Keys & Credit
The no-fluff real estate and mortgage podcast that helps you make smarter moves with confidence.
Hosted by Realtor Bill Jerikovsky and Mortgage Lender Barb Miller, this show cuts through the jargon and industry hype to bring you honest, practical insights on buying, selling, and financing homes. Whether you're a first-time buyer, seasoned investor, or just trying to decode your credit score—Bill and Barb keep it real with bite-sized episodes.
💡 Real answers. 🙅♂️ No sales pitches. 🏡 Just straight talk on homes, loans, and everything in between.
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Barb Miller NMLS ID: 329237
Guaranteed Rate, Inc. dba Rate, NMLS #2611
Bill Jerikovsky RE/MAX RESULTS
This Podcast is edited and produced by Kody Hughes - Focal Point Media
FocalPointKody@gmail.com - 320-224-9828
Keys & Credit
DIY Disaster: When Homeowners Play Realtor
Ever wondered why real estate professionals cringe when they hear "For Sale By Owner"? Barb and Bill pull back the curtain on the FSBO world, exposing why these transactions frequently end in disaster.
The allure seems simple - save on commission by selling your own home. But as our hosts reveal through hair-raising stories and first-hand experience, what appears to be a money-saving move often becomes a financial nightmare. When a homeowner in St. Louis Park had to tear down walls after closing because of undisclosed structural issues, the seller learned the hard way that "ignorance is no excuse" in real estate transactions.
From contracts written on napkins to hidden assessments costing sellers thousands, the podcast explores how the lack of professional guidance can lead to catastrophic outcomes. Barb even shares her own humbling experience attempting to sell FSBO with three kids under six, standing awkwardly at open houses with garage sale signs, before eventually listing with a professional and selling in just 10 days.
The most chilling revelation? When real estate professionals see a FSBO listing, their first thought is often "What are they hiding?" Whether it's clouds on the title, unpermitted renovations, or disclosure landmines, the risks for both buyers and sellers in these transactions extend far beyond the closing table. As Bill bluntly puts it, when you sign a FSBO contract without representation, you can find yourself "contractually fucked."
Share this episode with anyone considering buying or selling without representation – it might be the most valuable real estate advice they'll ever receive.
0:00 Episode Introduction
0:35 Why FSBOs Bug Real Estate Pros
3:43 Contracts and Disclosure Requirements
7:12 Hidden Problems and Disclosure Landmines
12:17 Limited Service Listings Explained
15:50 Barb's Personal FSBO Experience
21:14 Pricing Mistakes and Financial Losses
38:42 Assessments and Hidden Costs
44:57 Episode Closing
Welcome to Keys and Credit. Ladies and gentlemen, Sorry, go ahead.
Speaker 1:Welcome to Keys and Credit, your no-fluff, no-nonsense real estate and mortgage podcast. I'm Barb, your straight-talking lender.
Speaker 2:And I am Bill the noble realtor.
Speaker 1:Whether you're a first-time buyer, seasoned investor or just real estate curious, you're in the right place.
Speaker 2:What are we talking about today, Barb?
Speaker 1:Well, let's get into it, Bill.
Speaker 2:What are we talking about? What are we going to do? We're going to pick on some people today, Barb.
Speaker 1:What are we picking?
Speaker 2:on. We're picking on Fizbo's For sale by owners. Okay, this one kind of hits home for me because they bugged the living shit out of me. I don't know if I can say that. We can delete that if you want, but FSBOs are a tough thing to handle in a real estate market when you're actually representing people, right. How about you? What do you think about them? What's your opinion?
Speaker 1:Well, I mean, everyone needs to sell their home. I think they should have representation. But if they want to try it, it they can try it for a short period of time, but they're probably not going to get to what their goals are see, I don't think they should try it at all.
Speaker 3:Um, quick question from a lending perspective your lender does that affect? No, I'm asking, bar, I know I'm fucking with you from a lending perspective, does it affect your pre-approval if it is a for sale by owner or any inspection, or does that like? Is there any hiccup to the process?
Speaker 1:no, okay, no, but you do want to make sure that you're within your purchase agreement, that your t's are crossed and your i's are dotted. So it is a lot of liability by, uh, doing a for sale by owner. It is something you want to make sure you kind of know what you're doing, got it.
Speaker 2:So on that, so say you get, we'll get into this stuff. I have lots of stuff talked about. But on that say you have a for sale by owner contract, that's say written for over exaggeration on a napkin. Is that allowable?
Speaker 1:no, it has to be on a purchase contract on what type of purchase contract well it has to be. They can go get it at, you know, their local staple store or office max but. But you want to make sure you're getting the right one.
Speaker 2:I mean I'm that's what I'm saying. So if they submit to you, say you have a for sale by owner seller and an unrepresented buyer and these brilliant people have been in the real estate market for 35 whole minutes, they've've decided they're going to put this contract together, put this transaction together, and they submit it to you with an Excel spreadsheet and a few verbiages that they stole from the internet, is that acceptable? No, it has to be on a contract.
Speaker 1:It has to be on a contract.
Speaker 2:Go figure. So here's another question. I got this in my notes. Here too, is ignorance an excuse? No, no, it is not. So there's something to think about when you're doing a FISBO. If you're for sale by owner, okay, and you make a mistake, you're liable for that mistake, correct, correct, correct, okay. You don't get to say, well, I didn't know, because I'm a for sale by owner, no, so being a for sale by owner can cost you a bunch of money. It really can, okay. So let's go back to that contract part. What do you do if you get a contract?
Speaker 1:from a FSBO that is incorrect, they would have to correct it, depending upon what part is incorrect, but they would have to have it corrected.
