binding clauses such as a home inspection clause. As a result, you may be unable to be released from the sales contract and you will be forced to complete the purchase. Make sure you have experts involved in your dealing to avoid being stuck in a bad transaction.
You may not get your deposit back
Some sellers ask for an ‘up front’ earnest deposit. When dealing with a house FSBO, should you choose not to proceed with the transaction, there is no guarantee you will get your deposit back. To prevent this make sure you put your deposit into an escrow account so that the money can be refunded to you should the deal fall through.