“FSBO” is an acronym for “For Sale by Owner.” There are always some FSBOs available in any neighborhood. When the market is hot and houses are selling well, sellers try to avoid paying a commission by selling themselves. When the market is cold and houses aren’t selling, sellers eventually give up on agents and try to sell by themselves. If you’re house hunting, you owe it to yourself to check out the FSBOs in the area where you want to live. You just might find exactly what you’re looking for. When you do drop by (usually it’s best to call first, since many sellers working without agents are wary of strangers), expect to be courteously shown around the property. Take the time to check out the home. Look it over carefully, especially since you won’t have an agent along to point out good parts . . . and bad. If you decide that you really like it, then the real work starts dealing with the sellers direct. Unfortunately, many FSBO sellers have only a vague idea of what the market price for their house should be. Most often they are asking too much. If you suggest this to them, they may be insulted. It is very difficult to negotiate terms or price reductions with them because of the one-on-one relationship between you, the buyer, and the seller. Unless you’re well versed in real estate, you’ll probably find it’s difficult to deal with FSBO sellers. Additionally, there’s the matter of resolving how the paperwork will be handled. We cover resolving these issues in this article.

One way of handling FSBOs is to work with a “buyer’s agent.” Prearrange with the agent. (See Article 6 for tips on how this is done.) When you find an FSBO that you like, the agent will step in and handle the negotiations. Of course, for his role, the agent will expect at least a buyer’s agent’s commission (usually half of a full commission). Often agents can convince the sellers to pay this. But if that’s not possible, you could be on the hook for it! Be sure you determine in advance how your buyer’s agent will handle commissions. My own experience with FSBOs has been mixed. As a buyer, I have walked the streets stopping at FSBOs and talking to sellers. I have tried to buy the homes for myself. Unless the seller is just trying to sell by owner for a few weeks before listing, the results have almost universally been dismal. Typically a determined FSBO seller wants too much for the property or is inflexible when it comes to the terms. In other words, I can usually make a better deal on a property that is listed by an agent. But not always.

Why Does a Seller Go FSBO? Almost 90 percent of sellers who start out trying to sell FSBO eventually give up and sell using an agent. Why don’t they simply list to begin with and save time? The answer is that they want to save money. They’re hoping that you (or some buyer) will come along and pay them full price, take care of the financing, and let them avoid paying the big 6 (or 5, or 7, or whatever) percent commission to the agent. What few FSBOs recognize is that what’s important is selling the home. And trying to get an unrealistic price is wasting the seller’s time. It’s wasting your time, too. However, every once in awhile, you’ll come across an FSBO who really wants to sell quickly and understands that by giving you a bargain price, he or she can not only save a little on the commission, but also get a quicker sale. That’s the FSBO you’re trying to find.

TRAP YOU SHOULD PAY LESS FOR A FSBO? Remember, you’re not getting the benefit of an agent oiling the waters to make the deal go smoothly. You have to do some of the work, or hire an attorney or agent to do it for you. Therefore, there’s every reason to expect to pay less for a FSBO.

Where Do I Find FSBOs? Walk neighborhoods where you want to live and buy a home. Drive the streets. Look for signs that say the house is for sale by owner. Also check for “assisted” sale home. Some brokerage agencies, such as “Assist-to-Sell” will provide signs and some assistance to sellers who are trying to sell by themselves. Try checking the local newspapers under the head, “For Sale by Owner.” Sometimes there will be many ads there, sometimes only a few. If any are in your price range and where you want to buy, call them right up and get out there to look at the property. And check the Internet. There are dozens, sometimes hundreds, of FSBO sites. I’m not listing any FSBO sites here simply because they seem to come and go with surprising frequency. Just use a good search engine to locate them. (Key in the words “FSBO” or “by owner real estate.” Don’t be hesitant to check out any properties you find on the Internet. Usually the seller’s name and phone is given. Just call him or her and continue on as if you had seen the ad in the paper. But remember that the Internet is worldwide. Be sure that a property you find is, in fact, in a location where you want to buy. It could be in the next town, or the next continent!

Do I Just Walk In and Say Hello? Unlike when you’re touring with an agent, when you can wear whatever you want and act anyway you like, when you first meet a FSBO, you should be on best behavior. Dress well. Be polite. Don’t hog the conversation. Let the FSBO give you a tour of the property. Add the complimentary “oohs” and “aahs” at the usual places. In other words, try to make a good impression. Remember, if it turns out that this is the place you want to buy, this seller is the person with whom you’re going to negotiate and with whom you’re going to take the sale journey. If you like the place, I recommend that you don’t begin negotiations on your first visit. Rather, use that as strictly an exploratory mission. Try to find out as much about the property and the seller’s motivation as you can. At the same time the seller will be trying to assess you and your intentions. Later, after you’ve left and had a chance to think about it, if you still like the place, call the seller and arrange another time to come down and negotiate. Waiting has the added effect of letting the seller know you’re not too anxious. And calling for an appointment allows the seller to build anticipation as to what you might have on your mind, how much you might offer. It gets the seller more interested in seeing what you’ve got.