Speaker 2:Okay, so how many times do you have to send it back before you give up?
Speaker 1:Or you just keep sending it back and it's wrong. You know they have goals, so we'd have to keep sending it back right.
Speaker 2:Right, what do you mean?
Speaker 1:they have goals well, the seller has goals to sell and the buyer has goals to buy.
Speaker 2:Right, okay, okay, so in here, um, let's talk about disclosure laws, minnesota disclosure laws. So, as a seller, you are required to disclose certain things. Okay, now, for sale by owners usually don't know the disclosure requirements, right. So if you're coming in as a buyer on a for sale by owner seller, okay, and you ask them for certain things, if they don't tell you what's going on with the house, you're, you're kind of in trouble, right? You're not going to figure all these things out until after you own the house. Now, if you're under representation, okay, say you have a seller that's represented by an agent, a buyer that's represented by an agent. We know exactly what we're looking for, what's supposed to be disclosed, um, and if they're trying to hide something, usually we can find it okay because it's true right that if you know about it, you need to disclose it, right?
Speaker 2:yes, right material facts it's the use and enjoyment of the property.
Speaker 2:If anything affects the use and enjoyment of the property, it has to be disclosed. Back to ignorance is no excuse, correct? Okay, you can't say, well, I didn't know that rule, it doesn't matter. Okay, because you entered into this transaction, you are assumed to know the rules. You don't get to pretend you don't right and a lot of things with for sale by owners to me is oversight. Okay, that's a big one in here too.
Speaker 2:If you're looking at a house and you see that it's a FISBO, most of the times they just don't want to have somebody telling them what to do because they're trying to hide something. This, this is my opinion. This isn't a fact, but this is what we see 90 of the time. When we walk into a fizzbow, we'll see hidden stuff, painted walls hidden, you know, mold. We'll see all kinds of stuff or there'll be an encumbrance on a title. Let's say we go into fizzbow, the house looks okay and we start doing our title work as a buyer's representative. We do our title work and we find a cloud on the title. Say it's a lien, say it's, uh, an assessment, something like that, and the seller didn't disclose any of it. They're not going to tell you about any of it and they're going to want you to take care of it well, right, and then you're that far into the process, you've maybe had an appraisal done and yep which has cost you money.
Speaker 1:And now? Now it's delayed it's and if your interest rate is locked, if it takes too much to clean that mess up, yep, you may have to have a lock extension and it just costs money it costs and it's on nobody but it costs money for both the buyer and the seller and the seller.
Speaker 2:That's just it. When you're a fizz ball, if you make mistakes, you have to pay for them. Okay, ignorance we're back to. Ignorance is not an excuse, so, um, we'll stick into disclosures for a minute. So talk about mechanicals, roofs, um, buried tanks, abandoned wells. There's all this stuff that these for sale by owners could be hiding, that they're not going to tell you about because they're going to plead ignorance. I didn't know I was supposed to tell you. I didn't know I was supposed to do that.
Speaker 1:Well, because within a Minnesota contract, you have your disclosures. Which is what about 12-ish pages?
Speaker 2:Ten pages. Come on line 406. You know better than that.
Speaker 1:So, anyways, you're going to list out all the potential issues, but if you just go to OfficeMax to get your purchase agreement, you may not have the disclosure.
Speaker 2:So does a lender require a disclosure, or do they just require a purchase agreement?
Speaker 1:We require a purchase agreement. But if it is marked that there is a disclosure statement, sometimes I'm asked for it by underwriting and other times I'm not. So it just really depends upon the program.
Speaker 2:So there won't be any oversight from a lender when it comes to disclosing what's wrong with the property. Right, right, right. So as you jump into your for sale by owner transaction, you don't know what you're getting into and if they haven't filled out a disclosure statement, then how do you know what?
Speaker 2:you're buying, you have no idea. You have zero idea what's going on, okay. Okay, let's talk about truth in housing. This is something that's not normal up here. This is something that's more in the city. If you're for sale by owner, you have to still follow truth in housing. Tish requirements Right.
Speaker 1:Right.
Speaker 2:Now, going from, say, West St Paul to St Paul, there's a one block cutoff where your truth in housing requires an actual inspection and your truth in housing only requires a sewer cert. Okay, now, if you jump into a for sale by owner and they didn't know either one of these, somebody's on the hook for that. It's called a point of sale requirement. So if you go in to a for sale by owner in West St Paul and they don't have their sewer cert and you're like you know what We'll write in the contract the buyer will take care of the sewer cert. Okay, now that you've written that in there, with your for sale by owner and all your infinite knowledge, if you get your sewer inspection and it costs the last one that we did was $17,000. You're on the hook for that because you wrote that in right. For sale by owner Brilliant.
Speaker 1:It's just not a good idea, okay wrote that in right or sale by owner brilliant. It's just not a good idea. Okay, right, and in your example the buyer was doing the septic cert, so they would be responsible for that, the sewer cert, yeah so so when we did it we were both.
Speaker 2:I was a seller, uh, representation okay. So we had it figured out. I'm proactive, so we had all that done before we enlisted the house. But if you're in a first sale by owner and the owner says you know what, I don't want to deal with this point of sale crap. You take care of it and the buyer's like love it, have it, gotta, can't live without it like it, love it, can't live without it.
Speaker 2:That one says you know what I'll do. Whatever I have to do to get this house, you just let me sign this contract, we'll put it together. Whatever point of sale stuff I need, whatever I need, we'll do it. Sign that, that's a legally binding contract. Okay, the for sale by owner just got you, because for you to buy that house, you have to do all this stuff and it could cost you a shit ton of money, right? What are they hiding the biggest thing for me with for sale by owners? What are they hiding? This one says disclosure landmines, which is a big one.
