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'By-owner' services help buyers, too

What's good for the seller can be just as good for the buyer. As the For Sale By Owner, or FSBO, movement gathers momentum, some buyers are taking advantage of the increased availability of homes to negotiate directly with sellers, cutting out the middleman and saving money in the process.

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Web sites linking home buyers and sellers directly are proliferating on the Internet, making the search for a new home, and potentially cutting out the real estate agent's commission, easier than ever.

While commissions have never been as much of an issue for buyers as they are for sellers, they affect the buyer indirectly in the form of a higher home price. Without the traditional 6-percent real estate commission, both the buyer and the seller stand to save, especially in areas where home prices are skyrocketing.

Home buyers looking to go this route should proceed with care: While bargains are out there, uninformed buyers can make costly mistakes and actually pay more than they would had they used an experienced real estate agent. "The biggest problem with this situation is that the sellers want to save the commission money and keep it for themselves while the buyer also wants to profit from that situation," says Steve Hattan, owner of HomeOwners Advantage in Chicago. "Both of you can't save the same money."

Paul Purcell, a partner at Braddock and Purcell, a real estate consulting firm, agrees, saying, "Buyers should be very careful -- it flies in the face of logic that a seller would give a stranger a discount on his own home instead of keeping that money for himself."

Where to Start
Web sites including ForSaleByOwner.com, Owners.com and FSBO.com link buyers and sellers. Once you register, it is free to do so, most of these sites will send you alerts as soon as homes meeting your specifications are listed on their site.

If you find a home that you are interested in, you can shoot the owner a quick e-mail asking any specific questions you might have and even arranging a day and time to see the house. If you're moving from a distance, you can use e-mail to set up several appointments to view homes when you're in town.

But keep in mind that many of these sites have lots of homes in some big cities and not many in smaller cities or towns. A FSBO buyer may have to use Web listings in conjunction with other methods, such as looking through local ads, networking with friends and relatives, and driving through the neighborhoods they are interested in find to the types of FSBO properties they want.

There's a lot of free information to guide you through the buying process on most of these sites, including how to figure out what type of home you can afford, the ins and outs of getting prequalified by a bank or mortgage company, free reports on cities and school districts, moving tips, and data on what homes are selling for in the area where you're looking.

Owner.com offers a free buyers' checklist that walks you through the buying process, making sure that you don't miss any essential steps along the way. FSBO.com offers reports for a fee that include detailed information about a particular property, recent comparable home sales in the area, property tax information, and flood maps. Prices vary from $4.95 for a comparable sales report to $29.95 for a complete property valuation report.

Low-cost or discount real estate brokerage firms, many with brick-and-mortar offices, offer some of the same services as the Web-only firms, including e-mail alerts and multiple listing services. Assist 2 Sell. offers buyers both MLS lists and nonMLS listings. Many of the low-cost or discount brokers will work with you in the buying process for a reduced commission. Other firms in this space include America's Choice and HelpUSell.

What To Watch Out For
When you go it alone, you need to do more research to make sure you're fully informed about the ins and outs of home buying. "Buyers without representation can get burned," says Purcell. He recommends that buyers get prequalified by a mortgage company or bank, fully understand the mechanics of the buying process and the contract, and verify any numbers.

While there are many free real estate forms and contracts on the Internet, these may not be customized to your particular state or situation, which is why it is good to sit down with an experienced real estate attorney and pay an appropriate fee to make sure all of your ducks are in a row so that your entire transaction, particularly your closing, goes smoothly. Unwary buyers may sign contracts obligating them to buy a house without a financing contingency, landing them in hot water if they can't get the needed financing.

Others may forget to include a home-inspection clause and end up getting stuck with a real lemon, Purcell says. "You can bet that if a home has a leaking roof or basement, the seller will do everything they can to disguise it," he says. "Ask lots of questions and be sure to get a home inspection before you commit. Don't get so emotionally invested in a house that you can't walk away. There is always another house out there."

Another issue to clear up with the seller is what appliances and personal items will stay with the house. In some states, appliances are considered part of the house, in others, the seller takes them with them. Ask questions about everything, Purcell advises, including items such as curtains and pool equipment. "Some buyers have gone into a house after the closing only to find that everything that wasn't literally nailed down is gone," he says.

 
-- Posted: May 16, 2005
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