How to buy a FSBO home
It's every buyer's dream: Get your dream house for less than the
Some buyers target properties that are "for sale by owner"
(also known as FSBOs, and pronounced FIZ-bows), thinking that owners
will pass along their savings from avoiding an agent's commission
-- usually about 6 percent to 7 percent of the asking price.
Myth-busting time: Unless the market
is really slow, hope to split that "commission." If
the market's really hot, forget even that.
And remember, there's no such thing as free money.
If you want to buy a home without an agent, you will have to do
the agent's work yourself. There may be a few instances when you
want to hire a buyer's agent to do all or part of the heavy lifting
The trade offs
First sacrifice: selection. If you're looking to move quickly, a
broker often makes it easier to shop the widest selection of properties
in an area.
"It's OK if you happen to find exactly the kind
of house you're looking for in exactly the right place," says
Jack Guttentag, author of "The Mortgage Encyclopedia"
and professor emeritus of finance at the Wharton School at the University
of Pennsylvania. "But what you're giving up is access to the
An agent can give you a good picture of local trends
and even financing options, says William Poorvu, professor emeritus
of real estate at Harvard Business School and co-author of "The
Real Estate Game." The question to ask: Do you need this assistance
or can you handle it yourself?
On your own, you have to be more diligent about patrolling
the areas you like and keeping an eye out for new "for sale"
signs. You can also contact neighborhood associations to ask if
anyone is selling. And some FSBO networks will give you access to
the Multiple Listing Service, a digest of available houses that
Second sacrifice: accurate pricing information. Buyers
are just as likely to be offering too much as too little. Your job
is to get an idea of what the place is really worth before you start
talking money. Talk to real estate professionals in the area. Look
at newspaper listings for homes sold in the past six months. What
did they bring? What are agented sellers asking now?
sacrifice: someone to negotiate for you. If there's a big discrepancy between
what you think a house is worth and the asking price, tread carefully. If you
sit down to negotiate, keep the conversation as neutral as you can. Show the sellers
copies of your research. Don't criticize the house, its condition or that ugly
dining room wallpaper.
And if you don't want to handle this yourself, consider
hiring an agent for a flat fee or hourly wage to negotiate for you,
says Bill Carey, co-author of "How to Sell Your Home Without
a Broker." "Some people feel better to have negotiating
done by someone else," he says.
Poorvu agrees. "We all think we're fabulous negotiators,
but sometimes it's good to have an intermediary," he says. "It takes
the personalities out of it. When you're buying a house, it can be a very emotional
What you don't see
a real estate professional has an advantage: picking up the clues to a home's
true condition. "There are material facts about a house that a trained broker
or sales associate will see," says Ron Phipps, broker with Phipps Realty
and Relocation in Warwick, RI.
Most states require that the
seller fill out a disclosure statement. If you're serious about the house, ask
to see it. This should clue you in to any problems or potential problems you might