FSBO Screening Tips
We are meeting more and more folks who are interested in selling their homes and moving to a less congested areas of California or other States. And with the 6% full commission charged by most established Agencies, some Home Sellers are tempted to explore listing their home as a FSBO. Would you take the same gamble?! With that in mind, let’s explore top 4 tips to protect yourself if you decide to sell your own home.
Pre-Approval: Look for a Pre-approved buyer. A Pre-Approved buyer is the person who has gone through the complete loan application process. The application for a pre-approval will require borrower’s full employment history, financial information, assets and other real estate holdings. Avoid Pre-qualification letters that you will get from any mortgage lender and broker cause they are not worth the paper they are printed on.
Seasoned Cash: Make sure the funds that the buyer is showing to purchase your home has been in their account longer than 3 months. The longer the better cause you want to make sure they are not borrowed fund that could prevent your escrow from closing if the investor pulls the funds out.
Close of Escrow: If you see a cash offer from a buyer on your FSBO which requires more than 30 days to close the escrow, walk. Don’t consider such offers. After all, if this buyer has the cash to close the escrow on your home, why would they need 30 days. The only condition on the close of escrow should be an inspection or an appraisal which can take less than 10 business days. If your cash offer has a long escrow, the odds are that it’s a low ball offer that this buyer plan to flip to someone else and has no interest in purchasing your home.
Due Diligence: Because you are not working with an agent, you have to perform your own due diligence on every condition associated with your offer. Explore ALL the Terms and Condition on the offer to make sure the buyer does not trap you into a bad escrow. For instance, if the market interest rates are at 3% for a 30 year mortgage on a $2 million dollar loan, then accepting an offer conditioned on a 2% loan is too risky since this buyer will never find such a loan. Further, they will use this condition to cancel the purchase contract on your home and you would have nothing to show for it but a long delay in your sales cycle.
So, contact the Mortgage lender or Loan Officer that has been identified in the pre-approval. You should then insist on getting a loan application completed for your For Sale By Owner (FSBO) buyer. The loan should be in the NAME of the same buyer who is on your Purchase Agreement.
Finally, Sale of a home is probably the largest financial transaction that you have faced. So, educate yourself about what is involved in the transaction. And feel free to Contact Us if you need help identifying qualified buyers for your FSBO.