There is a property in your preferred Rhode Island neighborhood that you like. It truly feels like this could be your new home, but a closer look reveals that it is a for sale by owner (FSBO) property.
Should you purchase that FSBO property, or would it be better to look elsewhere?
In this article, we will discuss why it matters if a property is listed as for sale by owner. We will also highlight the perils of trying to buy that kind of property. Stay tuned so you can determine what course of action you must take.
What Does the For Sale By Owner Designation Mean?
We will get into the risks that come with purchasing an FSBO property a bit later in this article. For this section, we want to focus first on the significance of that designation.
The term for sale by owner is pretty self-explanatory. Instead of partnering with a real estate agent to sell their property, the owner of an FSBO property has decided that they will conduct the sale alone.
Why do some homeowners decide that selling their property without a realtor is the right move for them? According to this article from Zillow, most homeowners who decided to go the FSBO route did so because they wanted to save money. More specifically, 49% of homeowners said that saving money was why they opted for FSBO.
Furthermore, 35% of sellers said they went with FSBO because they were confident in completing a sale even without an agent on their side. An additional 34% said selling FSBO made sense because they already knew a potential buyer.
It is not that difficult to see where the property owners are coming from. Their property may be their most valuable asset, so they want to maximize the profits they gain from it. For those unfamiliar with the work done by realtors, it is also easy to assume that their job is simple enough to manage.
Of course, a property owner’s decision to forego working with an agent also affects buyers. As a result, the buyer’s process to purchase an FSBO home can be different from the typical experience.
How Do Transactions Involving FSBO Homes Differ from the Norm?
The thing about transactions involving FSBO properties is they tend to be unpredictable. You may have an idea of what the process should be like from the previous times you purchased a property, but the one you are about to undertake could be completely different.
How can a transaction involving an FSBO home differ from the ones you have experienced? Allow us to highlight those potential differences.
The Transaction May Take Place Mostly Online
How do you get eyeballs on your property if you are not working with realtors in your area? Well, one solution would be to post your property on websites like Zillow and Redfin.
When you start talking to the person managing the FSBO listing, you may quickly realize that they want to do all their business online. That could be because staying online is more convenient for them. After all, they may have a full-time job, so they can only manage their listing when they have free time.
Are you willing to push through with a purchase if most of the dealings are online? That will be your call to make. It is also something to keep in mind while you decide if pursuing FSBO properties is worth it.
There May Be No Open House
Hosting an open house is commonly used by real estate agents to generate interest in one of their listings. They lure potential buyers in with the promise of free food and hope that some visitors will register a genuine interest in the property.
The opinion on hosting an open house is more polarized than you might have originally thought. Regardless of how you feel about open houses, it would be best if you prepared for the possibility that the FSBO seller will not host one.
Setting up an open house requires time and effort. Those are things the property owner may not have to spare. They may forego the open house and hope they can still sell the property without it.
You Deal Directly with the Property Owner and Their Confidants
The conversations during the buying process usually involve real estate agents. The realtors are the ones who do the bulk of the talking, and they simply relay information back to their clients.
Since the property owner has opted for the FSBO route, no real estate agent will serve as the intermediary on their end. Your dealings will likely be with the property owner directly or perhaps some people in their inner circle.
This may be a big departure from the process you are familiar with, and you may need some time to adjust.
Why You Should Be Cautious of Purchasing an FSBO Property
Let’s now get to the potential risks of buying an FSBO property in Rhode Island. Keep these in mind while looking for your new home so you can make more informed decisions.
There is No Guarantee That You are Dealing with a Legitimate Seller
The first thing you need to worry about with an FSBO property is its legitimacy. You are not working with a real estate agent here. No one can assure that the property is legitimate beyond the owner.
We know how cunning some people can be. They will resort to using any tactic necessary to make a dishonest buck. People who are well-versed in the art of conning can even come up with legitimate-looking documents to bolster their ruse.
The odds of you running into a fraudulent seller simply because you are considering FSBO homes are low. However, the fact that there is still a small chance you are dealing with a fraudster is a genuine cause for concern.
The Seller May Not Be Disclosing Everything about the FSBO Property
If this is the first time you are buying a home, you may not be aware that the state of Rhode Island has a law that requires sellers to disclose certain information about their properties.
