When you're out there doing your home search, especially if you make a point of driving through neighborhoods that you like looking for that perfect house, you're bound to come across a house advertised "For Sale by Owner."
Some agents refuse to show FSBO's (called fizz-bo's by those of us in the real estate industry), but I'm happy to do so. However, before we go and look at them together, let me educate you about some of the ins and outs of FSBO's.
Some For Sale By Owners Will Work With Realtors
Some FSBO's are happy to work with Realtors who bring buyers to see their properties, the only reason they have not listed their house for sale with another Realtor is that they are trying to save money. Instead of paying a listing agent 6% (who then splits the commission with a buyer's agent) they will only have to pay a buyer's broker 3%. That's a lot of savings that the seller of the house gets to put in their pocket.
They are, however, essentially waiving their right to representation in the transaction unless they get a lawyer to represent them.
Getting Into A FSBO
Like I mentioned before, I am happy to show my buyer clients FSBO's when the seller is willing to work with me. However, there is a procedure that has to be followed. It's really very simple, all I have to do is contact the seller and have them sign paperwork stating that they will pay me to represent you.
So when you're out there driving around and you see a FSBO, grab a flyer, or write down the number on the sign and pass on the number to me. I'll call and make the arrangements. For all practical purposes, once they sign the paperwork, it's like any other transaction where I represent you free of charge.
Some FSBO's Will Not Work With Realtors
There are other owners who refuse to work with Realtors altogether. Either they've had a bad experience with a real estate agent in the past, or, more commonly, they don't have any money to pay one, even if their home sells. This can frequently be the case in a market like the one that we're slowly coming out of when house values declined so much. This is also why FSBO's are frequently overpriced.
Potential Problems Working With For Sale By Owners
So they save money. I get that, who doesn't want to save money, right? But why should the seller get to put that money into their pocket when the sales price of their home is based upon the sales of other homes in the neighborhood that included the entire 6% listing/selling commission in the sales price and that allowed the buyer to have their own representation? Isn't that like the seller having their cake and eating it too? Isn't that unfair to buyers? I think so.
What other ways might someone trying to sell a home in a distressed situation try and squeeze the buyer to make more money? How about not paying for the appraisal ($500) like a seller typically does here in New Mexico? Maybe by not letting you have normal home inspections ($375) or paying for a one year home warranty ($300) for you? Or I've seen this before, they try to put the Title insurance on you ($1,500).
As you can see, the costs can start to add up and if you don't know what you're doing, it will cost you a lot of extra money.
One last thing, how much will it cost you if you don't have a Realtor to advise you, to negotiate for you not only on the sales price of the homes but how about on the repair issues with the home? That all gets negotiated too. Are you willing to forego expert advise to help the seller make more money and potentially take advantage of you?
Proceed with Caution!
Don't ever buy a house without a real estate agent or an attorney by your side. Don't risk your biggest investment, it's not worth it. If that FSBO won't let you use the Realtor of your choice, walk away and find another house. There are many to choose from.
And remember the procedure, pull the flyer, write down the number and contact me. I'll make the arrangements, and I'll keep your best interests in mind, not the sellers. And that, my friends, will protect you and save you money.
by Albuquerque Real Estate Agent Rich Cederberg, eXp Realty, (505) 803-5012