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We want to buy a For Sale By
Owner
Dear Dollar Diva,
My husband and I have been working with a real estate agent to find
a home. He's worked very hard for us, but so far he hasn't shown
us anything that we like in our price range. We finally found the
home of our dreams, only it's a for-sale-by owner. Can we still
buy this home even though we have a real estate agent? Who pays
the real estate agent's commission? Do real estate agents look down
on this?
The Diva understands your predicament, but it's not
as bad as it feels. Real estate people make a nice commission when
they match up a buyer and seller -- the reason it's so nice is because
it has to make up for all of the time they spend on unmatched buyers
and sellers.
Can we buy the home without a real estate agent?
Yes you can. It 's called buying a FSBO
(pronounced Fizzbo), which stands for For Sale By Owner, and it's
done all the time by people who were formerly working with real
estate agents. It's the bane of the agent's existence, but he's
used to it. Generally, there's no such thing as an oral agreement
when it comes to real estate transactions, so if you didn't sign
anything obligating you to the agent, there's no obligation.
Who pays the real estate agent's commission?
The seller pays the commission. He lists his home
with a real estate sales agent. The agent who gets the contract
is called the listing agent. The homeowner signs a contract and
agrees to pay a commission, usually around six percent, when the
house is sold. Of course, the seller knows that when he sets a price
on the home.
The agent who lists the house and the agent who finds
the buyer usually split it in half. Sometimes it's the same agent,
more often it's not. The agent then splits his share of the commission
with the firm he works for. If he's a big producer he gets to keep
a higher percentage of his share than if he's the new guy on the
block. The buyer doesn't have to worry about all this.
Do real estate agents look down on this?
Don't worry about the real estate agent looking down
on this. He's not your friend, he's a broker who wants to make a
deal. He looks upon you as a potential buyer, and his goal is to
match you up with a seller. Working hard at it isn't good enough;
he has to find a house that will work for you. Since you found the
house for yourself, he didn't make a match. It's all part of the
game, and if your real estate agent can't accept this graciously,
he's in the wrong business.
Buying a FSBO
When you buy a FSBO, you have to do a little more
work than when you use a real estate agent. Two things are very
important:
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Have a real estate attorney look at your sales
contract before you sign it. You want to make sure the seller
pays his fair share of any problems that are found during the
inspection. If there are any contingencies, make sure you include
them, such as having the sale dependent upon getting a mortgage,
selling your present home, or the results of the inspection
you're going to have done on the property.
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Have the property inspected. You want to make
sure it doesn't have any structural, electrical, mechanical
or plumbing problems, termites or anything else that's going
to cost you a bundle after you move in. Be sure to remind the
inspector to check for environmental hazards, such as asbestos
and radon. And follow the inspector around when he's checking
the place out; you'll find out a lot about your new home that
way. Sometimes sellers say it's not necessary to have an inspection
because their house has nothing wrong with it. Don't believe
it.
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DOROTHY ROSEN has a master's degree in finance, with a specialization in accounting,
from the Kellogg Graduate School at Northwestern University in Evanston,
Ill. Rosen has more than 15 years of experience in the financial arena, serving
in Illinois and Florida as a certified public accountant, financial consultant,
expert witness and educator. She is owner of Dorothy Rosen, CPA, a public
accounting firm that serves individuals and small businesses.
