A For Sale By Owner or FSBO is a property sold directly by the owner to a real estate investor without a listing agent’s involvement. An approach like this helps the seller save money on commission, which is why they may not be willing to pay a 3% commission to your buyer’s agent.
Let’s take a closer look at the ups and downs of such properties.
Pro: Zero Commission
Real estate agents usually claim a five to six percent cut of a sale. An FSBO homeowner may not be willing to foot the other half of this commission, which will leave the agreement solely between you and the seller. Although a deal like this deprives you of professional advice, it helps you get a lower quote on a property.
You see, sellers usually factor commission in the listing price. When there are no agents, there won’t be a commission, meaning a lower selling price. You can thus request a much lower hard money loan on an FSBO.
Con: Inflated Selling Rate
An FSBO owner with insufficient experience in real estate might overvalue their property by looking up similar ones on the MLS. If their knowledge of appraising homes goes only as far as the surrounding area, they might end up overcharging you for their home.
Since such owners are already trying to save on commission, they’re less likely to negotiate on their quotes. They’re also hyper-aware of their lack of representation and would therefore try to hold their ground.
Pro: Direct Communication
With typical properties, something as simple as arranging a house viewing means you have to go through your agent who has to go through the seller’s agent who’s in direct contact with their client. By the time your communication reaches their ears, you don’t have time to spare.
It’s much easier to align schedules with an FSBO seller. You can just call them up and arrange a suitable time to meet without going through the motions or an extremely bureaucratic process.
Con: Missing Information
Some homeowners might skip the home inspection report because they aren’t aware or, don’t want you to be aware of the problems they’re legally obligated to disclose before the property is sold.
Just to be safe, schedule a home inspection from your end to check if the property suffers from an infestation or water damage issue.
Pro: Simpler Terms
Direct communication also allows both parties to negotiate the final transaction in less time. With conventional deals, it’s more time-consuming to make an offer through your agent to their agent and finally them—even more so if their answer is a counteroffer.
In FSBO dealings, you can just sit down and negotiate the transaction in a single sitting.
Contact us for help with real estate financing.