Speaker 1:Illegal remodels. Let's talk about it. Let talk about that let's, let's get back to you being proactive, okay um because that saves time because we don't uh. If you said I'm proactive, I have that all done before I list, or all the sewer, certain point of sale stuff, because it can take time. So that's another reason why you'd want to hire an agent, because you don't want to get two weeks down into a contract and all of a sudden realize you need this, and then it's two weeks before that can be certified.
Speaker 2:And here's Cody had something to say. We'll get back to it in a minute.
Speaker 3:What do you got? I was going to ask what. This is unrelated to this question, but I was going to ask what does a illegal? What did you say? Illegal? No contract point of sale illegal what did you say? Illegal Contract Point of sale? When they updated the house illegally. Oh an illegal remodel, illegal remodel yeah.
Speaker 2:So being proactive.
Speaker 2:We'll come back to that in a second so being proactive with us, good agent, good lender, we know the rules and with Because you and I run the state, I know the rules, whether it's West St Paul, st Paul, st Louis Park which has the most strictest truth in housing requirements. So if you want to buy a house and you're worried about inspections, buy one in St Louis Park, but it's my job to know all that stuff. Where to us it's common sense, to a for sale by owner, they don, but it's my job to know all that stuff Right.
Speaker 2:Where to us it's common sense To a for sale by owner. They don't know any of this stuff. Well right, they're just. Oh well, we're going to put a picture on the internet and we're going to fucking sell it. It's going to be great Woo. And then all this stuff comes flying down the pipe and they're going to say I didn't know. Okay.
Speaker 1:Well, and as a buyer, do you really want to deal with that? I didn't know.
Speaker 2:When you're coming in as a buyer. If you got the like it list, it love it, can't live without it. I'll get that figured out eventually. And you got those champagne glasses on and you sign on a dotted line wherever that Fizbo says you should sign. You are fucked. There's no easy way to put it. You are contractually fucked. They will run you through the ringer.
Speaker 2:Now let's talk about the other side. So if I come in as buyer representation into a FISBO and I get a weird feeling that this FISBO is hiding something whether it's a lien, an encumbrance, whether it's not disclosing things maybe they didn't pull permits, they didn't get engineer's reports for a wall they moved. It could be a million things I am going to fucking pull. Tear you apart. I am, so I am going to pick it apart. Try not to swear. This stuff ticks me off. But as a representative on the buy side in a FISBO, it doesn't matter if they have a representative or not. You have me to deal with.
Speaker 2:Okay, so for sale by owners usually don't want an agent on the other side either, because that oversight is still there and we'll find what you did wrong and I will. I will find everything you've done wrong because that's my job, right, and that's one thing for sale by owners. If they say well, if you use your agent, the price is going to be this, if you don't use an agent, the price is going to be lower. Gives you those champagne glasses, sign on the dotted line, I'm going to save a bunch of money and you're contractually fucked, sorry. Okay, what else do we got? What do you got? Do you got any notes? Or do you want me to just keep going?
Speaker 1:Well, I'm chipping in.
Speaker 3:Okay, I got lots of stuff here. Let's go back to the illegal remodel. Yep.
Speaker 2:Okay, so illegal remodel without permit. Say you walk into a house and you tell it's been renovated. Okay, you're in a for sale by owner. You can tell it's been renovated and you think it's fantastic, it's awesome. Okay, you close, everything's fine. And City of St Louis Park? This actually happened to me. City of St Louis Park comes a knock on the next day and says hey, where's your engineer's report for the structural wall? You moved? And they say well, we didn't do that. You know, that was the seller. Ignorance is an excuse. You now own the house. Okay, if there's no engineer's report, we need to tear that down and make sure that's okay and structurally safe and then you can put it back together. Whoa, that would be crazy. Welcome to Fizbo's. Okay, they were gone. The transaction's closed.
Speaker 1:Was that a for sale by owner that In St Louis Park?
Speaker 2:It wasn't a for sale by owner. Okay, it wasn't a for sale by owner. This was.
Speaker 3:it was just something, it was just an illegal remodel.
Speaker 2:It was an illegal remodel Yep.
Speaker 2:Is that more common with for sale by owners or just it's just something that happens? A for sale by owner? Usually 90% of the time they're hiding something or they're just cynical people that don't want to, you know, pay the extra money to have it done correctly. But most of the time it doesn't have to be structural. It could be clouded title, it could be a probate, it could be a weird type of sale, it could be disclosure stuff, it could be a crack foundation, it could be all kinds of stuff. But if you guys, if the for sale by owner transaction snakes through and closes, the owner now owns it. The owner is responsible for that property. Okay, so on that situation they had to come in and tear. They had to tear the sheet rock off the beams, all that stuff, make sure it was okay, it was good. So they just had. It was like two grand, they had to put sheet rock back up, but imagine if it wasn't.
Speaker 3:But that's still two grand that you didn't have to spend, didn't have to spend now imagine if it wasn't. And right, I mean oh yeah, and then there's even a bigger can of worms. It's's just icky.
Speaker 2:So on that one, I'll disclose that was one of the two clients that I've lost in the past seven years. Okay, so when I went in there and I told them they needed to do Truth in Housing in St Louis Park, they didn't want to and I said, well, this is a point-of-sale requirement.
Speaker 3:What is Truth in Housing?
Speaker 2:Truth in Housing is a. It's called a TISH report in St Louis Park, st Paul West, st Paul, parts of Minneapolis. It's different for every city down in the 494, 694 loop. It's a requirement point of sale where a city approved inspector has to come in and make sure your property is up to code before you sell it, just making sure there isn't any updates that weren't.
