Selling FSBO to an Investor

3 Replies

I live in an older neighborhood (1950s) in a hot market where there are a lot of investors are coming through, flipping homes and (I assume) making solid profits. I had a realtor look at my house and some comps and he thinks I could get about $410-415k going to market. However, I found an investor that has offered me $400k with 5k in earnest money and no buyer realtor commissions. I know it's under market, but after buyer/seller realtor commissions of 6%, plus paying for minor repairs and other misc costs to get the house in a salable condition, I'll still end up ahead. Plus no headaches of dealing with buyers coming in/out of my house and a fast close.

Based on my discussions with him, I think his plan is to flip the house. He's been doing this for awhile, so I have no doubt that he'll make a solid profit. Win-win, right? The only problem is, I've never sold a house by myself, so I don't know the ins/outs of the closing process and what all I should do to protect myself. I don't expect any malpractice as he is also a realtor. But, just doing my due diligence, I've had a family lawyer and my lender look over the contract. Both have said it looks pretty standard. One friend suggested I get a Due Diligence Fee rather than earnest money to get him more locked-in to the deal.

My question is, should I hire a real estate attorney (or other professional) to represent me in the closing? I asked my buying agent, and he said he would rep me, but it would be 1.75% ("firm policy") vs the typical 3%, which equates to $7k and would almost defeat the purpose of this whole process. I know attorneys aren't cheap, but I wouldn't expect something as simple as a closing to be all that expensive. Based on my research, it seems like the title company does most of the work. I'm not sure if I need one at all. I just don't want to screw myself/family over because of my own ignorance of the law.

Any suggestions/insight is greatly appreciated.

You're right. The title company does all of that work for you and they are the ones who will have your back to make sure all goes smoothly.

Spend time with the title company and become friends with them to make sure they have your back at the closing.

Here I sell FSBO using the same MLS realtor PSA that is standard. That and a title co. There are also lead paint and condition disclosures you need to complete as a seller. Ask the title co.

The buyer will present the offer. Take that to a pro and title co for review. Ask again about standard disclosures. Get advice, but I wouldn't pay $7k for the privilege, especially working with an experienced buyer.

If you're in a state that uses closing attorneys, take your offer to one of them, obviously.

1st. If you can get 96% of a realtor price opinion, seems like a no brainer, unless there is something we done know! If you use a title company and they can help with disclosures and you can pay a small fee for a real estate professional/ and or attorney to review the contract, in Colorado and a couple other states I have purchased in you would be fine.

2nd. Something is off about this high of an offer, if it is a flip deal.

If a seasoned investor is offering that much, the ARV must be much higher than the current value or they will lose money, not have a healthy profit! Investor offers are usually 50-70% of value, because they will have to rehab the property.(Side note – could be more for houses that don't need much work, but I have never spent less than 25K on a rehab in Denver.) When an investor sells it, over the rehab costs, he will have to pay realtor commissions if he wants it on the MLS, he will have holding costs and more than likely finance costs. Oh and by the way if the investor does this for a living there should be 10-30% profit in the deal depending on how much work is needed. In Hot markets where supply of housing is low and investors compete with buyers who just want a place to live and are willing to buy fixer uppers, investors will always be out bid on MLS deals. Since owner occupants don't need to figure in profit and usually under estimate the cost of repairs or do them with their own labor costs, they have the ability to offer more than an investor that flips a property.Sounds like a unicorn!

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