TRAP DON’T BE IN A HURRY Don’t plan on simply breezing in, making an offer, and then breezing out. Plan to spend time, hours if necessary. Use “small talk.” Get to know the sellers better. Let them get to know you. When you present your offer, present it one element at a time. Sometimes, if you’re lowballing, it’s better to present the favorable terms first with the price last. The more time you and the seller spend together, the more likely you are both to be committed to working out a deal. After all, no one likes to “waste” an entire evening with nothing to show for it. After awhile, the seller will begin bending over backwards to “save” the deal.

Finding the Enlightened FSBO Let’s say you’ve dropped in on half a dozen FSBOs and realized that they either weren’t for you, or if you liked them, the prices were too high for the market. Now, suddenly, you find an FSBO in the neighborhood and discover the seller is enlightened. He tells you that homes like his in the area go for $300,000. However, he’s selling by owner and realizes that’s a harder sell. So he’ll cut the price by an amount equal to half a commission, $9000 in a price reduction, if you’ll buy directly. The price will be $291,000. Right off the top you’re offered half the value of the commission in a price reduction. Now it’s a matter of negotiation. You point out that, yes, you’re willing to buy. But since there’s no agent, you’ve got to do all the usual work that the broker performs. Plus, you’ve got the risks of dealing directly with a seller. You want a price reduction equal to the full commission. The FSBO balks, and maybe you compromise somewhere in between. Or maybe he agrees. Remember, he’s keeping his eye on the doughnut and not the hole. He wants the sale. If all goes well, you’ve just gotten the home at a lesser price.

How Do You Handle Paperwork in an FSBO Deal? The correct answer is, “Very carefully!” You can’t trust an inexperienced seller, one who probably lacks the knowledge to handle the paperwork for the transaction. This is an area that tolerates few mistakes. The wrong language, a misinterpretation of a law, the failure to include some important item such as your demand for a professional home inspection, could result in a bad deal that could hurt you or that might end up in litigation. You want it done right. In actuality an enlightened FSBO will already have considered this problem and come up with a viable solution. That solution, usually, is to have an agent prepare the purchase agreement and other paperwork on a fee-for-service basis. Alternatively, the seller may be having an attorney do it. agents charge similar amounts (see Article 6). Keep in mind, however, that while attorneys that handle real estate transactions are found all over the East Coast, they are seldom found in other parts of the country. Fee-forservice agents, however, are cropping up everywhere. If the seller hasn’t come up with this solution, you can come up with it yourself. Just be sure that you agree in advance who will pay the costs of having the paperwork done.

That’s what the agent does. No agent? Then it’s up to you or the seller. It’s a good idea to get an initial understanding between yourself and the seller on the delegation of responsibilities. The last thing you want is to think that the seller is doing something while, in reality, he or she thinks you’re handling it. Your fee-for-service agent, your attorney, or your escrow officer can come up with a good list of things that need to be done in order to close escrow. Then delegate who will do what. But be sure to call the seller occasionally to see that he or she is doing her part. You don’t want to come to the end of escrow only to discover that the seller hasn’t even started with termite repair work.

Can I Negotiate with a FSBO

Seller? Yes, but usually with difficulty. Face-to-face negotiations are something that most of us cringe at. Yet, to get a home at a better price by buying from a FSBO, it’s something we’ll have to do. Here are some helpful points to remember:

FSBO Negotiating Tactics  Remember, this is business. Never say anything personally disparaging to the seller. To do so will almost immediately end the negotiations. If the seller says something personal against you, make note of it, and then move on. If you hold it personally against the seller, again the deal’s likely to come unraveled.  Argue at your peril. Always remember that if you argue with the seller, there’s no third party to settle the argument. You could each end up in a rigid, uncompromising position that would make consummating a deal impossible. Instead, simply listen to the seller and then present your position. If you’re at odds, then look for common ground and whittle away until you’re both in agreement. Sound easier than it is? Perhaps, but with a little practice and keeping a cool head, it works surprisingly well.  Never lie, not even a tiny, little small one. If you have a credit problem, you don’t necessarily have to bring it up. (Although if it’s going to affect the deal, getting it out in the open early on is a good idea.) However, once it comes up, don’t lie about it. Don’t make it bigger than it is, but don’t make it smaller either. Lies, even small ones, have a way of poisoning the negotiation. If the seller catches you in a lie, he or she begins wondering what else you’re lying about. Maybe you’re just there to cheat the seller? Maybe you really don’t have the cash to buy or can’t qualify for the mortgage. And on and on. Telling the truth may hurt, but it hurts a lot less than lying.  When the sellers’ price is way off, let them know. But back your comments up with facts. Have a list of recent comparable sales in the area to point to. Let the facts do the work for you. Figures don’t lie. They tell what the house is worth.

