by Dian Hymer
Most home sellers -- about 4 in 5 -- use real estate agents to list and sell their homes. Of the other 20 percent, some sell FSBO (pronounced Fizz-bo) which is real estate jargon for For Sale By Owner. Other sellers, however, sell without marketing their homes at all.
Property transfers between family members account for some of these direct home sales. Also, tenants are often offered the opportunity to buy the property they're renting before the landlord lists it for sale.
Direct sale offers can include a price break -- a reduction made possible because the landlord, or relative, doesn't have to pay a real estate commission. (Real estate brokerage commissions are negotiable, but they can range from 5 to 7 percent of the sale price.)
There's a risk involved for both the buyers and sellers in situations where the property transfers before it has been openly marketed. The sellers risk selling their property below market value. The only way to know that you're selling for as much as you can get is to test the market.
Also, the buyer risks paying more than a property might be worth on the open market. Without giving a home the market-test, it's often hard to know how well priced it is. This is particularly so in neighborhoods where there is a lot of variety in the home style, size and condition. It's easier to pinpoint price in tract neighborhoods where there is standardization in the housing stock.
First Time Tip: To protect yourself from over-paying, try to see as many comparable listings as possible in the neighborhood. If this is not possible, hire an appraiser to appraise the property.
Keep in mind that appraising property is not an exact science. It's somewhat subjective. An appraisal shouldn't be construed as a guarantee of fair market value. To maximize your chances of getting an appraised value that reflects fair market value, hire an appraiser who has a lot of experience working in the area of the property -- someone who knows the local market well.
Aside from the pricing issue, there are other considerations when buying a home directly from a seller. Make sure that you have the property thoroughly inspected by qualified professionals. Even though you might feel awkward inspecting a property that belongs to a close relative, it's far better for all parties involved to know if there are significant property problems before, not after, closing the sale.
Most buyers don't have the expertise to draft a purchase contract that protects them and that accurately states the terms of their agreement with the seller. Seriously consider hiring a knowledgeable real estate attorney to take care of this critical part of the transaction if there isn't a real estate agent involved.
Buyers who are short on time, and who have little experience with real estate sales, might find it worthwhile to hire a real estate agent to represent them in the transaction. If the buyers don't hire an agent, the sellers might be wise to do so.
Some agents will handle such a transaction for a discounted fee because they won't have to spend time and money either marketing the property or showing the buyers property for months before they buy. With a discounted commission, the sellers can lower their price to the buyers and still net the same from the sale as they would selling on the open market with a higher commission.
The Closing: The buyers get a break on the price, and both buyer and seller benefit by having a knowledgeable professional involved in the transaction.
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