Why Do Scams Happen With For Sale by Owners?

For Sale by Owners (FSBO), four words that may sound simple and harmless enough can be the start of a long road of a headache and financial loss for those who elect to go through with a FSBO. Known as a real estate transaction that occurs without the oversight of a real estate agent, FSBO can seem appealing to sellers who want to skip out on the commission fee owed to real estate agents. In their minds, they’re making a smart choice, lowering their final bill and taking their home directly into the market, relying on their own instinct to vet and work with buyers.

FSOB has its advantages for the seller, no doubt. But, from a buyer’s perspective, nothing could be worse.

Why do scams happen?

When there is no intermediary, professional third party, or outside perspective on a transaction – especially one that involves as much money as selling a house – something is bound to go bad. Without professional assistance, no one is able to pick up on the scams and point them out to their clients. FSBO is the perfect scenario for a seller to pull a scam on a buyer.

Let’s look at an example… say you are looking to buy a new home, and you find one that seems reasonable. It’s listed as FSBO, but you assume that you’ll be fine without a realtor on the case. In reality, FSBO comes with the most hidden fees and transactions of any real estate agreement. After chatting with the homeowner, you put down $10,000 towards the new house, a 5% payment commitment that you two agreed to on the phone.

After making the payment, one-week later, you haven’t heard from the seller. You give them a call, and they tell you that they have changed their minds, taking your $10,000 and blocking your phone number. There’s nothing you can do to fix the situation since no real estate agent or agency was involved with the transaction. You’re out $10,000 and infuriated beyond belief.

Beware of FSBO

You wouldn’t go into a courtroom without a lawyer by your side, so why would you attempt to buy one of the biggest financial investments of your life without a professional by your side? FSBO come with double the financial fees, making them more expensive in the end, as well as a lengthy process that draws out the start to close over many, many months. Not to mention, sellers have the freedom to flee (unless of course, you have some kind of document drafted and signed). Sellers who list FSBO know what they’re doing – they’re pulling a fast one on you, and understand that the ball is entirely in their court.

As a buyer, be vigilant of these scams. Real estate agents exist for a reason – to lobby on your behalf and educate you on the process so you end up with the best deal and house possible. Don’t fall victim to FSBO.