Speaker 3:It takes away that. What if Old with permits? Yep, it takes away the what if?
Speaker 2:And St Louis Park is the strictest, okay. So I went in there. When they first got the house, they inherited it and they said we're going to do all this stuff. I said, great, make sure you pull your permits, it'll be fine. He's like oh yeah, no problem, we got it. So I go, walls moved and all that stuff. They're like don't worry, we got the permits pulled. This is great. Okay, you know, awesome, um, go on there to list it. And I told him I said we have to have st louis park come in and do their truth in housing. And they're like okay, have them come on in. And the guy walks in. I was there. The guy walks in, he looks around, he's like absolutely not, like, absolutely not. What. He's like they haven't pulled one permit because they check st louis park checks before they go out on truth in housing. And this is point of sale. You don't get to sell the house without this guy's approval.
Speaker 3:Now, how would they know? This is only obviously major structural changes to the house, because then, they can see a floor plan of what it's supposed to look like.
Speaker 2:When you're in real estate. Okay, when you see real estate, you are pretty much in a lot, because now you take pictures all the time. Right, you can tell where a galley kitchen's supposed to be in a 1978 house. You can tell when that wall's been removed and opened up. Okay, you can tell downstairs where the support beam through the center of the house, the structural support beam, has been covered up and walls have been taken out. You just know, okay. So when an inspector comes in and he sees four or five of these a day, five days, days a week, 365 days a year, you're not getting shit by this guy. So he walks in and he sees, because the house looked cool, it was wide open, but it was a 70s house that was boxed squared galley kitchen, and now it's wide open with this big giant island, and he said exactly that. He walked in and said absolutely not.
Speaker 3:So what do they have to do you? Have to start putting supports back in.
Speaker 2:So I had them signed up under contract, okay, um, I told him. I said we have to get this fixed because he flagged it. You're red flagged, you need an engineer cert. You got to supply all this stuff before you can sell it you can't, you can list it.
Speaker 2:You ain't selling shit, you, you can't close that thing until all this is done, right? So they got mad at me. They got mad at me and they said, well, we don't want to deal with this crap, blah, blah, blah, blah. And what they did is they fired me and they hired a different agent. Three days later, that truth and housing report was satisfied because that agent knew a different inspector. So inspector a was the initial, inspector b was the one that signed it, because I can see that stuff.
Speaker 1:I look, wow can you imagine that buyer?
Speaker 2:buyer. This is where we're getting to. After that they went under contract and I watched this thing all the way through because I knew what was going on. They went under contract, closed All that good stuff and their agent the buyer's agent that bought the house sent me an email and said hey, how come this canceled and relisted three days later. I was asked the question. I am ethically bound and I have to disclose material facts, if I know it, about the property. So I told them guess what? You have all this stuff done without the proper engineer certs. So the agent went in, tried to figure out what was going on and he had supplied an engineer's cert copy. Whatever that he did himself.
Speaker 2:St louis park is like absolutely not. That guy came back. He's like absolutely not. They came out, they ripped everything down. It was okay, it was don't get me wrong, it was okay. But imagine if it wasn't. This is one of many of hundreds of stories that we see and that come to mind when we see a for sale by owner. What are they hiding? What are they doing? Why are they doing it? Why don't they want that oversight I don't want to say oversight, that representation. Why don't they want to do it right, do it correctly.
Speaker 1:You know, um can I interject? Absolutely yeah, you may not like fire away.
Speaker 2:is it my fault? No, sometimes it is.
Speaker 1:I'm going to tell a little secret, but this is I'm going to tell it from a perspective of a seller of why they may want to be a for sale by owner, so back in 2000. I don't like this devil's advocate stuff Back in 2000,. My husband and I decided that we're going to sell our little house in stacy that had no garage and buy this new house. Um, that was a new build, and we asked the realtor um, because we thought we're going to make more money without paying real estate commissions.
Speaker 1:This is well before mortgage, and and this I mean I was I was young okay but we thought, well, you know, because we were getting in by the skin of our teeth, which we see a lot of buyers getting in right, and so we thought, well, if we could save a little money on our sale Put it back in your pocket, well, or have it for our down payment, blah, blah, blah, sure.
Speaker 1:So the realtor was representing us on the purchase as well and we said we want to try to sell our house that we currently have for sale by owner. He's like, okay, well, I'll give you 30 days, the builder will give you 30 days, and then it's going to have to be listed. So we thought, okay, we're going to go down this path of for sale by owner, which I just need to tell you what a disaster it is, because, okay, instead of hiring a professional, now you need to advertise that this house is for sale. You don't get to have your house on the MLS to be shown to all other realtors. Realtors are not going to probably bring their buyers into your for sale by owner because they know that you're not wanting to pay commissions 80%, you lose 80% of your buyers.
Speaker 1:So then you're going to hold your own open houses. We had three small children under the age of six, three under six. So we're going to hold our own open houses. Then we're going to monitor those strangers coming in. Yep.
Speaker 2:And who are those strangers?
Speaker 1:Who are they? Well, they're buyers, and we don't know them?
Speaker 2:How do you know that? Are they buyers? Are they pre-approved? Do you know?
Speaker 1:Are they axe murderers? I?
Speaker 2:don't know. That's just it. How would you know? And then we have our three children there.
Speaker 1:Right, but it was all too like you. Long and short of it. We had like through this 30-day trial. We had two open houses.
Speaker 2:The second one was you think you did his fizz balls.
Speaker 1:Yeah, yep, thinking we were all that and a bag of chips and with our children there. And the first one again, not many people came because it wasn't advertised on the MLS and we just had. You know, like, basically, the garage sale signs out, right. That's crazy, like picketing advertised on the MLS and we just had, you know like, basically the garage sale signs out Right.
