4 Reasons To Avoid FSBO
4 reasons to avoid buying a FSBO House are:
1. Money 2. FIRPTA 3. History 4. Quality
The FSBO- For Sale By Owner- is not as good of an idea as is used to be. So many things can go wrong nowadays. You may think you’ll save money buying a FSBO, but always remember “Buyer Beware.” In regards to a FSBO, this is a very good idea.
- Do you believe all people are honest when money is involved?
- Are you willing to be a victim of a dishonest home seller?
- Why won’t a seller pay for either of you to have a Realtor?
- How do you check the information Mr. FSBO gives you?
- What’s in it for you to make a large purchase without a FREE Realtor
- Why would Mr. Seller sell his house for less to you, net the same amount of money and do all the work himself instead of using a Realtor?
A home is the largest purchase most people make. Why would you not use a Realtor? When a seller is not paying a Realtor, saving the commission money is most common reason. Usually the seller gets all financial benefits because he’ll want Fair Market Value and show you comps. You’ll pay what the comps paid and have no professional advise, knowledge and assistance.
Know that Money may be the most common motivator for a seller to FSBO but there are WAY WORSE reasons.
READ THIS! Do you know about FIRPTA? FIRPTA is a law that holds 15% of the sales price of the home for the IRS to ensure that Mr. Foreign-National Seller files a US tax return next year. That makes sense. What is SCARY in that law is that the buyer is responsible for the seller paying this withhold or the consequesce is that the buyer can be stuck with this debt.
Example: David Smith AKA Mr. FSBO sold you his house for $400,000. Two years later the IRS asks you for the 15% of the SALES PRICE or $60,000 that David Smith should have had withheld. It was up to you to have it withheld or have an affidavit signed. You’ve probably never even heard of this law or affidavit. Mr. Smith was born in Germany and moved to America when he was a toddler so he had no accent. David Smith is such a common name that he cannot be located. Guess what? You owe the IRS $60,000 because you bought a FSBO to save a couple thousand dollars.
There could be something about the house that the seller does not want you to know. Most states require a disclosure form where KNOWN things are to be disclosed. These questionaires don’t cover everything. Recourse if a seller lies is a legal matter.
A few examples are:
- Water Leaks- roof issues, a flood inside, or broken water line in the yard or under the slab
- Mold- Professional or self fixed. (I asked a seller about mold once and was told he sprayed it with bleach and painted over it- NOT GOOD!)
- Lawsuits- Kitec Plumbing- HUGE problem and the lawsuit is no longer open. Maybe the seller got money and did not fix the plumbing. There could have been a class action lawsuit within the development or the association is being sued
- Crime Scene- burglary, tear gas usage, murder or drug lab history
When a seller is just cheap in general, you need to be careful. Poor quality repairs or “band-aids” to cover things up are out there. What’s under the throw rug? Is that plastic instead of glass on the oven? A room can be unusable because the air-conditioning doesn’t go into that room. Did Mr. FSBO have the water heater he installed permitted? Are there earthquake straps on it? Does Mr. FSBO always buy generic and the least expensive product available? I saw a plumbers’ house where the bar sink drained into the rain gutter downspout that drained to the front street gutter.
Protect Yourself! There are always reasons to consider buying a FSBO. If you go that route, please keep your eyes open, get professional advice and ALWAYS get a home inspection.
Blog written by: Kurt Grosse, a 24+ year Las Vegas Top-Producing Realtor. As a Retired Structural Engineer, his real estate and building expertise protects his clients every day. If you need a Nevada Realtor, contact Kurt today.