For-sale-by-owner (FSBO) properties still pop up now and then. Although a seller may opt not to be represented by an agent, you can certainly still work with one as a buyer. In fact, it’s probably even more important for you to have representation in these cases as there are several reasons why purchasing from a FSBO can be challenging. Here area a few examples:
1 – Incorrect Pricing
Unfortunately, most sellers who attempt FSBO get the pricing wrong. When listing agents price a home, they rely on their experience, solid market data, and knowledge of real estate market conditions. Sellers often lack access to this information and/or do not have the experience to analyze the data correctly. More often than not, FSBOs are overpriced and sellers are not quite willing to accept that their pricing is inaccurate for current market conditions. This can be challenging when it comes to making offers and negotiating prices/concessions.
2 – Extended Market Times
Because prices are frequently inflated, it can take longer to get a FSBO under contract. Early on, sellers typically remain firm on price despite receiving multiple offers at the lower (but more accurate) market value. They don’t quite realize that most buyers cannot get financing for an overpriced home; and cash buyers would never overpay for a property. If anything, cash buyer do the reverse and look for discounted pricing. It can take a long time for sellers to realize that their price is too high and that they must reduce it to get their home sold.
2 – Unexpected Seller Expectations
Beyond price, there are other seller expectations to contend with. Since FSBOs do not have an agent working on their behalf and advising them throughout the process, they may not be aware of proper procedures and norms. This can apply to negotiations, contracts, mortgage steps, and closings. Often times, the buyer’s agent ends up doing double duty in advising their clients and educating sellers. However, knowing that the buyer’s agent works exclusively for the buyer, sellers may not always trust what they are being told by buyers’ agents. Navigating this requires skill and tact on the part of a buyer’s agent. Managing seller expectations is one of the biggest reasons why purchasing from a FSBO can be challenging.
Summary of Reasons Why Purchasing from a FSBO Can Be Challenging
From start to finish, purchasing from a FSBO can be challenging. Allow for additional time and pack your patience when dealing with this type of property. Lastly, understand that your agent may be presented with more work than usual and his/her efforts will be critical to achieving a successful closing on your behalf. By understanding how FSBOs may differ from other properties, you can be better prepared for the process and potential delays and issues.