For sale by owner homes represent a good opportunity for sellers who want to save on commission. But are they a good deal for buyers? The answer depends on who you ask.
The problem for some owners who are selling their home is that they over-price their home since they can not emotionally detach themselves ad often expect buyers to pay more than the home’s value. Also according to a recent Wall Street Journal post by Penny Doherty, some of these owners even refuse to pay the commission for the buyer’s agent! This would not help your agent champion a For Sale By Owner home for you either.
The biggest challenge however, is that buyers 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 the agent representing you to buy these FSBO homes might be reluctant to write an offer on such properties. Why you ask? Well, some 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) Inspection: If you are buying a FSBO, you need to insist on a very vigorous inspection to identify anything that’s wrong with the property. In California you have the right to order your own inspection even if the FSBO seller is providing one for you.
2) 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. This report should include all the mechanic or private liens that the FSBO sellers might have against their property. But if these liens are not recorded, then it probably won’t show up on the C.L.U.E report either.
3) Order CMA : Competitive Market Analysis (CMA) report is essential when you are planning to purchase 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.
Contact Us if you are curious about selling your home by yourself.