"I'm looking for a for-sale-by-owner property because that's where you find the real deals."
Who wouldn't like to cut out the middleman and save money on a commission? In the best of all possible worlds a seller wouldn't have to pay a real estate fee and that savings would be passed on to the buyer. But we don't live in an ideal world. What happens instead is FSBO properties are often over-priced! The seller of course believes that their unrealistic price is correct and the buyer may believe this as well because they have no professional guidance. By the way, a buyer's ability to surf the Web and to assess the value of a property via sites like Zillow for example does not qualify as "professional guidance."
FSBO's can sell for more money early in the game when the house first comes up for sale. This is great news for sellers but not for unwary buyers; especially when a buyer needs to sell the house a few years down the road in a market that has either stagnated or has declined. And if you think the buyer is protected because the seller or a lender had the property appraised ... think again. Lenders are in business to make loans and, as I mentioned in previous posts, appraisals often don't bear any semblance to reality!. Over the past decade hundreds of thousands of properties appraised at inflated values which helped contribute to the current mortgage crisis, leaving many homeowners high and dry.
Conversely, if a FSBO doesn't sell relatively quickly and languishes on the market for as little as a month or less in some cases, the seller runs the risk of their house becoming overexposed. When they do finally list with an agent a pool of buyers who have already seen the house may, for whatever reason, not want to see that house again.
Many FSBO's fail to make proper disclosures of latent material defects of the property (things you cannot see) mainly because these sellers are not properly counseled. The buyer finds out after title transfer that there are problems with the house that the seller perhaps knew about but never mentioned. This deception or negligence can of course also occur when the house is listed, but it is far more likely to take place without professional assistance.
Finally, if you do go the FSBO route, whether you are a buyer or a seller, you would be well advised to hire your "own" attorney. This means that you and the seller do not share the same lawyer! I have seen this "obvious" conflict of interest before. It's insane. Simply put, would you hire the same attorney that your adversary hires to defend you in a lawsuit? And never sign a real estate contract until you have had your attorney or your Realtor review that contract. Good luck.
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