For Sale By Owner

Are You Sure You Want to Buy, or Sell, FSBO (For Sale by Owner)?

Ask yourself if it's worth the risk......

During the summer of 2008, I had a client contact me to let me know he decided to pursue a home purchase being offered "FSBO," otherwise known as 'For Sale By Owner.' Of course I didn't take this as the best of news. I responded by saying I respect whatever decision he chooses to make yet I'm here to help regardless and thanks for the opportunity to be of service. In addition, I felt obliged to bring a few things to his attention, to help him make an informed decision, which is part of what being a good Realtor is all about.

Now unless a person is a Real Estate professional, someone who works in an associated industry, is an Attorney specializing in real estate law, or a seasoned investor to possibly include builders and developers (to name a handful) I wouldn't suggest purchasing a property through a "For Sale by Owner" scenario. If you have, or are currently considering going this route, below are a few things to ask yourself and keep in mind.

1. How does one truly arrive at what is a fair price for a property without the assistance of a Real Estate professional? Sure, we are in an age of computers, people can pull flyers from other properties in a neighborhood as well as even consult comparable properties listed in local newspapers. In today's market however, looking at "Active" comparables is not sufficient. What one needs to know is, what comparable properties have recently sold for, as well as where properties are priced which are currently under contract. Will someone attempting to buy For Sale By Owner, be able to negotiate the best possible deal? If one isn't a professional, my experience w/ sellers in particular utilizing such tactics is they often are unrealistic about their price. As a seller, what's the time frame/how soon does the property need to sell? If one doesn't have a Realtor heavily marketing and drawing traffic to the property resulting in a good and acceptable offer coming to the table in a timely manner, will the additional months of mortgage payments being made justify the savings of not employing a Realtor or offering a commission in the first place?

2. For any sellers considering offering your property FSBO, some websites designed to provide a fair market value are more often than not, WAY OFF with their 'estimates' on property. So for buyers, this could work to to ones advantage, or provide an unrealistic value to ones disadvantage. Now if I were in contact with a seller who was considering the FSBO route, I'd of course be happy to prepare a CMA (Competitive Market Analysis) and even visit the property to point out things which would help them succeed with their efforts to sell 'For Sale by Owner.' I hope that if their attempts to sell on their own were unsuccessful, they would do the honorable thing if it comes time to list w/ a Realtor, providing me with the first opportunity. I'd also encourage sellers to offer a commission to a buyers agent to attract increased activity and also get some added protection and guidance since when I've represented buyers in the past on FSBO transactions, there are indeed duties I've performed which would have been part of the listing agents responsibilities, had the seller contracted one. If a seller does succeed w/ their FSBO efforts, I also hope they'll remember to refer me to others they know looking for a Realtor based on an appreciation for my contribution, recognizing any value I contributed to their success and or experience.

3. It is not uncommon for there to be items listed on a title report where, unless one is familiar with what they are and what they translate into for Mr. and Mrs. Buyer, a good chance exists one may get themselves into a regrettable situation. Now laws vary from state to state but on the federal level, they are the same. I've done business in both Hawaii and Washington (and I know Hawaii laws are modeled after California). Based on these experiences, our contract forms are designed to hold sellers accountable and more often than naught, to protect a buyer. Without using state association approved forms, a seller is not as at risk for liability. I would definitely question where the seller is headed (for instance, if leaving the state - for any buyer working without a Realtor, this may be a 'red flag'). At the very least, one will want a real estate attorney to review everything. For me personally, I have an escrow company I like to work with who also specializes in real estate law....even though escrow is to be a neutral third party, this is a nice 'perk' for me and my clients.

Here is a first hand, true life example to support why one would want to use a Realtor. In January of 2006, I wrote an offer on a new construction home on 2.8 acres (approx 120,000 sq ft) in Monroe. Once I received and reviewed the title report, I noticed ALL but less than half of one acre (approx 20,000 sq ft) of the property was NGPA or "Native Growth Protection Area." Legally, for my clients, this translated into them not being able to landscape, ride ATV's, have grazing animals etc on the majority of this property. Once I brought this to their attention, they decided they didn't want the property and were able to back out, based on the contingency time frames (another reason for working w/ a Realtor, to know what needs to happen when so as to not be out of contract). Anyway, getting back to my example, my clients backed out, got their earnest money back and we were done w/ the seller and his agent and that property.

A year later, another agent from my office at that time, acquired a new listing and I noticed it was the same property I had rescinded the contract on for my clients a year earlier. The seller of that property had decided not to work any longer w/ real estate professionals and to attempt selling FSBO. Obviously, there are rare occasions, these attempts do actually succeed. So I found out from my fellow Realtor friend w/ her new listing, her client had bought the same property directly through the seller not knowing the issues regarding the majority of the property being NGPA. As it turned out, there were also issues regarding placement of the septic system which I hadn't yet discovered since with my experience with this property, I hadn't yet pulled the county "as built" for the septic system design....the NGPA issue was enough to know it didn't make sense for my clients to go any further. So anyway, her client ended up buying the property thinking it was a great buy and he was going to "flip it" for a profit and so employed her to be his listing agent. Having bought it FSBO, he was unaware of these other issues and a year and a half later still had not sold the property. As far as I know, the FSBO buyer of this property (who has tried to sell) has not taken any legal recourse.

5. Lastly for a buyer to keep in mind, sometimes a Seller who has decided to go FSBO mainly to try and save on commissions, may still be willing to pay a commission to a Buyers Agent. If they aren't offering what is known as "courtesy to broker" (willing to pay a commission to a Realtor), usually they will if the offering price reflects it (if they won't, I'd question if they might have something to hide!).

I'm not attempting to intimidate or scare any readers but to make people aware there are benefits to employing an ethical Realtor, who will "have your back" so to speak when it comes down to purchasing (and selling) a property. As stated in the example, someone who is not working w/ a Realtor could be attempting to hide something and a buyer who is not experienced w/ the process or what to look for could be putting themselves at financial risk.