Why Buying FSBO To Save Money Is Overrated

With the how much technology has advanced in the last two decades, there has never been an easier for home owners to go the FSBO route and sell their properties themselves.

It can be as easy as snapping pictures of the house with the smart phone, registering for an account on a property listing portal or app, upload all the data and images, set an asking price, and one would be ready for business.

Once a purchase price is struck between buyer and seller, the buyer’s agent might even handle all the paperwork to push through the deal towards closing.

The sellers would save a huge amount of money… which means that buyers can get their hands on some of that savings by getting sellers to sell low… at least in theory.

Real life is seldom so simple.

Where’s the money?

Firstly, something buyers often forget as their buying temperatures increase is that the party that saves money in FSBO transactions is first and foremost, the seller.

Home sellers who have chosen to go FSBO after all, are primarily motivated by the huge amount of commission dollars that they can save by selling the family home themselves.

Buyers don’t pay any commissions unless they are specifically hire an agent to do the searching for them.

Even when agents do help a home seeker find a house to purchase, the chances are that the agents offer that service for free.

This is because in regular transactions, the seller is the one paying the commission. And through co-brokering, the seller’s agent would remunerate the buyer’s agent with a portion of his commission.

So a buyer, in most cases, don’t pay a commission to real estate agents.

This implies that buying FSBO don’t mean that a buyer can look forward to a cheaper house. The only material difference is that the buyer would not have to deal with a selling agent.

On top of that sellers without the expertise of real estate agents often overprice their homes as every homeowner feels that their homes are worth an awful lot of money.

Even if you present facts to a home owner that his house should be priced at 20% less according to market data, the odds are that the seller would still insist that his home is worth more.

So the chances of a home seller under pricing his house is actually quite low. Especially with those who have just got on the market.

Only after some time without any real breakthrough would a FSBO seller start inching down his asking price.

Some people even think that FSBOs would mean a better mortgage and lower loan costs.

There is really no truth in that.

Lenders really don’t care whether a seller has an agent representing him or representing himself. They are only interested in the value of the property so that they can assign a loan to value to it.

The types of loan programs, interest rates and freebies that you can coax out from the lender does not depend on whether a house is FSBO or not.

You are not going to save any financing costs unless the seller has some type of attractive seller financing involved.

So really. If there’s one point that you should hammer home is that buyers do not typically save any money at all by buying directly from a seller.

In fact, having no agents on the other side who has a code of conduct to maintain can even mean that a buyer would be taking on more risks.

Agents know what material information should matter to a buyer and what needs to be disclosed whether a buyer asks for it at all.

On the other hand, a seller can claim ignorance and a lack of knowledge and the buyer would have no way of proving that he is acting in bad faith.

Should you buy FSBO?

When you are going to approach an FSBO, you must be absolutely clear that you would be dealing with someone who is highly motivated by money. Specifically how much he can squeeze out of selling his house.

If someone is willing to take on the work of selling his house himself to save money, you can bet that he is not going to be an easy adversary to deal with.

So you should not walk into an open house thinking that you would be dealing with a loser for the reason that there is no professional agent by his side to look after his interest.

When there is no agent representing the seller, all the more you should be calling on the advise of professionals to ensure that you would not be taken for a rise.

Most people would be more than willing to pay a fair price for a house.

But there is a tendency for FSBO sellers to overstate the value of their homes. Thereby, increasing the tendency for buyers to buy it thinking it is a fair price, and end up realizing that the house is not in as good a condition than they thought.

You can take the risk with a dinner meal when the posters of the food look worth of the high price but ends up tasting like crap.

That’s just wasting a few dollars. And nothing compared to the thousands of dollars we are talking about in real estate.

This is why as a buyer dealing with FSBO, one should at least:

• Hire a buyer agent to conduct due diligence
• Call a home inspector to check for issues
• Have contracts checked by a real estate lawyer
• Get title insurance to protect your behind

If you are lucky enough to run into a FSBO seller who lives in reality, you also need to get your agent to run through the sales contract to see if it contains terms that are out of the ordinary.

It could very well be that the seller is willing to compromise because he is asking for some really odd terms.

They might not cost you more during closing. But it might start haunting you after closing.

The point of all these is that one should not assume that buyer from an FSBO would mean a better deal and a lower price.

This is never the case. But marketers have done a really good job in creating the perception that it is.

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