Question regarding for sale by owner

12 Replies

My husband and I are looking to purchase our first investment property. Found a small 2bd 1bath for sale by owner. The listing says, “Listed by owner, I don't need a realtor at this time, willing to work with your realtor for a negotiated fee.”

What are the potential drawbacks or advantages here?

All three of our properties have been FSBO just by chance. Advantages are potentially saving a little bit on price since the owner won't need to pay the typical 6% to the brokers. Downside is you may need a little more guidance from an attorney to navigate you through the purchase process. It isn't rocket science though, don't be afraid to proceed with an FSBO if you find a good deal.

Another thought; something we have found that we like is being able to negotiate directly with the seller when there is no broker involved. This way there is no way your intentions or thoughts get mixed up in a game of telephone. You get to tell the seller exactly what you want and why. That's not everyone's cup of tea but it is worth considering. 

I'd prefer to deal straight with the seller, no chance for communication to get twisted or a different spin placed on it.  But there are some down sides, an agent can help with contract language and help with an out if needed that gets you your earnest money back.

Part of why it’s good to use a Realtor is bc of the contracts and negotiations involved. It’s a lot of money at stake. I would not proceed without an attorney, which you will pay for. There is no cost to you as the buyer to use an agent, and the seller states he is willing to pay a fee to the buyer’s side (this is under the assumption of getting to the closing table). I would bring your agent. It could slow the process a tad bc that brokerage will need to negotiate an agreement for the fee. And it likely won’t be a ton (prob a flat fee versus a %) so it shouldn’t take too much bargaining power away from you.

@Maegan Erb I bought two single families through FSBO I asked my realtor if they would be my buyers agent since I've never purchased a property directly from a seller, they charged 500 to take care of everything it went very smooth, best of luck!

@Matthew Hollister

If the seller us willing to pay a realtor's fee, it seems you have nothing to lose and something to gain by hiring an agent. There are a lot of moving parts to a real eastate transaction. If you're new to this, you really need some guidance from someone. Realtirs have access to all kinds of contracts, addenda, riders and forms that help spell out the details of the process.

If the transaction proceeds perfectly, you don't really need much assistance. However, there are many ways to muck up a deal, especially when you're working through the contingencies. This is where a written agreement specifying who needs to do what and when, and what happens when one party doesn't comply becomes priceless.

Worst case, what happens when one of you wants to cancel the deal?

And then the there's this: who holds the deposit money? How is it released if the deal goes south?

Do these questions keep you up at night? Good. They should.

Full disclosure: I'm a real estate broker.

if the property is cheap, probably use a realtor. 

As the buyer you are definitely paying for the realtor. If the seller is willing to pay for a buyer’s realtor, they’re definitely willing to give you 2% off instead. On a property over $200k you’d definitely come out ahead taking the 2% and paying a lawyer. 

Originally posted by @Maegan Erb :

My husband and I are looking to purchase our first investment property. Found a small 2bd 1bath for sale by owner. The listing says, “Listed by owner, I don't need a realtor at this time, willing to work with your realtor for a negotiated fee.”

What are the potential drawbacks or advantages here?

 It depends. How much can you rent the house for? Will it cover the costs of the financing and give you some cash flow? Are there repairs to be made? Does he actually own the house? Does someone else own the house with him? Do you have a title report? Do you have escrow set up? Will you be paying cash or using a bank? If paying cash how do you know if it's a fair price? If using a bank they will require an appraisal. If the sales price doesn't match the appraisal what are your plans? Is he providing a Form 17? When is closing? Is it on city water or does it have a well and septic? When was the septic last checked? Will you have an inspection done? (I think you should) What happens if you miss your closing date or he backs out at the last minute or there is an undisclosed lien or a major mechanically problem with heat, foundation, water heater, electrical, plumbing, etc? What if the inspection reveals a non serious mold in the bathroom? If the inspection reveals 60 amp service and aluminum wiring, do you care? Should you care? On a 2/1 it is probably an older house, if it has asbestos siding or vermiculite for insulation in the attic, or post & pier foundation do you care, should you care? How much are you putting down? Why so much? What happens if there is a dispute? Where is the earnest money being held? 

No, I'm not a real estate agent. I've just bought lots of houses (In Pierce and King Counties) and I've seen about everything that can happen. Can you do this on your own? Of course. Might you pay a higher price for buying your first one with little knowledge of the process, sure.

But, it's yours to have. I only buy FSBOs. Tread wisely. Do your homework.