There’s one big reason that homeowners choose to sell their house without a Realtor: money. If they forego a listing agent, they don’t have to pay a percentage of the selling price to a broker. This choice, which is becoming more popular in the bumpy housing market, can be a good option for homeowners. But what about people on the other end—the potential home buyers? With no Realtor representing the property, is that a good thing or a bad thing for buyers? Actually, it’s a little of both. The smart tips below will help you make an informed decision when considering buying a home that’s for sale by owner (FSBO).
• They have to tell you what’s wrong with the house. Some potential buyers stay away from FSBO homes because they think that unlike a Realtor-represented house, homeowners don’t have to disclose the negative aspects of their house. Not true. The same federal and state laws apply no matter who sells the house. Federal laws include things like disclosing whether there’s lead paint in the house. State laws usually regulate what are called “material facts”—anything that might lead a buyer to change his mind about a purchase. This may include disclosing whether someone has died in the house within the past three years, whether it’s been hit by a tornado or other natural disaster, and what home repairs have been made. Failure to adhere to these laws leaves the homeowner open to a lawsuit.
• You may get a deal. Because FSBO homeowners don’t have to give a percentage of the selling price to a broker—anywhere from 5-10%--the home may be priced lower than if it was listed through a Realtor. FSBO does not guarantee a bargain, however. Realtors don’t have an emotional investment in the home, so they can price it according to market conditions, what other homes in the neighborhood have sold for, etc. Homeowners may overprice their own homes, which is why you need to do research of your own. Check out what other, similar homes in the area have sold for. If this FSBO home is higher for no apparent reason, move on.
• Think third party. If you’re serious about a FSBO house, most sellers will ask you for earnest money. Depending on the price of the home, earnest money isn’t usually more than a couple of thousands dollars. Still, that’s a chunk of change you don’t want to simply throw away if something goes wrong. Rather than giving this money directly to the sellers, protect your investment by giving it to a third party such as a title or escrow company.
• Make sure contingencies are clear. When writing your offer, you probably have a couple of contingencies that are important to you. If the house doesn’t pass inspection, for instance, you won’t buy it. Or if the inspection turns up something nasty, you want to lower your offer. Then there are things like making sure the house is insurable, that you receive loan approval, or that your current home sells first. All of those things need to be in writing—or the seller doesn’t have to adhere to your wishes.
• Think about engaging your own Realtor. Just because the seller doesn’t want to pay a Realtor doesn’t mean that you can’t bring one into the game. Do you know how to write an offer that includes every contingency that’s important to you? Can you calculate prorated property taxes? Are you sure you’ve specified who pays for absolutely everything? Have you lined up all of the necessary inspections? Do you even know what the necessary inspections are? If you’re afraid of being taken in some way—or simply want to make sure all of the i’s are dotted and the t’s are crossed, a Realtor can come in very handy. For a percentage of the price, he or she will act on your behalf. Who pays that fee is negotiable, but a smart seller will be happy to fork over 3% of the selling price just to get the house sold.
• Get a good lawyer. If you don’t get a Realtor, get a property attorney. Yes, it’ll cost you a few hundred dollars, but in terms of representing your best interests, it doesn’t get much safer than an attorney. She’ll make sure that everything is in order before and during the sale, go to bat for you when she needs to, and use her knowledge to protect you from a rookie mistake. No matter how many houses you’ve bought or sold, a good property attorney has probably handled double that number this week alone.

Create a free home listing today.