Beware of “For Sale By Owner”

You’re looking for your dream home, and you find it – beautiful yard, the perfect neighborhood, and a small red-and-white sign reading “For Sale By Owner.”

 

Should you buy it? While it may seem tempting to cut out the middleman, think twice before entering into an FSBO real estate transaction.

 

 

Licensed real estate agents must adhere to a particular code of ethics, but owner-sellers (unless they hold a real estate license) don’t. When you purchase a home listed through an agency, you know you’re protected from fraud. Legal property transfer contracts, verifying that a title is clean, lead paint disclosures, and other documents are part of the real estate transaction. If real estate isn’t your field of expertise, you could end up in legal hot water.

 

 

If you get cold feet thinking about negotiating a price for a car, you’ll definitely be out of your element negotiating home prices. It’s not just the price that’s part of a real estate negotiation. Concessions such as what things around the house will be repaired by the seller, the closing date, and whether the seller will wait for you to sell your current home before closing are also part of the deal. A real estate agent will take care of all that on your behalf.

 

 

By law, sellers must make full disclosure of the condition of the property, including the presence of mold or mildew, lead paint, and ground pollution. Any easements, liens on the title, or necessary repairs must also be disclosed.

 

Your real estate agent knows what should be disclosed in your state and will be able to find out what the seller doesn’t say up front. People who are selling their homes themselves may not even realize what they need to disclose to potential buyers, too, which makes it even more important to have a knowledgeable agent working for you.

 

 

If you don’t have a buyer’s agent for an FSBO home sale, you’ll have to do all the legwork yourself. Research includes ordering a comparative market analysis, scheduling a home inspection, and a C.L.U.E. report (Comprehensive Loss Underwriting Evaluation). The C.L.U.E. report lists any insurance claims filed on the property over the last 5 years. It costs a lot of money but is well worth it.

 

You’ll also have to set up the escrow for all monies exchanged, including an earnest money offer and the check for the home purchase. Finally, if you and the other party are foregoing real estate agents, you may still wish to hire a real estate attorney to ensure that the sale complies with state and local regulations.