Federal Financial Insights
July 20th •
“For sale by owner” signs usually trigger one of two responses—either that the house is a bargain, or there’s something wrong with it.
If you’re tempted by the idea of saving a pretty penny by working directly with the seller, it’s important to keep in mind these important pros and cons to temper your expectations.
There are a few perks to be had working with a private seller.
For starters, how about no agent fees?
Of course you aren’t paying agent fees; but because the seller also isn’t paying commission, that can translate into a lower list price than similar properties.
By skipping over a real estate agent, it’s sometimes possible to find common ground (and prices) that fit both of your budgets.
Without relying on a mediator, it’s up to you to build a relationship with the seller—for better or worse, the ball is in your court.
For example, say the seller needs to remain in the house for up to a week after your closing date. Working directly with them gives you the opportunity to be hands-on with the specifics of your contract.
Plus, the home owner is often in a better position to answer your questions about the house and the local area—whether that means getting to know your potential neighbors or the low-down on the school district.
In most situations, neither you nor the seller are going to have a ton of real estate experience under your belts.
And the main reason a homeowner lists a property without an agent in the first place is that they want to cut agent fees.
Nothing wrong with that, except owners can underestimate the value of hiring a pro. As a buyer, one of those values with the biggest impact is reality-checking.
Agents work with sellers to keep expectations grounded through every step of the selling process, using market research to ensure the home is listed at a fair price.
Without that system of reality checks, private sellers often have pie-in-the-sky expectations of their home’s worth, meaning FSBO homes aren’t necessarily a bargain because they have sentimental value tacked on.
Think of it this way—FSBO means the owner wants to save money, typically because they are upgrading or need to get out of their house. And just because they’re saving on agent fees doesn’t mean the savings trickle down to you.
Plus, you’re working without the legal advice of a realtor. Not every private seller is out to fleece you, but you’ll have to get used to working without a built-in safety net.
Going agent-less also means daily micromanagement. Great if you have the time, but a real headache if you don’t.
From meetings to phone calls, all the agent’s work now falls to you.
Not to mention the contract. Although you aren’t forbidden from hiring an agent when buying an FSBO home, their fees are now your responsibility. So unless you take on that extra financial burden, the weight of drafting a contract now sits on your shoulders.
You’ve seen contracts—probably skimmed them—and know how dense they are. Now imagine coming up with one for a huge purchase like a new home.
Yes, buying a home directly from the owner can save you money. In the right situation, FSBO homes might be preferable to traditional listings.
But that isn’t a guarantee.
We love to cut out the middle man, but in this case it’s more like cutting corners. Without the knowledge of a real estate agent, you could be at the mercy of dishonest sellers, confusing paperwork and wasted hours in phone calls and meetings.
Nothing is a sure thing—sometimes realtors can be a nightmare and private sellers can be a dream come true.
But the peace of mind that comes from working with a professional real estate agent typically outweighs any benefits from FSBO homes—benefits that may not even exist in every case.