Buying a For Sale By Owner Home in Mentor: What to Know

There's nothing wrong with buying a house that's for sale by owner. Some are great houses at fair prices. But in most cases, both the buyer and the seller are better off with a professional guiding the deal, and I learned that one personally.

My own FSBO purchase

Long before I was a licensed agent, I bought a house directly from the owner. The seller never filled out a residential property disclosure. I found out later that the house had been condemned before I bought it, and that foundation damage had been repaired without anyone telling me. Years later, other parts of the basement started to fail. If a professional had been advising me, I might have known those facts before I bought, and avoided a costly repair down the road.

Ask for the disclosure form

Ohio generally requires sellers to fill out a Residential Property Disclosure form, and the exemptions are narrow, such as certain court-ordered, estate and foreclosure sales. Ask for the form before you sign anything. If the seller won't complete it, ask why, and get the answer in writing. A missing form doesn't mean the house has a problem, but it does mean your inspection has to carry more weight.

Know who's working for whom

The seller of a FSBO is negotiating for themselves. So is the agent sitting at a traditional open house, who works for the seller. Neither one is looking out for you. That's not a knock on anyone; it's just how the roles work.

If you find a FSBO you like, you can still bring in your own agent to advise you. We'll explain our buyer agreement up front, in writing, including how our compensation is handled, so there are no surprises. One tip while we're on the subject: if a house you like has an open house coming up, ask your agent to schedule a private showing before it. You see it first, without the crowd, and you can ask questions without twenty other people in the kitchen.

Figure out what the house is really worth

FSBO sellers often set their own price, and sometimes it's based on what they need, what a neighbor said or an online estimate. That can work in your favor or against you. Before you make an offer, look at recent sales of similar homes nearby, adjusted for condition, size and updates. A FSBO price isn't automatically a bargain just because there's no listing agent involved. Sometimes it's the opposite, because the seller has never had anyone show them the comps.

If you're getting a mortgage, the lender's appraisal will check the price too. If it comes in low, you'll want a contract that lets you renegotiate or walk away.

Get your financing lined up before you make an offer, too. A FSBO seller may not know what a pre-approval letter really means, so a fully documented approval from a lender they can call shows you're serious and helps the seller take your offer seriously.

Get the purchase agreement right

A FSBO deal still needs a real purchase agreement. I've reviewed hundreds of them, and the same mistakes keep showing up: names spelled wrong, dates that don't line up, the inspection section left unclear, and blanks left where initials or signatures belong. Those are the kinds of errors that cause arguments later. Use a standard form and have someone who does this every day check it.

Keep the inspection and protect your money

I strongly encourage every buyer to have a home inspection. If a buyer decides not to, I want them to sign something saying so. That goes double for a FSBO, where the seller may not have disclosed much.

Use a title company to handle the closing and the earnest money, not a personal check handed to the seller. And never wire money based on instructions you received by email alone. Call the title company at a number you looked up yourself and confirm the instructions by voice first.

Mentor details to check

Look up the parcel on the Lake County Auditor's site so you know the real tax bill. Mentor covers a lot of ground, and two houses with a Mentor address don't always carry the same tax rate. Ask the city's building department whether anything is required at transfer for that property, and whether there are open permits. A FSBO seller may not know, so it's on you to ask. If something needs to be done before closing, put who's responsible for it in writing in the purchase agreement.

If you're a first-time buyer looking at a FSBO in Mentor or anywhere in Lake County, schedule a time with me or someone on our team at 21mike.com.

Mike Ferrante
The Mike Team at LPT Realty
www.21mike.com
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