Buyer Beware “For Sale by Owner” (Initial)
We recently got burned in a For Sale by Owner situation (actually it was a Rent to Own). As a journalist, I thought it might be useful to put together some first-hand tips on how to avoid a deal-gone-bad situation, where you might lose time and substantial money due to unscrupulous sellers, as we did.
I’m sure it doesn’t always go wrong in a FSBO transaction, but hopefully these tips will help you and yours avoid serious problems. It was our first and last foray into FSBO territory.
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“The idea is to sell the home, and if you price the house right, why wouldn’t it sell?” he says. “It’s a performance incentive for me.”
When working with a seller who cuts out the realtors:
Always hire your own lawyer. Don’t sign anything without your own lawyer reviewing it. It is highly unethical for a seller to suggest you use their lawyer, in order to save THEM time and expense.
Never waive an appraisal. Don’t do the deal if a seller won’t allow an appraisal. There is a realtor-driven bubble in Evergreen, leading to a sense of “if you don’t get it today, you wont have anything tomorrow.” It’s not true. Hold out and don’t overpay in this market. Rent an apartment short term and wait until you find what you want. Don’t overbid unless the offer can be justified and will appraise. There is always another house going on the market. Don’t contribute to the bubble. Remember 2008? More homes are sitting on the market longer in EVG – there’s a reason.
Never agree to pay ANY legal fees for a seller – even if you think a deal is a 100% go. Think again. YOU get nailed when sellers pull out of a deal for any reason, if they slip that in your deal papers, even when all contingencies are satisfied. Make sure you’re protected in the event a deal fails, no matter how much the seller convinces you it’s a done deal. Lawyers fees can be adjusted/inflated at whim.
Inspection Cost Clause – If you get an inspection at your own cost ($400+ these days), make sure the seller pays for it if THEY pull the deal.
Always ensure a clean title – clear of any liens against the property.
Get Seller’s full identification details and if possible a background check.
Buyer Beware – no matter how nice people seem, you never know who they really are, what kind of operation they might be running, or what they might be up to behind the scenes. Or if they’ve been down this road before with other potential buyers.
Always Check Sales History on the property you want to buy. If it was previously FSBO, you can be sure the sellers have jacked up the price $15-20K when re-listing with an agent, so that YOU pay the closing / realtor costs. Don’t overpay! Always offer $15K below ask. If you’re asking over the full price, you’re contributing to the bubble that will hurt everyone soon enough. In the past two months, we’ve seen three examples alone in our neighborhood of FSBO failing and the seller then listing with a realtor at an over-inflated price. Don’t fall into the trap.
For Sale By Owner sellers are by nature control freaks, and cheap. They want a fast deal done their way, with no or very little negotiation. Be careful. Always consult a lawyer or insist they pay your buyer’s agent fee.
Much of this is certainly common sense. However, in a tight housing market like ours, It’s easy to put on blinders when you have a sense of desperation to get your family settled. Especially when sellers are willing to work with you on what seems like a win-win deal for all. Shady sellers will prey on desperation. Don’t let it happen to you.
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David Hanna (Response)
Good advice. Bottom line, don’t go it alone. An attorney or Realtor can help with issues that are “slipped” into a sales Contract. More advice: get a Survey!
SJ O’Connor (Response)
Solid advice. Thank you for taking the time to write it up.
“There is a realtor-driven bubble in Evergreen” is an understatement. I’ve reached the point I no longer reply to local realtor emails since I’ve previously asked them to stop notifying me about every new listing they feel I need to tour immediately. It’s tiresome.
KC Butler (Response)
As a 34-yr veteran Realtor having closed over 2000 transactions I just want to say there’s some very good advice in this post and, honestly, some very bad advice. Yes, at the very least have an attorney involved in the contracts. But few attorneys have the negotiating experience that veteran Realtors do. We know how the give and take in negotiations makes and breaks our clients’ ultimate objective and we advise accordingly. Realtors don’t and can’t create bubbles. Supply and demand drives markets up and down. And I guarantee you we who survived it remember 2008-2012!! We serve buyers who NEED homes and we help them get them even when they’re in short supply if we can. That’s a challenge right now. There are a hundred moving parts in a real estate transaction and one misstep can cost 10s of thousands of dollars whether you are a buyer or a seller. If you’re wondering who to contact when selling a property, visit louisvillehousebuyers.com for we buy houses at fair prices. I don’t usually weigh in on these Nextdoor posts professionally but I TRULY do want everyone who buys and/or sells their home to have a fair and successful outcome. BTW, I’m profoundly aware there are unscrupulous Realtors. And unscrupulous sellers. And unscrupulous buyers. Your best source for any professional service is the referral of someone you know and trust who has used that service. Best wishes always.