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Should I Purchase a Home Through a For Sale By Owner Transaction?

Posted on in Real Estate

Lake County real estate attorneysWhen a person is looking to sell his or her home, he or she will usually enlist the help of a real estate broker to manage the deal. In some cases, however, a homeowner will forgo a broker and try to sell the home in a “for sale by owner” transaction, or a FSBO—pronounced “fizz-bo”—deal. If you are considering buying a FSBO property, you may be able to get great value for your money, but there are some risks that you should take into account.

Sharing the Workload

Real estate brokers are trained—and hired—to do much of the legwork involved in residential real estate transaction. In a FSBO situation, however, the owner will almost certainly not have the same level of experience or knowledge of the real estate world. This means that he or she might not provide you with all of the relevant information regarding the deal. While the oversight might be unintentional, you should be aware of it and be ready to take on some additional responsibilities in exchange for the lower price that is typically part of a FBSO purchase.

Likewise, paperwork might also be delayed. Be prepared for things to take longer than you originally expected. It is also a good idea to have a qualified attorney on your side who can help you research prior insurance claims on the home, title concerns, and other considerations that could affect your willingness to purchase the property.

Managing Escrow Concerns

When you buy a home through a broker, any money that is paid prior to closing—including earnest money deposits—are held in escrow by a bank or another neutral third party. The money is released to the seller upon closing or dispersed in other ways if the deal does not close. In FSBO deal, the seller may ask  for an earnest money deposit but never put the payment into an escrow account. This could cause a variety of problem if the deal starts to fall apart. With the help of your attorney, you and the seller can decide upon an escrow agent—including a bank, title company, or another lawyer—who can hold funds or documents in escrow until closing.  

Inspections and Contract Review

During a FSBO deal, it is especially important for you as the buyer to carefully vet the home inspector to avoid potential problems. Be sure that the person who will be conducting the inspection is a qualified professional who is equipped to identify possible issues with the home. Be prepared to hire your own inspector as well, if you are concerned about the reliability of the person hired by the seller.

It is also crucial to work with a knowledgeable attorney who can review all of the contract documents associated with the transaction. Misunderstandings related to the contract could potentially cost you thousands of dollars in addressing the details down the road. Be sure that you fully understand every provision related to the deal before you sign.

Contact a Lake County Real Estate Attorney

If you are considering buying a FSBO property, you need an advocate who will fight to protect your best interests. Contact an experienced Libertyville real estate attorney at Newland & Newland, L.L.P. to discuss your situation today. Call 847-549-0000 for a free consultation.

 

Sources:

https://www.trustedchoice.com/insurance-articles/home-family/buying-house-for-sale-by-owner/

https://www.thebalance.com/how-escrow-relates-to-your-real-estate-transaction-1798810

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