Buying a home may seem like standard fare if you’re talking to a real estate agent or broker. On the other hand, homes that are being sold by its owners may lead you to a seemingly similar set of transactions, but there are some quirks and specialties.
What sellers want: Greatest possible profit
For sale by owner (FSBO) sellers are property owners who sell directly to the buyer without the assistance of an agent to avoid having to spend for commission. Don’t be misled by this notion that if you purchase from the FSBO the cost is drastically lower than usual. The goal of the seller is to increase savings rather than pass the profit to the buyer or an agent. This also holds true for sellers who have low equity in the property, in which case the seller thinks he cannot afford an agent’s commission or give the buyer special considerations on the purchase price.
Homes located in a hot seller’s market boost the FSBO seller’s desire to draw extra money from the sale price. In this scenario, the seller has the upper hand in the purchase transaction.
Seller’s goal: Get the most out of the asking price
Unlike traditional real estate brokers, FSBO sellers base their asking price from listings of properties in their area instead on the face value of the property. If you are a first time buyer, it would be best to bring good comparables when negotiating.
Nevertheless, an FSBO seller knows when to negotiate with the buyer especially when the market for housing is slacking in their area. So if a buyer comes prepared in the negotiations, the FSBO seller might be led to accept the offer even if it’s below the sale price.
What should a buyer do?
Regardless if the seller is working with an agent or going solo as an FSBO seller, your role as the buyer remains the same. These are:
- To ensure that the asking price is right.
- To have the property properly evaluated and inspected.
- To negotiate an agreement and make an offer in order to get a comfortable deal.
Some possible anomalies
A buyer must be on his guard at all times during a negotiation especially if the seller does not employ the services of an agent. It’s quite possible that the seller is clueless about what they are entering into, leading to messy transactions. They can even get unreasonable and persistent on pricing the property to a point when no agent wants to take the listing.
Meanwhile, some sellers would rather take the shortcut by selling the property themselves, rather than face the difficulties of repairing the home so that it becomes suitable for selling.
Before buying an FSBO home, ask the following questions first:
- How long has the home been listed?
- Was the property in the listings of agent/agents in the past, and for how long before the seller decided to sell it personally without commissioning agents?
- What could be the reason why the property remained unsold for quite some time? It might be best to conduct an ocular inspection before closing the deal.
FSBO and your agent as the buyer
Even if the FSBO seller doesn’t have an agent, it doesn’t mean that you shouldn’t either. You are entitled to hire an agent who can assist you in the home purchase. For starters, you need all the vital information you can gather to help you decide on your purchase, so an agent could give you much assistance in this regard. Of course, you are free to transact directly with the seller and discuss some concerns. Anyway, whether you have an agent or not won’t matter to the FSBO seller, as long as you are a qualified buyer.
In situations where the FSBO seller and the buyer start discussions without an agent and then later on either one or both of the parties brings in an agent, a flat fee is paid to the agent. This arrangement is known as “one person listing”, in which the agent will receive a small commission.
Generally the agent will discuss his fee with the seller. In the event the seller denies payment to the agent, the buyer can work up a contract to shoulder the agent’s fee. If the latter pushes through, the agent will be looking at your best interests and not that of the FSBO seller.
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