The Potential Risks to Buyers and Sellers in a FSBO Transaction, by Rose Ogbonna.

The Potential Risks to Buyers and Sellers in a FSBO Transaction

By Rose Ogbonna

According to my analysis of the Maryland Housing Market, the average real estate commission is about 4.5 – 5.10% which is less than the national average of 5.49%.

This means that a seller selling a home that’s worth $400,000, will pay $20,400 in realtor fees. These are the largest fees that you will have to pay in this process which makes sense why most people avoid them, by all means, paying them. This often means going into the market alone. Do I advise it? Let’s find out!

Based on my research, the prices of FSBO houses in Maryland are 26% less compared to those sold using an Agent. Many people often prefer selling without an agent because of two reasons;

• To save • To sell their homes faster.

INTERESTING FACTS ABOUT FSBOS IN MARYLAND

• FSBOs are becoming so unpopular in the market. • Many FSBOs in Maryland are selling less (26%) compared to agented homes (Median of $217,000 vs. $295,500). • FSBO sellers represented about 8% of all home sales in 2020 in the country. • From 1981 to 2020, FSBO sales dropped from 15% of all sales to 8%.

There is a reason why FSBOs are declining in the market and I find that most buyers in Maryland do not want to buy an FSBO. But, that doesn’t mean that they will ignore the ones that pop out during their search. Many buyers will get trapped by the ridiculously low prices. Remember, the real estate transactions are extremely complex which is something many buyers aren’t willing to overlook, and also, there is a rise of low commission real estate agents that are chipping away at the popularity of FSBOs. There are benefits associated with FSBOs including direct and effective negotiations and simplified schedules with the sellers.

THERE ARE SO MANY MOTIVES, BUT I FIND THESE TWO TO BE THE PRIMARY DRIVER FOR MANY PEOPLE.

The first one is straightforward where a seller doesn’t feel the need to spend thousands of dollars for something they can do themselves.

What you will realize is that many sellers who prefer using this route already know who their buyers are. Research shows that about half of the sellers opting for FSBO in Maryland already know their customers which means they do not want to waste time on marketing and other activities. This speeds off the process.

While FSBOs look good on paper, you need to be cautious. The disadvantages of FSBOs outweigh the pros.

Before proceeding with the purchase, you need to think things through. A small mistake can cost thousands of dollars, not to mention your peace of mind.

I always tell my clients that real estate agents are professionals who have been trained for years on how to handle the complexities of this industry, something that a buyer or seller alone cannot manage not unless they have a background in it.

Additionally assuming you want to buy without an agent, consider where you are in the ‘buying pipeline.’ What I mean by that is, that many of the buyers still in the preliminary stages are not legally bound to use an agent, but if you have already signed the buyer’s agent contract, the contract binds them to work with the agent for the whole process. But that doesn’t mean that you cannot cancel the contract, you have the right to cancel the contract at any point with some specific valid reasons.

COMMON LEGAL ISSUES WITH FSBOS

USE THE PROPER TERMINOLOGIES

As a seller going into the market on your own, you need to describe your property using the right terminologies. Describe your property correctly. You must use the exact measurements, and the right property lines and describe accurately the history of the home. I don’t think this is something you want to do all by yourself. You may likely need professional help to cross-check what you find with the current records for the property. If you are not entirely sure about your listing, do not say it. Do fact-finding and ensure that you are 100 percent correct.

DISCLOSURE

In most cases, you will be required to disclose certain issues about your home. If you don’t, you risk being on the wrong side of the law. If you know that there is something wrong with the property you are required to disclose it to the buyer.

In Maryland, the law requires you to give the buyer a list of the known defects or a disclaimer that says you’re selling the house as-is and even if that is the case, you must disclose the latent defects, that is, you must disclose the issues that couldn’t be discovered by reasonable observation or inspection.

FAIR HOUSING LAWS

There are potential loopholes for discrimination to slip in when selling the property on your own. Fair housing laws are there to protect people from discrimination and if you are selling the property with the help of a REALTOR, you need to be aware of the laws and abide by them. Fair Housing laws make it illegal to;

• Refuse to sell to any qualified buyer • Use discriminatory terms and conditions in selling • Use discriminatory notices or ads that indicate a preference or limitations on who’s allowed to buy your home • Say that your home isn’t available when it is • Treat someone differently because of race, color, national origin, disability, family status, religion, gender identity, sex, sexual orientation, source of income, or marital status • Commit acts of prejudice, violence, intimidation, harassment, or abuse

With all the possibilities of buying an FSBO home, several risks come with it. I don’t think that this mode of buying homes perfectly suits everyone in the Real estate market. Currently, there are fewer buyers considering FSBO in Maryland, this may be due to the myths about FSBO which are misleading. I believe that it is the responsibility of every buyer in Maryland to understand and apply the tips for buying an FSBO home before considering the option to buy a house FSBO.

Prospective buyers always look into the home options that are cost-effective and FSBO is not less of these options. It is easier and less risky to buy an FSBO home when you work with an agent. You need to work with an agent who has knowledge and experience in the real estate market. An agent that you can trust enough to offer you the legal advice you need to know about the market but mainly, you need an agent with expertise in establishing property values or who has the power to negotiate the best terms for a sale. Alternatively, it is preferable to choose the better option. You can just buy listed homes in MLS. You have the opportunity to become a homeowner without having to spend more than you can afford. You can own your dream home in one of the best MLS-listed homes right away, especially with the current low rates. Avoid the risks Of FSBO homes while you still can!

Contact Rose Ogbonna at (301) 674-4542 rose.reobroker@gmail.com