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Risk and reward in for-sale-by-owner home buying

There are a few different ways to go about buying a house, some more or less conventional than others. For a variety of reasons, some homeowners choose to sell their home by themselves, without going through traditional real-estate channels. If you have been intrigued by a home that is for-sale-by-owner, there's no need to write off this opportunity automatically. For-sale-by-owner homes can be a great deal if proper precautions are taken in the home buying process.

One of the main advantages of considering FSBO homes is the potential to save a great deal of money. Usually, this is accomplished by foregoing many typical realtor's fees, and possibly negotiating down the asking price of the home significantly. For-sale-by-owner sellers often over-estimate how much their property is worth, and can be negotiated down well below their initial asking price, especially once you have done the homework to know the selling prices of comparable homes in the neighbourhood over the last six months. Ultimately, this can mean savings of thousands of dollars with proper preparation and patience.

All these potential savings can easily go sideways, however. From the home inspection to the status of the title to the transfer contract, there are many, many ways that a home buying process can go from great opportunity to nightmare. If you are considering buying a home directly from the homeowner, you should absolutely consider bringing an independent home inspector, appraiser and real estate lawyer onto your team. Perhaps the home is overvalued, or maybe the owners have a lien against the title or the contract that they are using is riddled with legally dangerous loopholes that may leave you exposed, you'll be glad you that you had professional help if and when something goes wrong.

Buying a FSBO home can be a great way to get a good deal, but must be approached with extreme caution. If you are ready to make an offer on a home, the guidance of an experienced real estate lawyer can help ensure that you are really getting the deal you anticipate, while protecting you from getting into a deal that's more trouble than it's worth.

Source: Byron & Company, "Residential Real Estate," accessed Oct. 12, 2016

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