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Home > Home Buying Tips > How to Work With a FSBO Seller

How to Work With a For Sale By Owner (FSBO) Seller?


There are some myths about houses For Sale By Owner (FSBO) that you should put to rest before you even think about making an offer on an FSBO home - and some truths that you should know. Because an FSBO seller is not a professional, most states do make allowances with regards to process and procedure, for instance, but every state does have disclosure laws by which they are bound. Here's five myths about FSBO sales, and the truth about how to work with them.

Myth: Owners selling their own houses are willing to take less than their asking price because they don't have to pay commission.

Truth: An owner who has decided to sell his own property without a realtor wants to make as much on his house as the guy who opts for a real estate agent. If you decide to make an offer on the house, keep the commission savings in mind - but don't count on it to lower the price by 5 - 10%. After all, if the owner wanted to pocket 10% less on his house, he'd have used a realtor and saved himself the time.

Myth: An FSBO seller doesn't have to tell you the things that are wrong with this house.

Truth: The property disclosure laws vary from state to state, but in general, FSBO sellers are bound by the same disclosure laws as realtors. There may be some variances under certain circumstances - for instance, if the owner has never lived in the house. Check the specifics of your state's disclosure laws to be sure that you know exactly what the seller MUST tell you.

At the very least, most states require that a seller disclose to you:

  • The age of the house and all of its parts

  • Structural defects

  • Problems related with to any parts of the house(Does the roof leak? Is the furnace on its last legs?)

  • Encroachments - where someone has built on another's property line

  • Lawsuits or claims that have an effect on home ownership (For example, an ex-husband who hasn't handed over the home ownership rights)

Myth: Once you make an offer and put down a deposit, the owner is obligated to sell to you.

Truth: Even if you put down a deposit on a property that you like, it's not yours until the final signatures are on the closing papers. Until that time, either party can back out of the deal with varying degrees of penalty. Make sure that you sign a contract when the deposit changes hands. It should detail who gets the money if the sale doesn't go through. But do be aware that until you actually close on the house, the owner is free to accept a higher offer and return your deposit.

Myth: If you put down a deposit and don't close on the house, you lose your deposit.

Truth: A deposit on a house - often called 'earnest money' - is meant to show the owner that you are serious about buying their property. The contract that you sign should lay out exactly what happens to that deposit if the deal falls through. In many cases, it will end up back in your hands, but make sure that the contract defines who gets the deposit (or a portion of it) in every eventuality you can think of that may sour the deal.

Until you actually close on that property, the deposit is YOUR money. An FSBO seller should not spend the money before the contracts are signed. For that reason, it makes sense to set up an escrow account for the deposit, with the funds released when the deal is done. An attorney with experience in handling real estate transactions is invaluable in that case.

Myth: It's far less complicated to buy an FSBO.

Truth: Because you're not dealing with a professional, buying an FSBO can actually be far more complex than buying through a realtor. You (or your buyer's agent) will need to be more aware of the laws governing real estate sales in your state to be sure that everything is legally processed.

Don't ever assume that just because you're dealing with an FSBO, a handshake is a deal sealer. Get EVERYTHING in writing, and on the proper forms. Make sure that you get answers to all your questions - in writing so that you have a record of them.

Some questions that you might ask an FSBO seller include:

  • How old is the furnace?

  • How old is the roof?

  • If the windows have been replaced, how long does the guarantee have to run?

  • What sort of septic system does the house use, and are there any problems with it?

  • Have there been any major repairs completed within the last three years?

  • Are there any encroachments on the property?

  • Is the property under any sort of homeowner-community agreement (for instance, a neighborhood association or town council may have specific requirements for color or outdoor decoration)?

If you're dealing with an FSBO, it is in your best interests to have a professional on your side to be certain that all the legalities are followed to the letter. Don't be tempted to let things slide, or assume that an FSBO sale should be conducted with any less professionalism than one handled by a real estate agent.


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