Is a FSBO priced at 6% below appraisal essentially break-even?

Question

I am considering purchasing the rental we have lived in for the last few years. In order to save on realtor fees, the owner is willing to knock off the 6% realtor fees from the appraisal price. Are there any advantages to this deal in the short term or just in the long-term if there is appreciation? B/c unless I'm misunderstanding, if I needed to sell in a year or two, I'd need to jack the price up by 6% to clear what I put into the home, right? Sorry for the obvious question!

Andrew S. · Answer

Thank you for the feedback everyone. Very helpful. The owner ordered the appraisal about 6 months ago so that he could get an idea of what the home was "worth", realizing that it isn't exposed to the market but at least produces a starting point of consideration.

We had the inspection done a few weeks ago, in fact, and are now in the process of trying to figure out how much the repair work would actually cost. Getting some bids (for example, it needs the asphalt driveway replaced and a 25' x 4' retaining wall replaced (currently rotten wood, replacing with concrete blocks/stone face) but hard to know exactly how much $ the repairs would cost (and what he's willing to cover).

Mo Weis · Answer

@Andrew S. the definition of an appraisal is one persons opinion of value for that day. If it a home you want to stay in long term than the "realtor fees" are not much in the long term. If you just think you're saving the fees and are therefore buying this property, buying at 94% of market value, find a decent agent who can negotiate on your behalf and you should be able to buy a home that you actually like for 94% of market value.

Russell Brazil · Answer

You will need a contract price prior to appraisal.

The benefit here is ability to not have to be in a competitive situation.

Appraisal is also not a good determining factor in valuing the property since its not exposed to the market, so dont put too much weight in it.

Tchaka Owen · Answer

Assuming that the appraisal is accurate, there's nothing wrong with this. The other option is for him to put it on the market at a higher price and he'll still net the same. Buyer will end up paying the agents.

That said, before you jump on it you should keep a few things in mind:

1. Since you don't have an agent representing you, you'll need to write the contract, find a settlement company, schedule inspection, etc. It's not terribly difficult, but can be tedious. You might consider calling an agent (or friend who is an agent) and offer 1% for them to help you through that. You pay out of your pocket.

2. Just because it's FSBO with an owner you know does not mean you don't do your due diligence. If the inspector comes up with issues, go back to the owner and address them (or get a credit so you can address them after closing). Good luck!

Is a FSBO priced at 6% below appraisal essentially break-even?

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