Buying a FSBO Home?
Tips for a smooth purchase
When buying a FSBO home, remember you are usually dealing with a home, not just a house. The sellers are often invested emotionally. Because neither party does this kind of transaction regularly, it's important to be diplomatic, courteous, and patient.
Research your rights and obligations.
- Make sure the price is in line with comparable properties in the area. A
local real estate office can provide that information for free. The downside
is that you could end up with agents relentlessly contacting you.
- Find out what the seller is basing the price on. Are they using a recent
appraisal or nearby homes? If they have an appraisal, ask for a copy. If they
have a bona fide appraisal check the date and possible changes to the property
since the appraisal was made? Are home sales in the area brisk or lagging?
Are local prices appreciating and if so, at what rate?
- Query the owners about the condition of the home and any improvements they
have made. Ask specifically about defects or problems they may have encountered
and how they were resolved. If you choose to buy, this history is invaluable.
Ask to see documentation. If you make an offer that is accepted, then make
sure the sellers know you want all the documentation they have. Ask how long
they have owned the home and why they are selling. Ferret out any conditions
that might be show stoppers. For example, is the home near a busy road? How
is it zoned? Does the city plan to widen the road? Are there train tracks nearby?
If so, how often does the train run? You probably want to avoid purchasing
a home on the mainline with high speed trains at 20 minute intervals day and
night. A lovely fenced yard on a sunny Sunday afternoon can hide a multitude
- Hire a building inspector and real estate lawyer to help protect your interests.
Find your own service professionals. Never take use the seller's recommendations.
- Make an offer based on comparable pricing for nearby homes that have sold
in the last year. In an active market with rapidly appreciating prices, don't
forget to factor in an appropriate buffer. With a FSBO home, there may be
some room to negotiate since real estate commissions are not an issue.
- Earnest money deposits should be made to a trust account, not to the seller. In other words, the money should be held by an impartial third party so if, for some reason, the sale doesn't proceed you can get your money back. The terms concerning the earnest money should be explicitly addressed in a written contract with the seller.
- If you don't trust the seller for some reason, don't be afraid to walk away. This is a transaction that relies on old-fashioned decency and common sense. There are exploitative sellers, just as there are low-balling buyers.
Use professional services whenever they are appropriate. Escrow and title companies
can handle many common real estate transactions. When the situation is more
complex, use an attorney to clarify contract terms and conditions to make sure
the final agreement works for you. You may hire a buyer's broker or real estate
agent to represent you during the transaction, but be prepared to pay their
fees yourself, since the seller may otherwise refuse your offer.
Be wary of overheated markets. People on both sides of the FSBO equation have
been burned in deals where the seller was motivated to sell because the market
was white hot and the buyers closed without doing their homework, having the
property inspected, or failing to have a lawyer review the contract.