The Dangers of For Sale by Owner Sellers and Properties
Today I read a news story about a real estate nightmare scenario. Tamara Holloway purchased a home from Justin McCrory of Nashville, TN. The sale proceeded and the sale closed as planned on June 1, 2016. Holloway gets the home, right?
The problem is that McCrory refuses to leave. Holloway filed a Detainer Warrant, which is the first step to evicting McCrory. However, it’ll take at least another 30 days for Holloway to remove McCrory. When questioned, all McCrory could do was state that Holloway got a great deal, he does not recognize that he needs to leave, and he finished the interview by screaming “You need to learn to take orders!” to the reporter.
Seems ridiculous? See for yourself.
The article ended with some wise counsel:
Also, get your keys at closing, Holloway did not. Lastly, try to work with a seller who has a Realtor representing him. McCrory did not have one.
“Make sure your realtor understands that it’s a ‘for sale by owner’ and can work with that other party to make sure things like this don’t slip through the cracks,” said GNAR President Denise Creswell.
For Sale by Owner (FSBO) properties are a mixed bag. Many believe that we Realtors denigrate FSBO properties because we don’t like not getting paid. Sure, there are financial concerns! However, there are other more important reasons we shy away from FSBO properties or even refuse to assist with FSBO sales and purchases.
1. Sellers think they know what they are doing, but frequently do not. Unrepresented sellers are just that; totally unrepresented. They usually don’t have the correct state paperwork, don’t know their responsibilities and obligations under state and federal law, don’t understand those responsibilities and obligations, and frequently engage in unlawful conduct. In my professional practice, I have encountered only one FSBO who truly knew and understood all of their legal obligations. Beyond this couple, every last FSBO seller made dangerous assumptions that placed my Buyers in legal peril.
2. Since the Seller is unrepresented, real estate agents must serve the seller to see the transaction close. Aside from being twice the normal amount of work for less pay, this also places the Buyer’s agent in a legally uncomfortable position of directly serving someone whose interests run counter to our own client’s interests! This puts us in danger of litigation from the unrepresented Seller and from our own Buyer. However, since we do not work with the Seller, many Sellers have no compunction about being less than cooperative with the real estate agent. This makes a tough job with additional work even more difficult.
3. Real estate licensees are partially responsible to ensure the lawful conduct of all parties. While the seller (and sometimes our own buyers) believe that we are balking over commission issues, we are really balking due to lack of disclosures and improper or incomplete disclosures. Did you know that simply not providing lead paint disclosure penalties cost $11,000.00 per violation plus treble (three times) any damages? There’s a reason we agents move cautiously! Sometimes we also slow things because we worry over fraud. Our moral and legal obligation is to protect you, our buyer! If things go sideways like Holloway and McCrory above, the courts and state licensing agencies demand we prove that we did everything possible to protect our Buyers during the process. These additional requirements are too much for some agents, which is why they politely decline to work with FSBO properties.
4. This next issue is delicate and may seem strange, but this is the entire reason I never solicit business from FSBO sellers. In my professional practice, I have encountered numerous FSBO Sellers and properties that have issues. In Wisconsin, a real estate agent is obligated to disclose known problems with properties even if the Seller refuses to do so. In one case, I saw a huge crack in a basement wall. My potential seller had me return two weeks later. They shoved putty into the crack, expertly troweled everything to match, and repainted the wall to hide any sign of repair. Wisconsin law requires agents to disclose things like this. When I informed the Seller of my legal obligation, the Seller ejected me from their home, went FSBO, and sold to an unsuspecting buyer. Another potential seller refused to disclose and wanted my assistance in hiding multiple liens against his property. (Please see below for more about this prize winner.)
Some sellers are also a little … “different.” Word spreads throughout offices, companies, and even between competitors when an agent finds someone who isn’t right. I’ve turned down business from sellers out of concern for potential buyers and for my own safety! The lien hider was a very well-armed anti-government tax protestor whose actions made me worry for the safety of buyers during showings. I politely declined to work with another individual who was convinced that an area factory was sending representatives to stalk and eventually abduct her parrot. Then there was a person who coated the walls of his home office with foil to stop penetration by various alien technologies and who demanded my word that I would test all potential buyers to ensure they were not under control of the aliens. (I had to decline because my testing apparatus was out of order.)
Does this seem funny? It is here, but imagine placing hundreds of thousands of dollars on the line with these people!
If you want to buy a FSBO, let’s talk. I can offer some tips to smooth the process, ensure that the paperwork is right, and will be your partner to ensure that everything remains honest. Please don’t hesitate to call or email; it will be my pleasure to help!