Speaker 1:That's crazy, like picketing. Hey, come on in. That's crazy. Open house, okay, right. And then the second one. We got a few more and we thought, oh, oh, these people are anyways. End of the day. 30 days expired enlisted.
Speaker 1:And it was way better. It was way better. I got notified of a of a showing. I had my house spotless, even with three kids under age six. My sink, it was crazy. My sink was all cleaned out, no water droplets, but I didn't have to show those people my house and let me tell you, and that's just one it's sold and I think maybe I mean, this is back 2000, so I'm trying to remember but but I think it sold in like 10 days.
Speaker 1:Yeah, listed with a realtor and I didn't have to really do anything.
Speaker 3:Wait. So what part is Bill not going to like about this? Yeah, what don't I like?
Speaker 1:That I was actually a for sale by owner.
Speaker 2:Oh no that's okay For sale by owners. You shouldn't do it, but I tried it right.
Speaker 1:I thought I was going to save money and at the end of the day I didn't. I lost time. Right Because this was also during the summer. We were closing in September, so I lost potential summer buyers.
Speaker 2:Well, and I get phone calls all the time from Fizbo's saying, hey, we tried it, we suck, yeah, can you get us figured out, okay? So let's talk about, besides that crazy, because that sucks, it really that crazy, because that sucks it really does um, let's talk about, say, you inherit something. Okay, you inherit a piece of property and you're going to fizzbow it. Okay, you think that you're going to make, say they, that grandma owed 200 grand on a property. You're going to list for 250. You're going to make 50 grand. It's going to be great. So you fizzbow. Okay, you go fizzbow, you get under contract on a napkin.
Speaker 2:Uh, barb, the lender approves it and we find that grandma still has a lien on the property for $56,000. Okay, now we're under contract. Does the contract state that you have to pay all that? Are you now paying another six grand on top of everything? So, when it comes to what agents do, what good agents do, good lenders do, because you and I work hand in hand just about everything. So, when it comes to what agents do, what good agents do good lenders do, because you and I work hand in hand just about everything, even when we're doing listings, because a lot of times some of my listings, barb will be the lender on whether it's with my people or your people coming in with different agents. Right when you have a good agent. We do a lot of background digging. We do a lot of proactive things to make sure that when we do list and we're under contract we don't run into that speed bump in the middle of a transaction.
Speaker 1:Right, we know who the true sellers are. That should be signing.
Speaker 2:Yeah, if there's a lien, if there's a tax lien on it, if there's money owed somewhere, if the subdivision was correct, if the survey was correct, Grandma's passed away.
Speaker 1:Has it went through probate? Does it need to go through probate?
Speaker 2:We've had that happen too. I went under contract with one with a seller that had a fucking terrible agent. We get halfway through it. Hey, guess what they can't sell? They didn't go through probate. Transaction stops usually cancels because six months later you can buy, or they can sell and you can buy it again and by then they're into their new house For sale by owner. Ignorance is not an excuse. Think if you get caught in that, Okay, let's talk about that. Think if you get caught in a non-disclosure thing. So you're for sale by owner. You're like you know what? I'm going to paint this mold in the basement. I use that a lot because what we see a lot. I'm going to paint this mold in the basement. It's black mold. Nobody will know. We'll sell this in six weeks. It'll be great. You sell it, buyers buy it. Moving on six weeks down the road, you get a letter from a lawyer saying guess what? You are mitigating or remediating mold in the basement at the cost of whatever it costs because, ignorance is not an excuse.
Speaker 2:You didn't disclose it, it's obvious. You covered it. You're paying for it. There's no getting around that, right, as a physical, you're like oh, I sold it, I'm off the hook. No, you're not. You are not Guess what. Welcome to the world of real estate. Um, okay, let's see. So we talked about why are they a physical. Did we talk about why are they a physical? Well, like in my example, your example was a good one, you know I needed a little extra money.
Speaker 1:I mean, I had three kids under six, so a little extra money not paying that, but at the end of the day it cost me money.
Speaker 3:Yeah, I was gonna say a lot of it it feels like to me from an outside perspective, as just a perception issue. You know, I think the the biggest pro that most people's perspective would see on doing a for sale by owner would be I want to keep more money, yep, but at the sacrifice of your own time and sanity Time is money, you just don't know all of the different facets of it, right, you know, from the perspective of you know me like seeing both sides of it, as a consumer and as, uh, someone who's you know in the industry and your wife was an- agent too.
Speaker 3:So, yeah, you got a little more knowledge than most you know, and so, uh, yeah, I think that's like the only real pro that people see and they just get so fixated on it is that they can, you know they'll save themselves some money. That's, but that's really just the perception of it, because the that's really not the case. If you spend months and months and months of your own time and energy doing this and still not selling the house, you've wasted a lot of money.
Speaker 2:Now let's talk about the stigma of coming on the market and going. Coming on the market, going on a contract, going back on the market, going on a contract okay when you see that as a consumer or a buyer, or I see that as an agent.
Speaker 2:It means there's something wrong, right in a instance of a fizz bowl. Think if they accepted a contract under fha. They don't know the fha safety and habitability requirements. Fha appraiser comes out for the buyer. Flags, flags the house six ways from Sunday, says we need railings, we need trip hazards fixed we need things painted we need a roof mechanicals are not sound. You have a leaky basement. This is all terrible. Fix it all.
Speaker 1:Well as a for sale by owner. They wouldn't know the FHA requirements.
Speaker 2:That's what I'm saying. So they don't know what FHA would require.
Speaker 1:So they're like yay, I got an offer, we'll accept.
