Buying a FSBO...

One of my readers asked me what they should be concerned about when choosing to buy a home listed privately.

FSBO (pronounced Fizbo) = For Sale By Owner

They say that approximately 10% of consumers are price driven while 90% of consumers are value driven.  I'd say, those numbers sound pretty accurate when applying that formula to the overall housing market in Winnipeg because I'm told about 15% of homeowners choose to sell their home privately.   I mean, let's get real, we are not called the "Discount Capital of Canada" for nothing.  Sometimes, I think we expect to be paid to take merchandise off business's hands.   Personally speaking, I love nothing more than a good bargain...as long as it doesn't cost me more than I am willing to pay in the long run.

But here's what I don't get.  When talking about houses, why in the world, would buyers, who can benefit from  the full service of a licensed and knowledgeable REALTOR® without any cost to them, choose not to be represented in what will probably be the biggest single purchase of their life?

Here's some things for buyers to consider when choosing to enter into a transaction in a private sale:

• Do you really know the true market value of the home?  I just checked out a FSBO site just today and spotted many homes simply overpriced.  

• Exactly, which party in the FSBO transaction thinks is "pocketing the commission"?  The answer in many cases is both of them.  Buyers believe that since the seller doesn't pay a commission, they will come down in price, making negotiations easier but  sellers believe that  they pocket the extra money.      

• Who exactly, negotiates the gap between what the owner wants in their pocket and what the buyer is willing to pay?  

• Has anyone done a title search?  Exactly, what kind of ownership does that little old widow that's lived in that house  "forever" have?  She may not be in a legal position to sell the home. 

• How about any liens, caveats and restrictive covenants on the property.  When you buy a property you also buy, acquire and are responsible for those too.   Do you want them? 

• Do you give the seller a deposit cheque with your offer and what happens to it when the deal doesn't go through?  Is the owner refunding you when they breach the contract?

• How about homestead rights.  Does someone have homestead rights on the property?  Do you know who that someone is?  It may not be the owner's girlfriend or boyfriend that you were introduced to when you viewed the home. 

• The owner told you that they have multiply offers on the home and if  you want it, you need to beef up your offer.  Do you believe them when they tell you they have 8 offers?  Are they bound by a Code of Ethics and the Real Estate Broker's Act?   ...no they are not.

• Real Estate professionals, including listing agents, are prohibited from concealing information that could dissuade a buyer from purchasing a particular property.  In a FSBO transaction, you must rely on the seller's honesty.

• Do you know what you don't know?

These are just some of my concerns for the buyer of a FSBO.  If you still choose not to have free qualified representation then my advice  is to select a lawyer to guide you throughout the process and include the condition of a good home inspector and your lawyer's approval of the offer.  These conditions are more relevant now than ever.

Your risks are much higher when you lack representation and many FSBO's have absolutely no problem working with agents.  On top of that, buyers do not pay to work with a REALTOR®.  What is that old saying of Lincoln's..."The man who chooses to represent themselves has a fool for a client."  So now I have a question for you...why are you not represented?

Don't pay more than you bargained for.  Protect yourself and your investment, buy with a REALTOR®.

I'm here for YOU.

~Ciao