You may wonder if it's worth contacting For Sales by Owners (FSBOs). Yes, write down the For Sale By Owner's phone number and call.
Myths About For Sales By Owners
- For Sales By Owners aren't serious sellers. A small minority might be testing the waters, but the majority of For Sales by Owners absolutely do want to sell their homes.
- For Sales By Owners are not flexible on price. Sometimes buyers think FSBOs can't afford to hire a real estate agent; they need every dime out of the deal and won't bend on price. But according to studies by the National Association of Realtors, most For Sales By Owners get less for their homes than those who list with a real estate agent. For Sales By Owners are willing to negotiate. Since they don't do it for a living, FSBOs are unlikely to be very good at it.
- For Sales by Owners are hiding material facts by not hiring a real estate agent. FSBOs are bound to the same laws that govern those who are represented by a real estate agent. These sellers need to give buyers federal- and state-mandated (if any) disclosures, including material facts.
Writing the Purchase Contract
If you are uncomfortable writing a purchase contract, call a real estate lawyer to handle that aspect of the transaction for you. Many lawyers will draw up a purchase offer for $500, give or take, and it's money well spent.
- Offer less than list price. The only way to go in negotiations is up; if you start out too high, you can't come back down.
- Write contingencies. Make sure you have a way out of the transaction if you find physical defects the seller will not fix, the CC&Rs are unsatisfactory to you or your loan is not approved. Some contingencies are:
- Loan approval
- Home inspection
- Clear title from seller
- Approval of seller's disclosures
- Pest inspection
- Earnest money deposit. Do not give your earnest money deposit to the seller. Give it to a third party such as a title or escrow company.
- Determine who pays for what. There are no set guidelines. There is local custom, but who pays which fees are negotiable. Figure out who will pay for transfer taxes, escrow, title fees and so forth. You can ask a local real estate agent or title officer how to do this.
- Prorations. You can use prorations to your advantage if you know how to figure whether a proration will be in your favor. For example, if property taxes are paid in advance, the unused portion will be a credit back to the seller. In that instance, you might ask for no prorations. However, if taxes are paid in arrears, you will want prorations because the seller will credit you.
- Possession. Specify when you will retain possession of the property and be handed the keys. In some parts of the country, it is acceptable to expect possession on the day of closing. In other areas, possession is given the day after closing to give the seller time to move.
Always get a home inspection by a reputable home inspector. Too many deals go south by hiring a bad home inspector. Ask for credentials and whether the inspector belongs to an association. If major problems are found, you can ask the seller to:
- Fix the problem. But bear in mind the seller is under no requirement to hire the best contractor or do a quality job.
- Credit you the money to hire your own contractor after closing.
- Lower the sales price.
Get a Title Policy
Some buyers think it's not worth the extra money to buy title insurance, but smart buyers will always order title insurance. The cost to fix clouds on title or disputed easements, among other factors, can be enormous when compared to the pennies it costs to buy title insurance.
Remember, if you have questions, seek legal and tax advice.
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.