I read a blog post on Inman.com titled “What to know when buying FSBO” that I think necessitates a response. The post is by Tara-Nicholle Nelson who received a question, via email, from a buyer inquiring about purchasing an FSBO (For Sale By Owner) home.
The buyer wanted to know the pros and cons of buying an FSBO property. While I do believe that buyers generally should use the services of a real estate agent, I thought Ms. Nelson’s answer was inaccurate, to say the least.
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Ms. Nelson asserted that FSBO sellers should not expect to get the same price for their home as that of a house listed by a real estate agent, because comparable sales prices include agents’ commissions; therefore, an FSBO property should be discounted; the buyer should demand it.
Why? Sales comps serve to provide house values in the area regardless of an agent’s commission; they are merely recorded sales prices. Real estate commissions are negotiable, how do you determine the discount?
Ms. Nelson continued by saying that ‘the seller should pass the commission savings to the buyer’. Then what’s in it for the seller? Why is there even such a thing as a FSBO? Nonsense, opting to do the grunt work to save money is certainly the seller’s prerogative. This is tantamount to saying that if I decide to save money by doing my own oil change, I should pay more per quart. Not very logical.
Ms. Nelson added that if there’s no agent involved, the seller should pay for legal representation for the buyer. The seller should do this because of ‘contracts and disclosures’. Real estate agents are not lawyers, nor do they draft contracts. Real estate agent or not, contracts used in most FSBO transactions are standard state contracts.
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As far as disclosures, by law the seller has to disclose everything to the buyer, which is exactly what would happen were a real estate agent involved. Nothing more nothing less.
Lastly, Ms. Nelson stated that the buyer had hinted to her in the email that they planned to do an all-cash purchase. This, she added, is more reason to hire an agent because ‘buying with cash would easily cause the buyer to forgo doing inspections, running a title search, or getting title insurance, things which would have been required by a real estate agent or mortgage broker’.
Again, this is simply not accurate, at least not entirely. An agent cannot require a buyer to do any of those things. They can advise a buyer that it’s in their best interest, but that’s the extent of it.
A cash buyer is in fact free to bypass all of the above. If buyers are ‘highly educated and savvy’, as she mentions in her post, Ms. Nelson surely doesn’t believe that they don’t know enough to do their due diligence.
Let’s not forget that the reason the buyer asked the question is likely because they’re interested in the property. Making demands may not bode well with the seller, and much like they’re not obligated to give a discount, they’re not obligated to sell either. You negotiate a price, you don’t demand it.
Article provided by Allison Klein, a Fort Collins Colorado real estate agent. If you’re interested in moving to CO, you can check out Windsor Colorado homes and Loveland Colorado homes on Allison’s website.
