When it comes to buying property, Buyers should always research and hire a professional REALTOR® who will provide the best possible service and advice. Below are ten important reasons why no one, regardless of their level of experience, should ever attempt to buy a property offered For Sale by Owner without REALTOR® representation:
(1). Risk of entering a dangerous situation with a For Sale by Owner (FSBO) Seller one has not met and do not know their past personal history (i.e. is this Seller someone a Buyer and their family can trust to be in contact with?)
(2). Risk of buying a home that had an undesirable previous history that was not disclosed by the Seller (i.e. does the home have a covered-up criminal or otherwise undesirable circumstantial history or is there something structurally or otherwise wrong (i.e. material latent defect or Government notice) the Seller is hiding from Buyers as a For-Sale-By-Owner?)
(3). High risk of innocent, negligent, or fraudulent misrepresentation by Seller who is not bound by the REALTORS®’ Code of Ethics (imagine how upset a Buyer would be if they bought what they thought was a 2200 sq. ft. home only to discover it is actually only 1650 sq. ft. - this is unfortuately a large risk when buying from a For-Sale-By-Owner who (unlike when a licensed REALTOR® is hired to list the home) advertises whatever they want about their property regardless if the statements are true or false).
(4). Direct negotiations can often be very difficult and emotional. Buyers often are inexperienced in knowing how to behave during high-pressure situations and it is easy for Buyers to accidentally disclose private information and / or leave out important details on the purchase since Sellers are the ones most familiar with their property. Without a Buyer REALTOR® who points out items to consider and disclosure of past sales, the Buyers often have little way of knowing if the home is priced properly for the neighborhood.
(5). No professional advice available from a REALTOR® - Buyers should work with one REALTOR® to show properties that closely match their requirements instead of ’finding homes on their own’ and working with whatever REALTOR® the Seller might have hired for three reasons: (a). Buyers need to make certain they are working with a top-quality REALTOR® who is looking to sell the home that is right for the Buyer as opposed to working with a REALTOR® who may be trying to push them into the wrong home; (b). Money is rarely saved by working with the Seller’s REALTOR® - total commission is due and payable by the Seller regardless if one REALTOR® is involved in the transaction or two; conversely, Buyers actually may pay much more for the home by working with the Seller’s REALTOR® who is looking to achieve a top sale price for the Seller vs. engaging a Buyer's REALTOR® acting in their best interests; and (c). REALTORS® are aware of new listings immediately and notify clients before Buyers can find them on their own - bottom line: a Buyer's next dream home could have been shown and already pending by another Buyer using their REALTOR® before the Buyer could find the home on their own.
(6). Risk of encountering construction quality, cost, and schedule problems (and surrounding area zonage surprises) after agreeing to purchase an unseen house or condo in a brand-new development from an unknown builder (i.e. selecting a builder with an excellent track record; and using REALTOR® representation on a new home buy are both very important).
(7). Risk of encountering unresolvable mortgage / inspection / zoning / insurance / deposit cheque issues (i.e. the risk of legal issues encountered by handing over thousands of dollars deposit to a Seller one has never met before and who is not a licensed REALTOR® bound by the Real Estate Act for holding deposits).
(8). Risk of Seller nullifying a Buyer's purchase for someone else who later agrees to pay more for their home (i.e. the scenario where a Buyer sold their home, were ready to move into the new home bought from a For Sale By Owner only to discover they are out on the street since the Seller used a loophole (legally or illegally) to nullify the contract because someone offered to pay him or her a few thousand dollars higher). This also includes higher risk of omitting important contractual details and extra legal costs from added contractual risk or from lawsuits due to not having the transaction conducted properly by a REALTOR®, using the standard Alberta Real Estate Association purchase contract designed to protect a Buyer’s best interests against a myriad of contractual pitfalls.
(9). Risk of paying over fair market value: it is common to see For-Sale-By-Owners drop the price tens of thousands of dollars when listing through real estate once they have hired a REALTOR® who shows them recent past sales to prove they have been asking way more money than their home is actually worth in today’s market. Bottom line: if a home is offered for sale by owner, often waiting it out can be a great approach since a sizeable percentage of FSBO cannot sell and Buyers may have a good chance to view and buy it properly with a Buyer REALTOR® escort once listed at a reduced price].
(10). A Buyer may wish to accept the high risks and purchase a FSBO property with REALTOR® representation by hiring a Buyer REALTOR® to facilitate the transaction (i.e. after receiving a disclosure and accepting the numerous Buyer risks of buying a FSBO property, and proceeding to sign an Exclusive Buyer Brokerage Agreement, with deposit, including insertion of the agreed Buyer REALTOR® commission to be either 100% Seller-paid or 100% Buyer-paid via the Offer to Purchase).
[Article written and ©2009 by Kelly Grant, M.Eng., ABR, NCSO, P.Eng. - REALTOR® at MaxWell Realty in Edmonton, AB]
Disclaimer: for those readers not currently represented by another licensed REALTOR®, to obtain more information on this topic and / or if you are serious about selling or buying in the Greater Edmonton Area, call Kelly at 780-414-6100 (pager) or send Kelly an email to SOLD@KellyGrant.ca to schedule a confidential appointment.