Speaker 2:They'll go absolutely not, we're not fixing any of this stuff and they'll cancel the contract. They'll put it back on the market. Now everybody sees that Somebody else comes in with a VA loan. They're like, oh, va, this is different, this is going to be awesome. That VA appraiser comes in and says, hey, we have the same requirements as F, you're fucked. Goes back on the market. Now you have it on there twice.
Speaker 2:And this is just one example of how a Fizbo can seriously shoot themselves in the foot and they don't even know it. Right, because we can see all that stuff if they're on the MLS. Let's talk about a limited service listing. This is a tricky Fizbo. Okay, this is a Fizbo that's on the MLS, listed like a legit listing. You think it's a legit listing. You call the number to set up a showing and you get Dan, the owner.
Speaker 2:Limited service listing Okay, these exist. I run across them all the time. What an agent will do will say hey, you know what? We'll sign a limited service agreement. I will put this on the internet for you. You can use my MLS access. I'm going to charge you X, y, z amount of dollars. That's it. The rest is on you and the agent is now off the hook. They are on the MLS like a legit listing, but they're FSBO. Okay, what are they hiding? What's wrong? Why are they a frisbee? All that stuff comes. Why they're frisbee. All that stuff comes back into a into, you know focus when I see that limited service. But as a consumer, you guys don't get to see that. Okay, you don't get to see what we see that it's limited that it's a limited service.
Speaker 2:We see that on our side because we have access to a bunch more stuff than you guys do, right, so it's like a hidden Fizbo. Okay, now imagine that when you call and say, hey, bill, I want to go see this house, and I call him and it's Dan the owner, and he says you know what? I'm not working with agents, I'll only work directly with the buyers. I'll call the buyers and say, hey, it's a fizz bowl. Um, I can't be your agent. 95 of my people will say, fuck them, we're not going to look at it. You just lost a buyer, you just lost a contract, possible sale, because you didn't want to take the time and do everything correctly. Or you thought you're going to save yourself some money, right? I mean, yeah, fizz bowls and financing fails. Oh, so that was so. This was fha, va, usda, non-compliance. Ignorance is not an excuse no, I mean so what would you do?
Speaker 2:say you got under contract, you figured out their napkin contract, um, and the fha appraiser said all this stuff needs to be flagged. Who's telling the seller?
Speaker 1:well, I get to right, because there's no realtor, so I get to deal with the buyer, telling the seller Well, I get to right, because there's no realtor. So I get to deal with the buyer and the seller. But the seller doesn't really understand that. You know, like with FHA, that appraisal is going to stick with the property. For six months, right so you're going to have to fix it up. You have to Because if another FHA buyer comes along, well you'd have they still see it.
Speaker 2:I'm not gonna be able to accept fha financing so there's, but there's another thing, though you you already know there's this issue, so but usually if you're for sale by owner, you're just going to cover it up or move on or try and figure out a way around it. I don't need to follow these rules because I'm joe bob fucking. Whatever I can do what I want you know, that's ignorance, just doesn't work. Um, but what a lot of people don't know is that fha appraisal. It doesn't just stick with the lender, it is attached to the property, right? So?
Speaker 2:any lender through fha connections so any lender that goes in there or through that fha case number you tell oh we were talking about that today. You can't have a case number because of that seeHA case number. Oh, we were talking about that today. You can't have a case number because of this. See, you learn something new every day.
Speaker 1:The case number would be on the appraisal, which is locked through FHA, and so they'd be able to see what was called out.
Speaker 2:So if a FSBO says you know what we can accept, FHA, the last one just didn't know what they were doing.
Speaker 1:Blah, blah, blah, blah, blah they were doing blah blah, blah, blah blah. Yeah, it doesn't matter, they'll see.
Speaker 2:The appraisal was done and then they'll ask for a copy of it.
Speaker 1:Yep, and then they'll say this all needs to be repaired anyways, right yep, and so back to those repairs that maybe would be called out on that fha appraisal so the seller could take care of those repairs. Right, buyer could. But as a buyer I want to talk to buyers on these potential repairs. Sure, you may be like, you know what I can paint, because they love it, like it.
Speaker 1:I'll paint that shed, it's no problem. I'll scrape it and paint it, well, no problem. But are you really going to go buy paint for a house you don't own? And, as a seller, are you going to really let a buyer on a house you don't own? And, as a seller, are you gonna really let a buyer on your property? And what happens if they fall off the ladder?
Speaker 3:well, this actually happened to multiple of my friends they fell off ladders. No, they painted houses they didn't own painting painted houses that they didn't own okay which can be good. A couple of good friends of mine. Actually, they had to go and build an entire deck off the back because the deck that was there which wasn't structurally sound, in order to for them to qualify for fha financing. Okay, all right.
Speaker 3:They had to fix this whole back deck and repaint the house, but they had not bought the house yet. It ended up working out they did buy the house and everything was fine, but I could see that coming back to be a nightmare if it doesn't work out still we did that with remember the, the cold, cold spring people.
Speaker 2:Oh yeah, we had to go paint a shed yeah.
Speaker 1:And that's okay. I mean, I'm not saying you shouldn't do it, just be careful on what you're willing to take on, because anything can happen. Okay, people lose their job right before closing, right, and then all of a sudden, you've painted this house that you don't own.
Speaker 2:FHA. And then, all of a sudden, you, you painted this house that you don't own fha amendatory clause. Oh yeah, think about that. What if the seller had no idea what that was?
Speaker 1:right right.
Speaker 2:They come in, coach them through that right the appraisal comes in low and he says I don't care, you're buying it anyway.
Speaker 1:No, that's why we're not because under contract.
