In today’s real estate market, we are seeing more and more For-Sale-By-Owner (FSBO) homes on the market. At first glance, buying these homes can appear to be an uncomplicated deal for not having to deal with those pesky real estate agents. But please be sure to go into any deal with your eyes wide open and be aware of the pitfalls with a FSBO home purchase.
Frequently, FSBP houses are overpriced because of two reasons. The value of the home is based on the metadata of your home (location, square feet, number of bedrooms), but this data does not take into account things that decrease the home value like deferred maintenance of the home or a garage conversion. Another reason that a house can be overpriced is that it is based on emotional value. Often owners selling their own home cannot separate sentimental value from actual monetary home value. Real estate agents are often the ones who bring knowledge and objectivity when pricing a home.
A second pitfall for purchasing a FSBO home is not having an objective negotiator. When owners are emotionally attached to their home, they do not like to hear about what is wrong with their house. It only takes one side to be emotional to really destroy the deal. Suddenly, an uncomplicated deal turns very complicated. Real estate agents have the know-how to speak to inspection objections and navigate the buyer agency agreement to protect your interests.
A FSBO seller is not going to pay for your buyer agent’s commission. This will have to come out of your own pocket. For this, you will have to take the 2.8% of the contract price and add it to the sale price. In the agreement, the commission will be given back to your agent. It is a good idea to be familiar with box 7.3 on commission on the contract to buy and sell. This is another factor that complicates a purchase of a FSBO home.