I saw a house that is For-Sale-By-Owner. Can my Realtor® help me with that?

Understanding the Real Estate Process from A – Z – A Buyer’s Guide to Real Estate – Part 10

This is the tenth post of a series in an FAQ format that I hope will help would be buyers better understand the real estate process that they are about to go through. There is a follow-on series to the posts for real estate sellers.

FAQ – I saw a house that is For-Sale-By-Owner (FSBO). Can my Realtor help me with that?

He/she sure can. In fact, it may be more important than ever to have your Realtor involved. Since the Seller has no Realtor representation, it is imperative that one of the two parties have someone involved who thoroughly understands the real estate process and make sure that things are done properly. That is not to say that the Seller doesn’t know what he’s doing. He may be quite knowledgeable and may have sold many houses in the past; however, the real estate process changes over time as new laws are enacted and new requirements must be met. Realtors are required to keep up with those changes, while someone who last sold a house 5-10 years ago might not be aware of the changes.  In addition, remember that the Realtor has assumed a fiduciary role with you in the sale and puts your best interest first. The seller may be a very honest person, but they are not putting your best interests first.

So, how can/will your Realtor help with a FSBO sale? For one he/she can do a little research on the place, so that you may be aware what the current owner paid for the place, what the taxes are and if there are any special assessments or association fees. He/she can also act as a go-between with the Seller to arrange the showing. Your Realtor will determine at that time if the Seller is willing to pay a commission on a sale or whether you might be on the hook for that, if you signed an Agency Agreement with the Realtor.

Your Realtor can also negotiate on your behalf with the Seller. Most Buyers are not comfortable

trying to negotiate directly with the Seller, especially if he has an attitude about the real restate process. The Realtor will also prepare the necessary real estate sale contract documents to make the offer official and will involve a title company when appropriate. For the most part, your Realtor may be able to make a FSBO sale look and feel to you much like a normal sale of an MLS-listed property; however, there may be much more going on in the background.

Follow-up FAQ – What are some things that I should be aware of or concerned about with a FSBO sale?

Much of the activity that goes on after an offer is accepted will be the same as the sale of an MLS-listed house and your Realtor can probably work with the Seller to smooth over any rough spots. Some of the differences may be found in the work that the Seller (or his missing agent) did (or didn’t do) on the front end. Since the Seller didn’t have a Realtor involved there was probably no preliminary title search work done, so there could be title surprises when the title work that is kicked off by the accepted offer is done.

The seller may also be unaware of any local governmental rules or regulation on sales and any requirements for city inspections and the issuance of a new certificate of occupancy for the new owner. The Seller also may not have bothered to do the Due Diligence work at the County/Township/City/ Village level to see if there are any outstanding assessments or liens against

the property. He/she may not have had the proper forms (or just decided not to do this requirement) to fill out to do the Sellers’ Disclosure and the Lead-based Paint Disclosure. Those are both required by Michigan real estate law and the sale cannot proceed without them. Any flyer that the Seller might have created must also be looked at with a grain of salt, since he might have been unaware of the real estate rules that govern what can and cannot be said about a property.

Perhaps the biggest concern is that the Seller may have overpriced the property. Without any advice from a Realtor, many FSBO sellers overprice their homes by as much and 10-15%, sometimes more. If they set their jaw at that price, negotiating a reasonable sale price may be impossible. Without professional help, many use the advice from friends and relatives or knowledge (real or imagined) of neighborhood sales, even if they’ve never been in the homes that have sold in their neighborhood. A Realtor would have been able to do a Comparative Market Analysis of their home and would have provided pricing advice for it relative to other sales. But, they didn’t use a Realtor.

Most times a FSBO Seller is just trying to save some money on the sale by not paying a commission to a listing agent; however, a few have had bad experiences in the past with a real estate agent and now don’t trust anyone in the real estate business and don’t want to follow the proper real estate procedures and laws.  Those latter Sellers can be difficult to deal with and can make the home buying experience very uncomfortable for the Buyer and his Realtor. A good Realtor will know how to handle that scenario.

Your Realtor will also take the time to go over the terms and conditions of the Purchase Agreement

(PA) with the Seller, since he has no one else to do that with him. Sellers with an attitude about the real estate industry may try to ignore, or get around, some of the provisions of the PA or the title policy requirements and closing processes. A good Realtor will make sure that everything that is required is done and that the T’s & C’s that are in the PA to protect your interests are not ignored by the FSBO Seller.

If the Seller has decided to use his own title company, your agent will act as the coordination point between them and your title company or work with that title company to make sure that your interests are taken into account. Your agent will also negotiate any issues or repair requests that come out of the home inspection, which can be another sore point for the FSBO seller. Your Realtor will try to keep everything on track and on schedule to meet the various deadlines that are in the PA and make sure that the closing takes place on the agreed upon date.

In the end, you will still be able to buy that house from the FSBO Seller. The process may not be as pleasant or as well organized as might be with a listed and represented seller; however, your Realtor will try to make the process as painless as possible. Just be glad that at least one of you had a professional who knew what he/she was doing during the process. The real estate process is not rocket science; but, there are enough potential things that could go wrong along the way that having an experienced guide – your Realtor – makes all the difference in the world. 

