Ed note. Real Insight is a periodic feature decoding some of the many mysteries surrounding HomeBuying.
A couple I know was recently given the opportunity to purchase the house they were renting before their landlord put it up for sale. When they called me to discuss the situation, I quickly gathered that Jenny and Jim were eager to purchase, and as new HomeBuyers, they were understandably anxious to save a little bit of money as well. So, the prospect of a private sale (for sale by owner) seemed promising.
A private sale happens when a HomeSeller (in this case, the landlord) does not hire a real estate agent to represent her, and (as a result) does not have her home listed on the Multiple Listing Service (MLS). Homes with a ‘For Sale By Owner’ sign out front are being sold privately. While HomeSellers may chose to go it alone for several reasons, most do not want to pay agent commissions, which normally amount to 5% of the sale price of a home.
As prospective HomeBuyers in a private sale, Jenny and Jim had been advised by a co-worker to pay me a flat-fee of $500 to get the “standard legal forms with all of the legal jargon” so that they could prepare an offer for the home themselves. You probably have the same co-worker, so I’ll explain why this sort of thing concerns me.
Buying a home does not make for a good Do-It-Yourself project. When you make a mistake with your purchase, you can’t run over to Home Depot, buy some plaster to cover it up, and then pray that nobody notices. Taking the wrong shortcut (like overpaying for a home by agreeing to the price a landlord helpfully suggests to you) may end up costing you a lot.
If you have a special circumstance (perhaps you have already found a home to buy) and want to save some money (who doesn’t?), do not hesitate to negotiate a suitable fee with an agent who will protect you through every remaining step of the real estate transaction. Are agent commissions negotiable? Definitely! (See more on this in Realosophy’s HomeBuyers Guide.) Find an agent who will work for a flat-fee or similarly reduced commission, but will be sure to assess the proper value of a home, counsel you on the home inspection and negotiate with the HomeSeller on your behalf, among other things.
If you are among those who don’t trust real estate agents and refuse to work with one, I sympathize. All too often, HomeBuyers do not get the value for money they deserve. But at the very least, protect yourself by hiring a lawyer to draft an Agreement of Purchase and Sale. In general, a lawyer will not counsel you on a purchase price or the condition of a home, but she will prepare your offer accurately and counsel you if the HomeSeller has any objections to it. Given that this document represents your commitment to spending thousands, now is not the best time to ‘Teach Yourself Legal Speak in 20 Easy Lessons.’ Leave the learning for satisfying summer nights spent building a deck for your new home.