Speaker 2:So say, if a fizz bowl was selling a house, I was the buyer's agent. We come in, we're using FHA financing. We go paint their shed, we replace their deck. We do all this crap because this FISBO is just a jerk and doesn't want to deal with any of it. Right, appraisal comes in and it's short Say it's 10 grand short. Right, we just didn't make it. We call up and say hey, you know what? We're going to have to renegotiate? And the FSBO says absolutely not, you're still buying.
Speaker 1:So why don't you explain what FHA amendatory clause is?
Speaker 2:Okay. So we cite that FHA amendatory clause. We say, hey, in the verbiage of the contract it states if the appraisal is not up to the agreed amount price in the contract, we either renegotiate or cancel with no penalty. Welcome to the world of real estate, fizbo. And then they get their earnest money back and they get no penalty. They get their earnest money back.
Speaker 1:They get everything back.
Speaker 2:They will have paid for their appraisal, but they get their earnest money back. They get their earnest money back. Now think if you're the seller and they can get out of this legal binding contract.
Speaker 1:Because, once again, a purchase contract is a legal binding contract that you intend to move forward and perform on yep and this is where, except with fha, they have this clause in there that if it doesn't appraise, you can get out okay, now I want to talk about that too.
Speaker 2:So say you are a fizzbow, say cody's wife is a fizzbow and cody or I'm sorry, cody's a fizzbow and his wife is an ex-real estate agent. Now I I heard from her this weekend. She is probably Pine County's number one agent. She just doesn't have a license. So you can quote me on that if you want. But say she knows her shit, so Cody knows his shit by default.
Speaker 2:A buyer comes in in a Fizbo transaction unrepresented and Cody knows what's in this contract, he knows the verbiage. He is going to run that buyer through the dirt. The buyer is going to say, hey, I want to cancel because of this. No, you're not. Hey, I want to cancel because of that. No, you're not, you're contractually fucked.
Speaker 2:It goes both ways as a buyer when you walk into a Fizbo. If you have a educated Fizbo or say it was me, I don't have my license, I was selling my house and a buyer came in and they're going to try and you know, I don't know, take me to the cleaners. However, you see it, take all my money, I'm going to run you through the dirt, right. Same goes on the other way. If I'm a buyer's representative, and a Fizbo is uneducated. Ignorance is no excuse. I representative and a fizz bowl is uneducated. Ignorance is no excuse. I'm going to pick you apart, that's my job. So I mean you have to be careful on both sides, because some fizz bowls are smart, some fizz bowls are just ex-agents. They're doing it right and it's fine. Don't get me wrong. There's that little one percent that are just fine.
Speaker 2:There are, you know they're not all bad, but 90 of them, it's a what the fuck it really is. Let's see what Fizbo's get wrong Pricing. Let's talk about Fizbo pricing.
Speaker 3:Where do for sale by owners get their pricing from Zillow? Zillow, that's actually on here, zillow and their Drunk Uncle, bob Drunk.
Speaker 2:Uncle Bob and nice.
Speaker 3:The Zestimate.
Speaker 2:Nice kickback to drunk Uncle Bob there. Buddy, nice, nice, nice, a little callback.
Speaker 1:Yep, maybe their value at the county.
Speaker 2:Or their assessed value. Okay, and that's. If they do that, they're just shooting themselves in the foot.
Speaker 3:Right, like the tax evaluation of it.
Speaker 2:That's like four years behind. I mean yeah, no, but pricing Say you're a Fizbo and you get the pricing wrong. Okay, here we come back into like FHA mandatory clauses, appraisals, things like that, because if you're a Fizbo, you put it at 300 grand, it's only worth 200. You get the champagne glasses like it, love it, can't live without it. Got it, got it, got. It Comes in and they want to buy it. You guys go through all the paces, get everything figured out. Appraisal comes in, absolutely not. Can't sell it Right Now. You have planned for this money that you're going to get that you're not. Your house is going back on the market. You got something, what do you got?
Speaker 1:Could be the reverse. What happens if they're like well, the county says it's worth this, so we'll list it. At that, they could list it too low, it too low, too low. So now they've lost money as well.
Speaker 2:Okay. So as a buyer, when you get an appraisal on a property that's too low, do you tell the seller?
Speaker 1:No.
Speaker 2:Absolutely not. Why would you Because?
Speaker 1:the appraisal is in the lender's name and the buyer the buyer, because that's their report. So the FSBO wouldn't know.
Speaker 2:So say they listed their house for $300,000. We got an appraisal at 500, that's 200 000 in instant equity. Okay, we actually had one.
Speaker 3:We had a 40 000 instant equity we just kept don't even move in, just relist. It was fucking amazing.
Speaker 2:We were all like high five and it was great and we call the agent. They're like how'd the appraisal go? It was good, moving forward. That's all they get to know yeah, right, and she can now refinance next year and get out of her pI and all the stuff she wants to because of that appraisal the seller doesn't get to know that so think about that.
Speaker 3:The seller would be super mad too, and we're not hiding there's always situations where it's like, hey, we just need to sell this fast we need to get rid of it. I don't care how much we make. It's a divorce, it's a quick sale it's a whatever.
Speaker 3:We run into it all the time so there's certain situations where the people just don't care, you know. So it may be a better deal just because they're not out for the money, right, I just need to get rid of the property yeah, yep, um, how about assessments and fizz bows?
Speaker 2:fizz bows and their, their ignorance of assessments?
Speaker 3:well yeah do you know what assessment is? No, I know what the word assessment means.
