BUYERS BEWARE of FSBO: In this market, everyone is trying to save another buck, but a wise man once told me: “penny wise, dollar foolish”, and never has that proverb been more true than in these trying times. Just like you are trying to save that extra dollar, so is everyone else out there, but no one more so than sellers.
Most people selling in this market are doing so because they have to, whether it is because they have been laid off and no longer are able to afford the home they live in, or maybe they actually need to upsize and therefore are forced to sell as well. Whatever it may be, these people are feeling the greatest amount of pain from this recession, especially if they bought their home between 2004 and 2007.
So now more than ever when home-buyers are driving around on their own, checking out neighborhoods and orienting themselves as to where they want to live, they see many more “for sale by owner” signs than normal, often next to a house with a regular realtor sign.
If the house is appealing to the buyer, they will be inclined to stop and knock on the door, with the owner answering. Sometimes the buyers do not yet have an agent, but sometimes they already do. When the buyer does have an agent, the owner will often say to the buyer: “If we do the deal between the two of us, I can save you around $10,000.”
This is an even older proverb, it is an old Latin phrase meaning quite literally: “Let the buyer beware” More often than not, the only party standing to save or gain anything from a sale not involving any real estate agents, is the selling party.
The reason why is the seller normally pays for the commission on the sale of the home. An agent working with a buyer is in a sense working for “free” as it costs the buyer nothing. But this is not the only reason why a seller would not want to work with an agent.
A real estate agent representing the buyer (or for that matter the seller) in a transaction is there for your protection. Among their many duties they are there to give you an estimate on the market value of the home your intending to purchase. So they are there to make sure that you are not overpaying.
Here we arrive at the crux of the problem. Many times these sellers that put up a sign saying “For Sale By Owner” on their front lawn, have already spoken to a real estate brokerage or two about listing their property. In such a situation, the agent is also obligated to inform the seller of the market value of his or her home, and what they can expect to sell it for. A lot of times this is where conflict arises.
Sellers who have bought their home in the middle of the bubble, often do not agree with the valuation that reputable real estate agents give their homes. While it is true that some real estate agents will list a home at any price the owner wishes it to be listed, truly professional agents refuse to list a home at a price far exceeding its value, as it takes time and money to list a home, and listing a home that will never sell is wasteful of both these resources.
So such a seller, after failing to list it with reputable brokerages and listing it for a period with a less professional brokerage, obviously without success, will decide to personally sell the home by putting up a sign in front of their house. They rather do this than sell the home at the market value, as they feel they are then losing too much of their initial investment.
If you then as a buyer are attempting to buy the home from such a seller, you will always end up overpaying for the house. The problem is, there is no way of knowing if you are encountering such a seller. You also have to be careful of seller provided purchase agreement that they printed off the internet and isn’t even valid in your state.
What it comes down to really, is that as a buyer, there really are no drawbacks to working with a realtor, especially not when you are dealing with a “For Sale By Owner” situation. Your agent is there for your protection, and to make sure you are well informed every step of the way. Call your Realtor at WC Real Estate and ask them to try and work with the fsbo at xyz street. You have nothing to lose and everything to gain.