For sale by owner homes represent a good opportunity for sellers to avoid paying listing commission on their property. But what is advantage for the buyer of such homes?! Well, it depends who you ask.
The challenge with some owners who are selling their home is that they over-price their home since they can not emotionally detach themselves from the home and often expect buyers to pay more than the home’s value. The other challenge with For Sale by Owner homes is that the sellers often refuse to pay the commission to the buyer’s agent too. This according to a recent Wall Street Journal post by Penny Doherty.
One serious challenge with For Sale By Owner homes is that you are not sure if the seller has disclosed all that’s wrong with the property. After all, these sellers are not professionals and do not know what information is material to the buyer which requires disclosure. We have written extensively about the California disclosures that are required to educate both buyers and sellers of such property.
The commission issue on For Sale By Owners (FSBO) doesn’t really go away with these transaction since your agent might be reluctant to write an offer on such properties. Why you ask? Well, deservedly or not, FSBO sellers have a very tough reputation when it comes to honoring commission demands. Even after getting a fully executed contract we have seen sellers continue to negotiate down the commission on the buyer’s agent sometimes risking the transaction.
So, the WSJ article makes some good recommendations which we also second.
1) Order Inspection: If you are buying a FSBO, you need to order a through inspection and study the findings to make sure there are no surprises.
2) Order C.L.U.E.: This is a report which will reveal any claims that the seller might not have disclosed to you as the buyer.
3) Get a CMA : A competitive Market Analysis (CMA) report is a must when you are dealing with any purchase let alone a FSBO. Have a CMA developed by cooperating Realtor or in this case the agent who is planning to write you an offer on this FSBO.
The challenge of dealing with FSBO sellers reminds me of our negotiation with a Los Gatos Condo owner who was claiming that his condo should be priced at least $50,000 higher than recent sales since his bedroom had view of 2 nice trees while others had the view of the parking lot. Sure enough properties with ocean view do command higher prices, but over looking into 2 trees is no justification for $50,000.
Contact Us if you are curious about selling your home by yourself.