While buying a home is usually a fairly straightforward process (even if you encounter a few unexpected hurdles along the way), this is because there is a lot that goes on behind the scenes. Good real estate agents do a lot to get deals to the closing table on time; and, when a seller is unrepresented, this can often lead to undesirable delays—and potentially more-serious issues as well.
So, if you are considering a home that is listed for sale by owner (FSBO) in the Summerville or Charleston area, what issues do you need to consider? Here are seven tips from Summerville real estate attorney Patrick R. Watts:
Tip #1: Review the Property’s Listing History
One thing you can do that is fairly easy is to review the property’s listing history. This information is available for free online through many of the major real estate listing websites. If the property is listed for sale by owner and either (i) has been listed for a very long time, or (ii) has been listed and re-listed on multiple occasions, this could be a sign that previous prospective buyers have run into issues with the seller. Of course, there could be various other explanations as well, and you should ask your real estate agent to inquire for more information before making any judgments about the risks of working with the seller directly.
Tip #2: Make Sure the Purchase and Sale Contract Protects You
You should always make sure your purchase and sale contract protects you, but this can be especially important when dealing with an unrepresented seller. If you are planning to buy a property that is listed for sale by owner, you will want to make sure that your contract has all of the necessary contingencies (such as financing and inspection contingencies), and you will want to ensure that it provides you with clear legal remedies as well.
As a buyer dealing with an unrepresented seller, your real estate agent should prepare your offer on a standard South Carolina real estate purchase and sale agreement. But, if you have questions, or if the seller insists that you use his or her form of agreement, you should speak with an experienced real estate attorney before you sign.
Tip #3: Make Sure Your Earnest Money Deposit is Placed into Escrow
In order to protect your earnest money deposit (if you provide one), you should work with your real estate agent to make sure it is placed into escrow and not paid to the seller directly. There are many horror stories of buyers attempting to work with sellers directly, only to find that the “seller” has disappeared with their deposit. While these types of scams are relatively uncommon, what is not particularly uncommon is sellers attempting to wrongfully withhold buyers’ earnest money deposits when buyers exercise their contingencies or when their deals fall through.
Tip #4: Be Prepared for the Seller Not to Understand His or Her Legal Obligations
In this same vein, buyers must generally be prepared to deal with situations in which FSBO sellers do not understand their legal obligations. Whereas a seller who has a real estate agent will be relying on his or her agent’s advice, unrepresented sellers are far less likely to understand the terms of their agreements (or the legal and ethical principles that apply to residential real estate sales in general). These issues can often be overcome, but they can create difficult and stressful obstacles during the buying process.
Tip #5: Be Prepared for Challenges if You Need to Enforce Your Contract
Likewise, if you decide not to move forward with purchasing the home because you are not able to obtain financing, because your inspection reveals unexpected issues that the seller did not disclose, or because any other issue forces you to reconsider, you may find it challenging to enforce your contract. Conversely, if you are prepared to move forward and the seller gets cold feet, then preventing him or her from backing out of the deal could lead to challenges as well.
Tip #6: Hire an Experienced Inspector
In South Carolina, residential real estate sellers are required by law to provide a disclosure statement that identifies any known material issues with the property. Once again, sellers who hire real estate agents are far more likely to comply with the law and complete the disclosure statement accurately. With this in mind, when buying a home listed for sale by owner, hiring an experienced inspector takes on heightened importance. Before you decide to close, you need to be as certain as possible that you have a clear and accurate understanding of the condition of the property.
Tip #7: Purchase a Title Search and Title Insurance
When working with an unrepresented buyer, it is also particularly important to conduct a title search and purchase title insurance that protects you (not just your bank). In South Carolina, buyers can occasionally run into some unique issues with regard to title to real estate, and buying a house that is listed for sale by owner can carry an increased risk of not getting what you paid for.
This list is not exhaustive, but these are some of the most significant issues that tend to arise in FSBO residential real estate transactions. This list is also not meant to scare you—you can safely by an FSBO property with the help of an experienced real estate agent and real estate attorney. If you are considering a purchase and would like more information, we encourage you to contact us for a confidential initial consultation.
Questions or Concerns? Schedule a Confidential Initial Consultation with Summerville Real Estate Attorney Patrick R. Watts
Patrick R. Watts is a Summerville real estate attorney who has been representing buyers for more than 40 years. If you are thinking about buying a home that is listed for sale by the owner, he can help you protect yourself and your investment. To schedule a confidential initial consultation at your convenience, call 843-851-7050 or request an appointment online today.