Speaker 2:Okay, so if you're in a real estate transaction, most of the contracts will state that if there is assessment or a pending assessment, it will be either negotiated one side pays, the other side pays or it will be prorated one side pays up up to date, next side pays up to the next date. Right, and it's also stated in there that if any new assessments show up, that it will be negotiated prior to closing because the seller will have to notify the buyer. Okay, assessments are big. Assessments can be tens of thousands of dollars. Now, if you're in a fizzbow situation, okay, and you sign a contract and none of that stuff's in there and they get an assessment that's pending, that you didn't know about, it could raise your payment two, three hundred bucks a month, depending on what it is. Yeah, and it'll show up in title work. It'll show up in title work and then, because that is part of their debt to income, you could be also not qualified. Not qualified because that assessment that the FISBO didn't know about or was hiding or assumed that they could get around.
Speaker 1:I mean a perfect example of an assessment. The road is being redone.
Speaker 2:Yeah, I was just curious, same thing.
Speaker 1:And the county or the city or whomever sends you out this assessment notice that your property is going to be assessed five grand. As a buyer, you'd want to know that and you'd want the seller to potentially chip in or split it with you or pay for it.
Speaker 2:Think about that. So if you're Fizbo on the sell side and you have William Jarkowski realtor, gri, on the other side, okay, negotiating, and I put in my contract, say I've done my homework and I know there's a $15,000 assessment that's being paid in payments from the seller. Okay, I know it, that's being paid in payments from the seller. I know it. Fsbo does not, because in all their infinite knowledge of putting their stuff on Facebook or Instagram or whatever they're putting out on there, they didn't do any homework. I put in there that any assessments are going to be paid by the seller. Any new assessments are going to be paid by the seller. Most sellers will zip through their contract because it's like 37 pages of what the fuck? At closing there's going to be a fifteen thousand dollar deduction from the seller's proceeds to pay that assessment welcome to the world of real estate bitches.
Speaker 2:Okay, and at closing they're gonna go. What? What is this? This is representation. I did my homework, you did not you don't get that, you don't get that you don't get it, you just get contractually fucked. It goes both ways.
Speaker 3:Hear me out, Hear me out. You do something like that and now you just saved $15,000. All of a sudden, basically, that pays for your commission.
Speaker 2:It pays the commission Right there.
Speaker 3:Little things like that can really save you a lot of time and money.
Speaker 2:What really kills us is especially Barbara and I, when we do transactions. It's super smooth. We get through all the speed bumps beforehand. When mine are listed, they're ready, okay. Their septic cert's done. Their truth in housing is done. Whatever point of sale requirements are done, we've done and only report. We check for liens, encumbrances, we check if it needs probate. We do all this stuff okay before it's listed. So when we have an offer we don't have to worry about that stuff. We know if there's an assessment, we know if we have to negotiate the assessment. We know all that stuff.
Speaker 1:We know if it's manufactured home, if we need to have an engineer cert.
Speaker 2:All that yeah, engineer cert. Affidavit of affixation. I actually said that without stumbling. That's a fucking tough one to say, uh, but where was I going with that? What were we on?
Speaker 1:well, we know it all. Oh, so we we make it look super smooth.
Speaker 2:So what? What kills us there?
Speaker 1:I wouldn't say make it look super smooth it is, it is super smooth, but what people see is that it was simple oh, it was so simple.
Speaker 2:Yeah, imagine if you try and do that yourself and you miss well, because we do it day in and day out.
Speaker 3:Yeah, but that's what I'm saying so people think they can do it themselves we.
Speaker 2:It's all just simple.
Speaker 1:That's fucking fine, it's just you see how easy they did it. It's crazy, but the thing is is that this is our stuff, so like, for example, if a tax accountant wanted to do a for sale by owner. Well, I don't want to do my own taxes, I go to the professional for that right, plumbers, let the plumbers do the plumbing.
Speaker 2:Electrical do the electrical. Let smart people do the smart people stuff.
Speaker 1:Well, let them be in their lane to help us with this.
Speaker 2:We know a guy that says that Let the smart people figure it out. We all do. We all know who that guy is. But what I'm saying? There is the for sale by owner. Some of them say they bought a house with me and they seen how smooth it went Like holy smokes, this was smooth, it was great. I could do this myself when I sell. Now think if they missed that assessment. Think if they missed a point of sale. Think if they missed. Maybe they missed that the buyer wants them to pay closing costs in the contract and they signed it. That's another eight $9,000 they didn't know about. It's in the contract. You're paying for it, okay. So just because it looks easy or we make it look easy, doesn't mean it took us a long fucking time to make it look this easy. How many is that? It's like five, right?
Speaker 1:It's where we're at. Yeah, I think we're at 25. No, it can't be 25.
Speaker 2:Come on, I've been doing really good with the profanity man I really have. Honestly, that's all I got.
Speaker 1:It's a work in progress, Bill.
Speaker 2:Oh, lender stuff. This was the Barb's time to shine. We glazed over this. What if somebody sends you something that you don't need? That is detrimental to the transaction.
Speaker 1:Do, don't need that is detrimental to the transaction.
Speaker 2:Do you have to use it? Well, yes, I have to disclose anything that's provided to me. You have to disclose. So say, you're a fizzbow and something comes in and you decided that you wanted to let the lender know about an assessment.
Speaker 2:Okay, oh, you're going to find it anyways but, you would have to tell them, right, you'd have to tell. I mean we always say don't send Barb anything unless she asks for it. Yeah, seriously, I mean. So what happens if they send an unrequired doc that flags? Could it be a? It could be a deal breaker. It could be a deal breaker, right?
Speaker 1:Because they don't know, Right, I really want to swear they don't know what they're doing. Right. Thanks for tuning into keys and credit, where the only thing inflated isn't the market, it's your knowledge. If you found this helpful, share it with a friend or leave us a review. It helps more than you think, more than you can imagine.