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On the surface, for sale by owner homes do not seem to present a significant risk. You pay the homeowner for the home, and you move in.
In reality, however, there are a few risks every investor needs to be aware of in such transactions:
- Some foreclosure for sale by owner homes are sold on an "as is" basis. In some cases, such homes may simply be heavily neglected or damaged and may require considerable renovations. However, if a for sale by owner home is being offered "as is" and the homeowner does not allow you to professionally inspect the home, you need to walk way. Such homes represent too much risk, since there may be something seriously wrong with the property that the homebuyer does not wish you to know before the sale.
- In for sale by owner homes, there's no professional acting as a go-between between you and the home owner. This means that you are responsible for all contracts, legal obligations, and other paperwork related with buying a home. It iscrucial, therefore, that to you hire a real estate lawyer or get a professional to draw up all your contracts and look over the legal papers for you. Otherwise, you may find that you have just purchased a home that has cloud on the title or you may find you have not legally purchased a home at all.
- In for sale by owner homes, the homeowner has a little more leeway in terms of how the actual home is sold. Investors and home owners alike find that even after considerable agreement over the price and purchasing of a home, the homeowner may simply back out of the deal. This can be a waste of time and money invested in the buying process. To prevent this from happening, investors and home buyers interested in for sale by owner properties must use valid legal documents to ensure that both parties stick to be purchasing agreement.
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