First time buyers – What do I need to know about vacant land?

Question - I’m thinking of just buying some vacant land right now and building later; what should I know about buying vacant land?

Answer - Buying and selling vacant land uses the same basic real estate sales principles as are used for homes, but there are some unique things that you should understand.

First make sure that there is a good survey available and that the corners are clearly marked. With vacant land all you are getting is the land, so make sure you clearly understand the borders and boundaries. Don’t just guess, based upon tree lines for other things that you might think mark the boundaries and surely don’t take the word of the listing agent. Some owners might not even have a clear picture of where the boundaries are. If these things are not available make sure that you request that the seller provide them as part of any offer. Walk the land so that you can see all parts of it (see below about wetlands).

Most times vacant lands, especially bigger parcels (5+ acres), were almost always part of a much bigger parcel at one time and may have been used for farming in the past. Even though the last vestiges of the old farm seem to be gone there could be some interesting (sometimes dangerous) stuff lurking in the ground. Many old farms had buried fuel tanks or there might be old building foundations that have been buried over time. There could even be old septic fields or cow manure pits somewhere just under the current soil. This is all pointed out not to alarm you but to alert you to some of the dangers that could be there. Most of the time there is no way to know what’s just beneath the surface until you start digging to put in your foundation or septic field. While the seller might have a disclosure on file, many times the current owners have no real idea what went on decades ago.

If you are out in a rural area, you want to ask if the land has ever had a perc test. That would show whether it can sustain a septic field without having to resort to an engineered field. The soil type should give you a hint. Look for sandy soils that perc well and try to avoid land made up primarily of clay-type soils. If there is not already a well, then one will have to be drilled. In areas that have been pasture land for farm animals it is

not uncommon for there to be an elevated level of Nitrates and Nitrites in the well water. Those chemicals are not necessarily harmful to adults, but there are warning about what levels are safe for babies and children. Click here to read more about that. In many areas, Michigan being one. the presence of low levels of arsenic is not uncommon.

You should determine if and where the closest utilities are – electric lines and gas main. If there isn’t any then you may end up paying for a long run to bring them to the land. Having to pay for long runs of gas line or the placement of electrical poles and lines (or even worse having to bury power lines) to bring power to your build site can be very expensive. If natural gas isn’t available then you’ll have to resort to propane or heating oil, both of which are expensive. Put that into your future plans. To read my earlier post about living with propane, click here.

You should ascertain whether there are any utility or other easements that come with the deal and see how they affect any plans that you might have for the property. If your parcel is accessible only by crossing someone else’s property, make sure that you have a written and recorded easement in place to assure that access in the future. If there are any pipeline easements you will not be allowed to build above them, so know where they cross the land.

The next thing to be concerned about is whether the land has some wetlands areas included. In Michigan lots of areas are primarily wetlands. You can usually tell a wetlands area if there are cat tails growing on it. Areas that are designated as wetlands are protected from development out of a concern for preserving the habitats of wildlife in the area. Wetlands can be hard to spot in the deep summer, when they dry out; but a parcel doesn't have to be wet all the time or have standing water to be designated a wetland area. You cannot build on a wetland and in Michigan and many other states you are not allowed to just fill it in with fill dirt. Click here for Michigan’s guidelines to wetlands protection. Your local township or county should be able to supply wetlands maps for your area.

Understand what the situation is with the mineral rights. In our area much of the oil and gas right were sold off to exploration companies years ago. In some cases the rights have expired or the original oil or gas fields were depleted and the rights reverted to the owner; however, in some leases the exploration company still has the right to return and drill again, maybe using the new fracking techniques to make the fields productive again. Make sure you understand who owns the rights and who has the right to do any drilling or mineral extraction. It would be a little late to have built your dream house and have a drilling rig pull up next to the house. To read more than you’ll ever want to know about mineral rights, click here.

Understand the local zoning ordinances and master plan, if any exists. Don’t make assumptions about buying that 10 acre parcel and splitting it into 4-5 smaller parcels. You may not have any right to split it or there may well be zoning restrictions on how small a lot can be in that area and still be buildable. In some cases the only way to break up a bigger parcel is to build a road into it to access the back parcels and building a road is an expensive proposition. Go to the Township where the property is located and talk to the Township planning people about their ordinances and split policies. Things can get a little dicey if the land is on (or crosses) a governmental boundary, like two different counties. You mat be facing two different sets of ordinances in those cases.

One last thing to keep in mind is that there are no mortgages on vacant land. Banks just don’t want to write a mortgage when there are no improvements, i.e. a house. So you have to pay cash or work a land contract deal with the seller. Lots in more populous areas will cost more per square foot for a variety of reasons, but they also usually come with all of the utilities at the curb and may have paved rather than dirt road. They may also have amenities like cable access that are usually missing in rural areas. Getting out into the boonies will get you cheaper land, but usually offer less in the way of amenities.

So maybe you have these big dreams of living on a farm and buying a little piece of land is just the beginning or maybe you just want a secluded spot to build you r dream house. In either case do your homework. Buying  vacant land isn’t hard but it takes due diligence, just like buying a house would. In the meantime, click here to view a few episodes of the 60’s TV comedy show Green Acres, about a big city lawyer who always wanted to live on a farm.