Get It in Writing You may be agreed on Monday morning. But by Thursday morning the sellers may be having second thoughts and want to start negotiations all over again. Get yourself immediately down to an attorney or agent who’ll write up the deal, and then get everyone’s signature. Only then can you breathe a conditional sigh of relief (conditioned on the deal finally closing some 30 days later after you get financing, the seller clears title, and everything goes according to plan).

Why buy someone else’s home when you can design and build your own? You’d certainly be the rare person if the thought hadn’t at least crossed your mind at some point in your life. It’s the secret dream of a great many of us. I know it was the dream of my wife and myself when we first did it years ago in the Sierra woods of Northern California. The lessons we learned, as well as those of other self-builders with whom I’ve talked, can be extremely helpful if you’re starting to think more seriously about this.

Chances are you can’t do it better than builders whose profession is putting up homes. They know materials and labor, design and construction, as well as where to cut corners and where to be lavish. But what you can offer that they can’t is your own unique approach. I firmly believe that everyone should build their own home at least once. It’s an experience you’ll cherish and never forget. And the home you produce will always have a warm spot in your heart.

Start with the Lot The first thing you must do is find a lot. These days most people who construct their own homes do so in rural or vacation areas (developers having already built up most suburban areas). Lots are for sale everywhere, but good lots are hard to find. Here’s a checklist of what to look for in a good lot:

Lot Checklist Location Everyone knows that location is important in real estate, but it is doubly important in rural or vacation areas. The reason is simple. Properties here can take much longer to sell (frequently years). If you want to resell, you’re going to need a prime location so you can get out relatively quickly. Does your lot have the following (in order of importance)? yes no  Water Frontage (river or lake)?  View?  Level building site?  Easy access roads?  Close to urban/suburban area? Lot Amenities These are the features of the particular lot that you find. Some lots are grand, while others are not so grand. Does yours have:

Lots of trees?  A lot of room? (Sometimes a minus in the city, but usually a plus in the country.)  Good building soil? (It’s harder to build in a swamp or “rock country.”)  A lot of level ground? (It’s also harder to build on a mountainside.) Water In the city it’s something we take for granted, but building in the country, it’s a prime consideration. Does your lot have:  A well? (Not so good, but better than no water!)  A mutual or private water company (Good)  Water for irrigation? (Gardening) Sewer System It’s something important to consider before you buy. Does your lot:  Have access to a public a sewer system? (How much will it cost you to hook up to it?)  Require a septic tank? (Do you have enough room for a leach field?) Power Yes, many rural or mountain lots have not yet been accessed by the power company. It’s a very big negative.  Does your lot have electric power?  If not, is it coming soon? Drainage This can be a big factor later on, although it’s something few of us remember to consider when we buy.  Does your lot drain adequately?  Are there soft, wet areas indicating heavy water buildup?  Will you need to dig drainage ditches before you build? Title Buying a lot is not quite the same as buying a house. You have to worry about all kinds of restrictions.  Can you get clear title?  Are there any easements (to power companies, water companies, and so on) on your lot?

Are those easements just where you want to build? (If they are, you won’t be able to.)  Are you in any kind of restricted area that would impair your ability to build:  a coastal preserve?  a national forest?  a wildlife preserve?  other?  Is there a building moratorium in your area? Environmental Concerns These are important issues that you usually have to dig to discover:  Is your area facing any kind of environmental impact control?  Is there something occurring in the area that would severely affect the value of your property?  draining a lake?  changing the course of a river?  lumbering activity?  Is your lot located in a geologically unstable area (earthquakes)?  Anything else that’s detrimental

“Leach fields” are something new to many first-time home builders in rural areas. If you have a septic system, it is composed of two elements: the tank, which holds the solid sewerage, and the leach field, which drains out the liquid sewerage. Atank takes up only a few dozen square feet. Aleach field, on the other hand, requires hundreds of square feet, usually in a flat area. Be sure you have enough room for your leach field as well as your building site when looking at a rural lot. Have the county sanitation engineer check it out.

Watch Out for Poor Soil

Quality The quality of soil is a crucial factor when building. Ideally, you want soil that allows water to percolate yet retains its shape. Expansive soils (mostly clays) expand when they get wet, and this can easily lead to cracked foundations. Sandy soils can more easily wash away. If there is any doubt at all, get a soils report from a qualified engineering company.

How Are Lots Financed? Generally, lots are paid for either in cash or with a mortgage carried back by the seller (typically for a term of under 10 years at prevailing interest rates). It would be a mistake to buy a lot thinking you can refinance it through a bank or savings and loan. Most lenders won’t loan on bare land. Banks, when they will loan, generally will give only 50 percent or less of the appraised value. years at 2 percent below the current interest rate. Remember that lots are hard to sell and that frequently people own them free and clear. You’re not going to get such a favorable (to you) offer accepted every time, but you will get it accepted more often than you might think.