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Ask Now!Last week while meeting with one of our clients whose house we were listing for sale, our client mentioned they found a “For Sale By Owner,” (which in the Realtor community is commonly known as a “FSBO”) that they wanted to purchase. As we continued to discuss with our clients the specifics of the “FSBO” they were interested in, they soon realized that there are many things that they did not consider and that they should proceed with caution with buying a “FSBO.”
Seller May Not Disclose What Should Be Disclosed
When a house is listed for sale by a real estate broker, the seller is required to fill out a Property Condition Disclosure Statement (PCDS). There are a few exemptions to this requirement; New construction, condominium units, multi-family dwellings (5+ units), vacant land, transfer due to court order( i.e., estate, bankruptcy, eminent domain, divorce decree), and HUD properties. The New York State PCDS is a four page document that has questions ranging from length of ownership, length of occupancy, environmental questions, structural questions, and more. The seller fills out this document to the best of their knowledge and must “disclose” any problems that they are aware of in their home. When a buyer purchases a home that is multiple listed, they will acknowledge their receipt and review of the PCDS (by initialing each page depending on which version of the form is being used) and signing the final page.
A FSBO is not required to fill out a PCDS. In addition, a FSBO may unintentionally (or intentionally, Caveat Emptor, meaning “Let the buyer beware”) not disclose an issue with their home or may not be aware of the items that they should disclose to a potential buyer.
Contract Time Limits Maybe Too Strict or Too Loose
A purchase and sale contract has many time-frames, deadlines, and contingencies that should be written in to protect a buyer. A buyer’s agent, who knows the contract well, will know how to structure the dates for specific situations and circumstances.
Whether it’s giving enough time to get the inspection(s) completed, getting their clients mortgage commitment, life of the offer, or writing a contingency for the sale and transfer of title of their existing home, an experienced agent should correctly structure the contract to ensure the sale gets done. Some buyers utilize an attorney to draw the purchase and sale contract to send to the FSBO and unfortunately they may not have the experience with correctly structuring the contract dates, potentially due to them not having the total picture. Without the buyer having proper Realtor representation a savvy “seller” could take advantage of a situation that may be in their best interest and not the buyers. An example of this is “Offer Shopping.” This is when the contract’s life is too long and the FSBO has the opportunity to sit on an offer and see if something better will come along. This can be heartbreaking to a buyer.
Seller May Not Cooperate With Reasonable Repairs
When purchasing a home, a FSBO or not, we normally recommend hiring a reputable home inspector to have the home inspected. Even if the home you’re considering to purchase looks “perfect” and that nothing could be wrong, having an inspection can give you additional “Peace of Mind.”
A home inspector is going to find items in every home that may not be up to current code. One of the most important reasons to have a real agent representing you when purchasing a home is to negotiate the removal of contingency for any inspection(s) done. Many real estate deals fall thru due to a buyer and seller not being able to agree to items discovered from the inspection. This can happen because a buyer is being unreasonable with what they’re asking of the seller or the seller on the other hand, is not being cooperative with addressing reasonable repairs. An experienced sellers agent should know what would be considered reasonable and what would be considered “Nit-Picking.” Since the FSBO doesn’t have an agent representing them, they often resist when it comes to any reasonable repairs.
Seller Asking For An Unrealistic Amount For Their Home
You’re thinking of purchasing a FSBO because you’re getting a better deal, right? This is the common thought process of buyers looking at a FSBO. It can actually be the complete opposite. Whether the seller had an agent complete a comparable market analysis and they didn’t like what they heard OR they want to save the brokerage fee, FSBOs are commonly overpriced by 10-25%.
If you don’t have a real estate agent representing you, how do you know if you’re overpaying? A buyers agent will look at comparable sales in the area that you’re looking to purchase in and be able to explain to you what similar homes have been selling for and why.
You Maybe Responsible For Additional Costs Than If You Purchased A Non-“FSBO”
Generally, there are costs that the buyer should be responsible for when purchasing a home BUT also costs that the seller should be responsible for when selling. A buyer typically would be responsible for the cost of an inspection (Home, Pest, Radon, Etc.) and the cost of their mortgage application. A seller typically is responsible for an inspection ensuring that something is in good, safe, working order. For example, if a home that is on a septic system, a real estate agent representing the buyer should write a contingency for a septic inspection at the sellers cost to ensure that the buyer is not purchasing a system that may have defects and request that the results be put in writing. This may also pertain to a well water (potability) test. A FSBO often times is not willing to pay for any inspections and could attempt to make it 100% the buyers responsibility.
A for sale by owner can be tricky and complicated and if you’re thinking of purchasing from an owner directly, please proceed with caution. The above are just a handful of things that need to be considered when making the decision. Comment below or contact us, we’d love to discuss and/or answer any questions you may have regarding a for sale by owner (FSBO).
About the authors: The above information was provided by the Keith Hiscock Sold Team (Keith & Kyle Hiscock). With almost 30 years combined experience, if you’re thinking of selling or buying, we’d love to share our knowledge and expertise.
We service the following Greater Rochester NY areas: Irondequoit, Webster, Penfield, Pittsford, Fairport, Brighton, Greece, Gates, Hilton, Brockport, Mendon, Henrietta, Perinton, Churchville, Scottsville, East Rochester, Rush, Honeoye Falls, Chili, and Victor NY.
Visit our website at www.HiscockHomes.com.