Purchasing a property for sale by owner (FSBO) may make sense to many; because the seller doesn’t pay real estate agent commissions, the price should be lower. However, buyer beware. There are downsides to purchasing an FSBO. According to research conducted by the National Association of Realtors®, fewer than 10 percent of FSBOs are actually sold.
Why? There are any number of reasons, ranging from sellers not knowing how to price the property to potential problems with the condition of the house.
For example, without the advice of a real estate agent, the seller could overprice the home. So when your lender has the property appraised (which you will pay for), you may find that the appraisal comes in lower than the seller’s asking price. And because the lender is only prepared to lend against this appraisal value, not against the price the seller is asking, you may come up short.
A home inspection is always advisable, but with an FSBO, it’s essential. Even with an inspection, the seller may refuse to fix the items identified in the inspection and the deal may fall through.
In purchasing an FSBO, you will need your own real estate agent to represent your interests—even if you pay his or her commission yourself. Your buyer’s agent will evaluate the property in the light of current local market conditions, negotiate on your behalf, ensure that the transaction closes seamlessly, and more.
Your home is the purchase of a lifetime; if it’s an FSBO, make sure it’s done right.