Homes for sale by owner (FSBO) are just over 10% of the homes on the market, and potential bargains that a buyer should not overlook. Dealing directly with an owner is a bit more dicey than buying an agency listed property though, and buyers need to be well informed if they want to find that "bargain" they want. Buyers also need an understanding of the psychological makeup and motivations of FSBOs to make their best deal.
homes for sale in Johns Creek GA
Before getting started, there is one thing a buyer absolutely must do if they hope to avoid the potential waste of time and heartache involved in the home buying process. Those who seek out an agent to represent them will be told that they should first determine their loan qualifying limit. This does not change when going it on your own. Shop around for your best financing too.
If you do not have an agent representing you, do your homework to identify potential bargains. About 1:3 owners price their properties above what the market will bear, and most of these are priced from 10% to over 30% above their market value. On the other hand, 1:10 actually take the free advice they find online, and price their property anywhere from 3% to 6% below market.
Real estate values are local, and vary remarkably within markets. In example, two virtually identical homes, one on the south side of San Antonio and another on the northeast side can vary in value by 15% to 20% or more. Once you locate a likely FSBO property, you will need to calculate a base line value for the neighborhood in which it is located for each property.
Finding homes that are the best potential bargains is not too difficult, albeit the base line value you arrive at will not as precise as an opinion of value a buyer may get from their agent when they are represented. Search realtor.com to find homes in your price range and the location you want. Stay within 5% above your qualifying limit, or 5% above what you decided you wanted to afford (most buyers should buy 10% to 15% below their qualifying limit). It is also important to limit the search to either one story or two story homes. Two story homes will generally bring a slightly lower price per square foot than one story homes.
Get your calculator and a note pad ready. The search results will have properties that are priced too high, and foreclosed and short sale properties that will skew the value downward. Watch out for properties with swimming pools too. They will also be priced higher.
You want a list of at least five good comparable properties if possible. Make note of the price and square footage of each of up to ten properties in the search results. Next, divide the price by the square footage. Then take an average price per square foot, and cross off any property more than 5% higher or 10% lower than the average.
The next step is to revisit the listing data to see what differences may exist between the properties. Some may have features that add value, which others do not. Make note of the features of each, like covered patios, sprinkler systems, landscaping etc. Then Google around to see what the value of the feature may be. Most "upgrades" are worth from about 30% to just under 90% of their cost. See the resource box below this article for help determining the value added for improvements and upgrades.
Find your base-line property, the one with the fewest features and upgrades. Subtract the added value of the features and upgrades from each property priced above your base-line property, and calculate the new price per square foot. Then average out the price per square foot, and subtract 2% of that value. This is your new base-line value.
Subtract the value for the features and upgrades in the FSBO property that are not in the base line property for your price comparison. If the FSBO property is priced more than 6% to 8% above your base line value, cross it off your list. Make appointments to see the properties you find that are priced below that mark.
There are a few important things to do when you see the property:
o Ask the seller for the "Seller's Disclosure" notice. Some form of such notice is required by state law in most states. If the seller does not have such a notice, ask them to provide you with one. When completed in all candor, these notices generally reveal any latent defects and past repairs to serious problems with the property in addition to other helpful information about the property.
o Ask the seller how long the property has been on the market. The seller will be reluctant to say how long the property has been on the market. If you can get this information, it will be a significant help in the negotiations. Don't make a big deal out of a seller's refusal to reveal this information. Just exhibit a little facial disappointment and say, "OK, I had to ask." You may already have your answer if the refuse to say how long the property has been on the market-long enough that they do not want to say.
o Listen carefully to everything the seller says. Some will volunteer information you will find useful.
When you find one that suits you, you are ready to start negotiating. Understanding the seller's motivations and the time the property has been on the market will be the key to negotiating your price.
FSBOs are generally motivated by greed (saving the commission), or they mistakenly believe that they can sell more quickly if they price the property below the market value by the amount they would save by selling by owner, while obtaining the same net. This last will likely be your best bargain if the property has been on the market for over a month. Most FSBOs give up after two months, and list with an agency.
When you are ready to make your offer, don't reveal your interest at the time you see the property. Go home and prepare a written offer. You can get the forms you need in your state at uslegalforms.com. Before you go, make sure to give the seller your name and contact information. Give them the chance to contact you, and play it coy when they do. Giving this information may also be important if they list with an agency before you get back to them with your offer.
Make your offer at least 5% below your estimate of value or the asking price, which ever is lowest. In addition, ask for a seller contribution of 6% of the sales price toward your closing costs, a $435 contribution toward a home owner's warranty, and ask the seller to pick up the cost of the survey if they do not have an existing survey acceptable to the title company and lender. Your goal should be to eventually negotiate a price at least 2% below your estimate of value, and a 3% seller contribution to your closing costs, the contribution for the home owner's warranty, and the cost of the survey.
You should also be sure to ask for an option, during which you can cancel the contract without fault. The contract form should contain a clause for this purpose, and you can usually get a ten day option (to allow you plenty of time to order and get an inspection) for $50 to $100-and make sure to get an inspection. If anything comes up, you can usually negotiate further reductions or repairs during the option period. Remember, the inspection and renegotiation must take place before the option period expires. By the way, you should also stipulate that the option money applies toward your closing costs in your offer. Everything is negotiable.
If you do not mind taking the risk, and want to improve your bargaining position, wait a week or more before making your offer. The risk that it will sell before you make your offer is pretty slim, considering the success rates for FSBOs, but the risk that the seller will list with an agency is bit greater. This last is not a problem if the seller listed you as an exclusion in the listing agreement.
The last and most important thing you do should be to consult with an attorney about your rights and obligations under the option, and other legal matters related to the contract and transaction in general.
Homes for sale in Johns Creek GA