Buying a FSBO
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Traditionally, a lot of people begin their home search by scanning the paper and driving around looking at yard signs. (Of course, today, statistics show that most people start their home search on the Internet.) But nonetheless, yard signs have their place in real estate sales. There’s a good chance those yard signs and newspaper ads are For Sale By Owners (FSBO: pronounced Fiz-bo) and as a homebuyer, you have every right to consider all homes, including those.
The #1 Rule of dealing with a FSBO: Just because the Seller decides to go it alone doesn’t mean you should too.
If you are a buyer looking for a home with the assistance of an agent, ask yourself this: Are you working with the agent solely for purpose of finding a home? Of course not. Most buyers working with an agent today are working with them for what they have to offer above and beyond the home search. So if you want someone working on your behalf, looking out for your best interest, applying their experience and knowledge to help you through the contract and negotiations process, ensuring all the details are managed… why would that be any different when you buy decide to buy a For Sale By Owner? It’s simply another house on the market. The only difference is that the offer of compensation to the Agent is different.
Your Agent, as in any other purchase, can advise you on the viability of this home, offer comparable information to help you make an informed purchasing decision, assist you negotiating with the FSBO Seller for the best terms for you as well as insist on using standardized contracts which are designed to protect both parties.
In most cases, if you and your Agent decide to view a FSBO, allow your Agent to contact the FSBO Homeowner. She will then identify herself as your representative and normally ask if the Homeowner would be willing to pay a fee if her Buyer were interested in the property. Most reasonable Homeowners will agree, thus releasing you from having to pay the Agent from your Buyer Brokerage Agreement! The logic here is that the homeowner is trying to save money by not listing it with a Broker. So why would they pay your agent a commission if they are trying to save money? Traditional listing agreements have a system where the Listing Broker gets paid a certain amount… so that he can offer a part of it to another Broker who brings the Buyer. By only paying one Broker, the homeowner is still saving money by basically not paying two Brokers. Get it?
Your Agent should then have the FSBO sign an “Authorization to Show Unlisted Property” which clearly states that she is authorized to show the property to you and also defines the commission the Seller will pay to the Agent should you, the Buyer, purchase the home. Sometimes you’ll see a FSBO sign with the phrase “Agents Protected.” This means that the owner is willing to “protect” Agents by offering them a fee if they can help them find a Buyer for their home.
When you interview your Agent, consider asking them up front how they would deal with FSBO. Will they comb the market beyond the MLS to find the right home for them? If not, would it be all right if you did? If you find the right home and it happens to be a FSBO, what would they do? An Agent’s response to these types of questions can tell you if you are working with someone who understands that FSBO are simply a part of business or someone who sees a FSBO as a threat to that business.
Just keep in mind that the real work in buying a home lies AFTER the home has been found. Just because the Seller is going through it ‘blind’ doesn’t mean you have to as well. Always look out for your best interest and minimize risks by working with a skilled REALTOR®!
While I offer my services as a Buyer’s Representative to anyone wanting knowledgeable, competent, no-nonsense advocacy, I realize I may not be the best agent for everyone. If you would like to talk to me about representing you in your upcoming home buying process, simply email me and I will get back to you promptly.