In the disclosure form the property owner hands over to you, they must discuss their length of occupancy, the year the home was built, the condition of the plumbing system, and numerous other important matters.
Ordinarily, you do not need to worry about the property owner concealing important information. However, their realtor will remind them that they can be penalized for failing to disclose information properly so you can be confident that you know everything relevant to the property.
Things are different if you are navigating a transaction involving a for sale by owner property.
Whether they meant to do so or not, the property owner may neglect to share certain information with you. They may have believed they were within their rights to hide certain issues affecting their home.
Even if the law has your back in that scenario, it is still a troublesome situation to be in. Instead of moving forward with a home purchase, you may now be dealing with that legal issue.
The Buying Process May Get Dragged Out
A potential legal issue is not the only thing that can slow down your dealings with the FSBO seller.
As we mentioned earlier, there is a good chance that the FSBO seller also has a full-time job. Therefore, they can only manage the property in their free time, so they cannot accommodate you as much as you want.
It could delay every step of the process because the seller only handles them whenever they can get away from their other commitments. That can be a real issue if you plan to move into your Rhode Island home sooner rather than later.
What many FSBO sellers do not realize is that real estate agents work full-time for a reason. You must commit fully to this line of work if you want to do things right. Otherwise, you would only be doing yourself and your potential buyer a disservice.
The Seller May Only Be Testing the Waters
Earlier, we explored why property owners may choose the FSBO route to facilitate a sale. However, one thing we did not mention back then is the possibility that the property owner is not actually planning to sell.
For now, at least, the property owner’s goal may simply be to gauge the interest in their property. After that, they may be looking at how many buyers they can draw and what kind of offers they can get.
Once they are satisfied with the information they have gathered, they may take their listing down. It is good for them that they got what they needed, but you now have to start over.
Being in this situation can be frustrating because there is nothing you can do about it. However, the property owner did not violate any laws, so your only option is to move on.
The Homeowner Has an Inflated View of Their Property’s Market Value
There are numerous costs associated with buying a home. You must account for closing costs, moving expenses, taxes, insurance, and the property’s listed price.
If you are buying from an FSBO seller, there is one more factor you may have to account for. That additional factor is the market value the homeowner has in mind for their property.
You can present a seller with all the market data available, and you may still not convince them that they are overvaluing their home. They have a number in mind and not budging off that no matter what you do.
On the one hand, you can move on and not let the property owner’s stubbornness bother you. But, on the other, you could waste valuable time trying to negotiate if the property owner makes it seem like they are at least open to lowering the listed price.
Avoid this potentially irritating scenario by talking only to sellers represented by realtors.
The Property Owner May Let Their Emotions Dictate Their Decisions
Why is the property owner so intent on getting the listed price for their property? Their reasoning may go beyond maximizing profit. Their actions may also be from emotions.
Most people get attached to their homes. You can get attached to a childhood home or one you purchased with your hard-earned money.
Due to that attachment, the seller may refuse your offer even if they know you handed over a fair one.
The property owner’s emotional investment in the home could also complicate the negotiation process.
It is normal for a buyer to submit their lowest offer to kick off the negotiations. Unfortunately, an emotionally-invested owner may see that low offer as a sign that you do not value their property enough. With no realtor to advise them, they may end the negotiations with you abruptly.
The real estate agents on both sides help their clients make rational decisions. If the one on the seller’s side is missing, the entire process will become less predictable.
The Homeowner May Have a Tough Time Closing the Sale
Even if you somehow manage to avoid the issues we have already discussed, there is still one final hurdle you need to conquer.
When you and the owner finally agree to a deal, they will need to prepare the documents to turn property ownership to you. So, how confident are you that they can prepare those documents with no issues?
It is easy to make mistakes during this final stage of the process. However, your real estate agent can spot those errors and save you from making your own critical mistakes. Still, the sale could have delays because the other party decided to list their property for sale by owner.
Is the only Rhode Island property that caught your eye listed as for sale by owner? We can still help you to buy that! We work directly with homeowners all of the time as it can save them some money in commissions. Contact us at RI Home Store today to learn more!