April 16, 2005
By HunterMaclean Attorneys, published on April 16, 2005, in Savannah Morning News.
Buying a home is the biggest financial decision most people make in their life.
Not surprisingly, most buyers shy away from “for sale by owner” or “FSBO” homes for fear that they may be overpriced or conceal problems that the sellers hope to disguise.
Fear that a FSBO transaction may not go as smoothly as one handled by a real estate agent does not mean you should avoid a home you would like to own just because it is being sold directly by the owners.
Buyers can take several steps to minimize problems when evaluating a FSBO home.
1. Know what you can afford.
As a buyer, you should know your price range when shopping for a home.
Virtually all local and national mortgage lenders will pre-qualify you for a home loan, meaning that they will run a quick check of your credit history and approve you to a certain mortgage amount. The process is usually quick, and many lenders have online forms that can be used to expedite the process.
Once you have been approved, you will know what your price range should be, and what your approximate payments will be.
Having this pre-approval will show a FSBO seller that you are serious and will be vital if the seller is entertaining multiple bids in an attempt to sell the house quickly.
2. Get a competitive market analysis.
Find out if the home you want to purchase is fairly priced by reviewing recent comparable property sales in the area.
Many agencies will provide this type of research for a nominal fee or you can do it yourself by contacting the local tax assessors office. Checking real estate sales in the newspaper also is helpful.
Learn whether the home is overpriced before a bid is made. That saves time and effort later when a bank declines to make a loan because it’s for more than a home is worth.
3. Make an offer and negotiate.
Once you have found a home you are interested in buying, make an offer directly to the seller.
It is perfectly acceptable to start with a low offer, but you should expect to receive a counter-offer. Continue negotiations until an acceptable price is achieved but remember that in order to be binding, an offer must be in writing and must convey an earnest money deposit.
The earnest money deposit is a negotiable amount agreed upon by both parties and is applied to the down payment and/or closing costs on the home.
As a FSBO buyer, you should make arrangements with your bank or some other mutually approved neutral party to hold the earnest money instead of paying it directly to the seller.
4. Get it in writing.
Once you agree on a price and terms of sale, you will want to enter into a signed, written contract with the seller spelling out all of the specific provisions and conditions of sale.
If the seller does not provide a contract, you will want to contact a real estate professional, either an attorney or licensed real estate broker, to secure one for you.
The contract should spell out the agreed price, what closing costs each party will pay, when you want to close and when you want to take possession. The contract should be contingent upon getting an inspection of the home and evaluating the results.
If the inspection reveals a big problem, the contract needs to give you the option to rescind the deal if the seller won’t make repairs.
5. Have the home inspected.
Hire a professional home inspector to check the foundation, electrical wiring, moisture levels, carbon monoxide, asbestos, lead, plumbing and roof.
Have the house examined for past and possible present termite damage or infestation. Ask the neighbors if they have noticed any major problems. Look for water damage and ask about past flooding, mold or leaking.
Most FSBO sellers are not lying when they fail to disclose problems in their home. They either don’t know that a problem exists or, if they do, don’t know the nature or extent of the damage.
Do not be afraid to ask questions. If feel like you are in over your head, seek the advice of a real estate professional.
