Beware of For-Sale-By-Owner ‘Deals’

• Real Estate Tips
• May 1, 2015

Drive around any neighborhood, and you’re likely to see at least a few for-sale-by-owner (FSBO) signs on front lawns. When you see them, you should know a couple of things, some of which are common knowledge, and some of which aren’t. Sadly, there are numerous misconceptions floating around about this type of transaction. I encourage you to do some research for yourself. Speak with people you know who have sold their homes without the help of a Realtor. Don’t just take my word for it.

Watch Out for Scammers

While there can, rarely, be a few advantages for a seller to go the FSBO route, the method is fraught with legal difficulty, financial risk and even physical danger. Yes, sellers who go it alone often fall victim to clever burglary scams and worse. That said, here are some of the key points to keep in mind about FSBO homes, from the point of view of both buyers and sellers.

• The main reason sellers sometimes don’t use Realtors is their desire to save money. Typically, buyers don’t pay commissions, sellers do. The goal of saving money is understandable in these cases, but usually misguided. The problem is, sellers are not professionals and typically do not know how to price their homes accurately.

• Most FSBO homes are overpriced. Buyers who purchase them can run into a pile of trouble when it comes time to sell. How would you feel if the FSBO home you bought this year for $250,000 turned out to fetch no more than $200,000 when you have to sell it two years from now?

• Legal problems abound in FSBO sales. Defects to the home may go unnoticed, or may even be concealed by an unscrupulous seller. When you buy an FSBO property and a Realtor is not involved in the transaction (either by you or the seller), you are taking a huge risk.

• Here’s an analogy that might shed some light on the question: Suppose you were unsure how to prepare your tax return in a particular year because you had several sources of income, large charitable donations, a complicated stock purchase and a few hard-to-categorize transactions. Would you attempt to “save money” by having an unlicensed, inexperienced person prepare your return for you? Hey, you might save $500, which is what the CPA you inquired with said he’d charge. Why not have your friend Jimmy do the return for $50 and be done with it? This is a bit of an exaggeration, but is quite similar to what happens in many FSBO property transactions.

How to inquire about an FSBO home you like

If you see an FSBO home you like, tell your Realtor, who can contact the seller directly to make sure everything is on the up-and-up, check that the price is not inflated, and protect your interests. Because FSBO sellers are in the game to save money, they are sometimes happy to get a valid offer from a Realtor who can put real money on the table. In such cases, the seller will have to pay at least half of the commission, but is usually happy to make a sale. To paraphrase an old adage, “Ninety-seven percent of something is better than 100 percent of nothing.”

The lesson learned: If you want to sell your home, FSBO is almost always a bad idea. You open yourself up to scammers of all kinds, don’t get the market exposure you’d get with a Realtor on your side, and will inevitably have trouble setting a fair price. For sellers who are interested in an FSBO property, protect your interests by having your Realtor contact the seller. That way, you can rest assured that all the legal and financial requirements are met.

For the biggest investment of your life, why take any chances? Saving money is a laudable goal, but the legal transfer of property is not the kind of transaction where you want to cut corners or work with unlicensed merchants. Be safe. Be careful. Do the smart and responsible thing. Hire a Realtor for your home buying and selling needs.