VA Loans & For Sale By Owner (FSBO) homes
A home that’s labeled For Sale By Owner (FSBO) is exactly that – a property available for purchase that’s marketed by the homeowner rather than a real estate agent. For VA homebuyers, it’s important to understand the potential challenges and advantages that can come with a FSBO approach.
Potential FSBO Advantages
Buying a FSBO property might provide the ability to land a great deal. FSBOs typically have a lower median sales price than homes sold by real estate agents. Every property and housing market is different, but the general thinking is FSBO sellers aren’t “pricing in” the real estate agent commission. On a $200,000 home, a 6 percent commission could add $12,000 to the asking price.
Another advantage is that some buyers and sellers find it easier to work directly with one another, rather than using an agent as an intermediary. But be cautious. “Going it alone” isn’t a smart choice for every buyer and seller. A home purchase is likely to be a buyer’s biggest financial investment.
Potential FSBO Challenges
Good listing agents help give homeowners an objective viewpoint. Agents help sellers understand how local market trends, available inventory and a home’s features should affect pricing. That expertise helps owners price homes appropriately and attract the right buyer.
Real estate sales aren’t simply about open houses and advertising. They’re legal and fiscal transactions.
FSBO sellers may not be aware of the proper legal requirements of selling a home. Or they may not know how to best address typical real estate transaction challenges, such as seller disclosures, inspection issues, appraisal problems and title insurance glitches.
One of the most common reasons homeowners go the FSBO route is to minimize what they pay in agent commissions. VA buyers and their agents may want to see something in writing from the seller regarding commission payments before formalizing a purchase offer.
Generally, prospective homebuyers will sign a buyer-broker agreement with their real estate agent that covers FSBO transactions. In some cases, these could obligate the buyer to pay their agent’s commission if the seller refuses. But VA loans offer an important safeguard here: The VA prohibits borrowers from paying real estate agent fees.
Just because the seller isn’t represented by a real estate agent doesn’t mean the buyer can’t be. It’s nearly always in a buyer’s best interest to hire a real estate agent before purchasing. If you’re using a VA loan, remember that your agent’s commission must be paid by the seller. Make sure your seller and your agent are fully aware of this fact before signing a purchase contract.
Get a CMA Before Making an Offer
Whether buying a FSBO or an agent-listed property, all buyers should obtain a Competitive Market Analysis (CMA) before making an offer. This is a short report about the value of other homes in the area, and it’s a great tool for determining a property’s fair price. Your buyer’s agent should conduct a CMA before you make an offer.
Don’t Skip the Inspection!
If you decide to make an offer, don’t forget to add an inspection contingency to your contract. This little loophole gives buyers an “out” and allows you to renegotiate with the seller if the inspector discovers problems with the property. Don’t let the challenges involved with a FSBO sale limit your options. Simply prepare yourself for what’s ahead with a thorough understanding of the FSBO process.
