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Buying A Fsbo (for Sale By Owner) Home: Protect Yourself
Youíve found the perfect home. The only problem is itís for sale by owner, and youíre not sure where to start. Possibly you have heard horror stories about homes bought directly from the owner. Unfortunately many of them may be true.
There have been many buyers who have found out too late about problems with a home, or incorrectly negotiated the terms of the contracts. The result of which, costs the buyer even more money.
With the right steps, however, a FSBO home doesnít need to be a scary prospect. There are simple methods that you can use to protect yourself (and your money).
Consider a Buyerís Agent
Before we get into tips for negotiating alone here is something to consider.
Without professionals involved you have two parties negotiating the terms, in an industry they may not know anything about. A buyerís agent will not only make the whole transaction run more smoothly, they know the law concerning real estate and they can help you to protect yourself.
Call a real estate professional. Ask them to contact the seller for you. Most real estate agents will do this at a reduced commission. In many cases you can negotiate that fee into the contract.
Ensure a Fair Price
The first thing you want to do is, ensure that the asking price is in line with what similar houses are selling for in the area. Since the seller isnít a professional, it stands to reason that, they may not have correctly priced their property. Real estate professionals, the local newspaper, and the internet are all good places to start. Some real estate offices will even provide an in-depth market analysis for an area (usually for a small fee).
Tips for Negotiation
Negotiation can be one of the more stressful components of a FSBO purchase. Without the involvement of a third party you are dealing with the seller on a one-on-one basis. Since you both have a vested interest, in the price of the property (you want to pay less, the seller wants more), this phase of the purchase can get quite tense.
Here are a few considerations for the negotiation phase:
Start Low with Your Offer: Since you donít know what the seller really expects, start low! The only place they can go from there is up.
Negotiation Contingencies to Protect Yourself: Along with the price you should make protection a part of your negotiations. Ensure you allow for appraisals, home inspections, approval of the disclosures, and a contingency for insurability.
Leave Your Earnest Deposit with a Third Party: Instead of giving your deposit directly to the seller, use a lawyer, or an escrow service.
Full Disclosure, Really?
Most states have laws that say, a seller must disclose all known faults/issues with a property. The problem comes when the seller didnít know about a problem (or their just dishonest). Be sure you hire a qualified inspector to look at the home. Your lawyer or local real estate office will be able to recommend one.
Real Estate Attorney
Last, but definitely not least, do not sign anything without a lawyer. Have them draw up the purchase contract. Work with your lawyer through-out the purchase. They know the laws, as they pertain to real estate. They can also help you to watch out for any caveats that might come back to haunt you.
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