Guide to buying real estate For Sale By Owner (FSBO)

Some people think that they need to use a real estate agent when buying property in the same way that you need to use a stockbroker to buy and sell shares. This is not true. In Australia there is no legal requirement for property to be sold through a real estate agent.

Other buyers think that the process of buying property will be quicker and easier using a real estate agent. Wrong again. Many buyers find that by cutting out the middleman the process is faster and far less stressful than purchases made through an agent.

Owners are more knowledgeable about their own property

Who better to tell you about a property’s features than an owner that has more than likely lived in their home for many years? The owner is likely to know what schools are in the area, the location of amenities such as parks and where the closest shops are. Real estate agents on the other hand are often woefully under-informed about the property that they are showing. A typical agent will often have several properties on their books at anyone time and will only remember the basic details of each property. Some agents don’t even know the basic details! At one open house that I attended the agent didn’t even know if there was secure parking on title. Can you imagine an owner forgetting where they parked their car at night?

Real Estate agents are no guarantee

Some agents will claim that by using their services buyers are protected from any misrepresentation as any disputes can be taken to a real estate tribunal. Unfortunately this is not the case. Agents found to be making false claims about a property will often claim that they are acting in good faith on the instructions of the owner therefore they are not guilty of misrepresentation. Members of these real estate tribunals are often chosen by the real estate industry and unsurprisingly dismiss many complaints brought before them. I wonder how many convictions you would get for armed robbery if bank robbers were allowed to select the jury?

For Sale By Owner sellers have room to negotiate

One of the main reasons that buyers chose to buy properties for sale by owner (or private sale as it is known in Australia) is that they know the owner can be more flexible on the price and both the buyer and the seller can still end up better off. As the owner is saving on the real estate agent’s commission (sometimes this can be as much as 3%) they can sell the property for a lower price and still end up with more money in their pocket than they would have had they used an agent.

Buyers should not however expect the owner to discount their property by the full value of the commission saved. Although selling your own home is not nearly as difficult as real estate agents would have you believe there are costs involved both in terms of time and money. It is only fair to expect that the owner will want to keep some of this saved commission as a reward for their endeavours.

Faster going direct

Real estate agents may claim that buyers can find a home more quickly by using their services as they have many properties on their books for the buyer to choose from. While this may have been true ten or twenty years ago like many other aspects of our lives the internet has changed this by offering a cheap way to bring buyers and sellers together. There are now dedicated private sale real estate websites such as www.smartvendor.com.au that allow buyers to compare hundreds of properties online, all for sale direct from the owner.

Real estate agents will often ignore a buyer’s stated preferences and even lie about a property’s features in order to get buyers to attend an inspection. Do agent’s really believe that they are so good at extolling a property’s virtues that the buyer is going to forget that they wanted a fourth bedroom? Some agents may take buyers on ‘The Run’ where they are driven to a number of cheaper but totally unsuitable properties in the hope that when they are shown the final property they’ll jump a the chance to buy it. Showing the buyers the property that suited them first could have saved this wasted time.

Even when real estate agents do not indulge in time wasting games the buying process is slowed down by the presence of a middleman. A call to the agent to request a viewing will be followed by a call to the owner to confirm that the time is suitable before the agent can call the buyer back with the final details. One call could replace these three phone calls when the buyer and seller deal direct.

Real estate agents are often reluctant to show homes at times other than their scheduled open house inspections. This is understandable as they may have many properties on their books and need to have some control over the viewings. An owner seller on the other hand only has the one property to sell and will often try to be as flexible as possible to be able to show the property at a time convenient for the buyer.

Speed up the process

Buyers can speed up the process still further by taking matters into their own hands and seeking out sellers with a letterbox drop in areas that interest them. For a fee your post office may even agree to distribute the letters for you. Alternatively buyers can get a feel for a neighbourhood by walking around posting letters through the letterboxes of properties that look like they may be suitable. Some buyers may even choose to leave a message on the back of their business card to show that they are not real estate agents trying to drum up business.

Get organised

Before you start to look for a property you should take the time to work out exactly what it is that you want, as this will speed things up in the long run. Make a list of all the features that a property must have and those features that it would be nice to have. Don’t waste time going to view a property that does not have all the features on the must have list. If after a couple of months you are still looking re-evaluate your must have list.

It is advisable to obtain pre-approval for a loan before you start looking. This way you will know how much you can afford from the start and you wont waste time viewing properties that you can’t afford and will avoid disappointment for all involved.

Viewing a property

Always be respectful when you are viewing a property for sale by owner and remember that it is their home. The interior decoration may not be to your taste but you can be tactful in how you express this. Antagonising the owner is not likely to result in them accepting a lower price for the property; in fact the opposite is true.

Closing the deal

Buyers should seek a professional home inspection before finalising the deal (this is the case whether buying through an agent or direct from the owner). This report will alert you to any problems such as termites, damp or structural irregularities. Any problems present at the time of purchase may become the buyer’s responsibility to rectify as insurance policies will not pay out for a pre-existing condition.

If the owner agrees to make any alterations to the property such as removing junk from the backyard, make sure that this is agreed in writing before signing the contract. Likewise if you have negotiated for any fittings such as a refrigerator to be included in the sale price this should also be included in the contract.

Unless both the buyer and the seller have legal knowledge it is advisable for the contract to be handled by a legal professional or licensed conveyancer. As real estate agents have no legal training this would also be the case if buying through an agent.

Increase the chance of finding your dream home

Many homeowners have had previous bad encounters with real estate agents so that when they come to sell they will only deal direct with buyers. By including private sale properties in your search you cast a wider net increasing the chances of finding your dream home. If you have never bought without real estate agents being involved you may be surprised at how easy the process is.

Please visit our For sale by owner (FSBO) site to find out more.