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What Does ‘For Sale By Owner’ Mean: A Primer

If you’ve been house hunting for a while, chances are you’ve encountered at least one or two homes for sale with a “FSBO” sign in the yard. FSBO, or “for sale by owner” is exactly what it sounds like, a home that’s being sold directly by the owners — as in, they aren’t represented by a real estate agent.

And while these types of sales are less common, you may still encounter them in your home search. So what’s the difference between this type of sale and more traditional ones? When you get down to the details, what does for sale by owner mean?

Here’s everything you need to know before jumping into a FSBO deal.

What Makes a FSBO Home Different?

On the whole, FSBO deals are very similar to typical home sales. You’ll start with a viewing, make an offer, get the necessary inspections and paperwork completed and close the deal.

So what makes them different?

Said John Gulch, Realtor and founder of The Gulch Group: “When purchasing a home listed FSBO you’ll be negotiating and dealing directly with the owner of the property rather than through an agent representing the owner,” he says. “Commonly this makes the transaction far more emotional and personal.”

While real estate agents often act as an emotional buffer between sellers and buyers, deals without them can start to become a negotiation nightmare. Many sellers believe their homes are worth more than they actually are. Plus, it can also be harder to work with sellers to get things fixed on the property — especially since these requests can be taken more personally without the involvement of a seller’s agent.

Another thing to keep in mind about FSBO homes is that the seller doesn’t really owe you anything from a legal standpoint.

“It’s critical to keep in mind that the seller has no duty to you whatsoever beyond their obligation to follow the letter of the law,” says Gulch. While real estate agents are bound by their local and national licensing boards to certain ethical standards, sellers are not. That means that while a seller’s agent would be legally obligated to share critical details about a home’s history, including things like if it’s ever been flooded, or the scene of a crime, a seller is not obliged to disclose such information.

This is one reason sellers might opt for a FSBO sale. But more often, they just don’t want to pay a real estate agent.

Why You’ll Want an Agent (Even if They Don’t Have One)

Just because your seller isn’t working with a real estate agent, doesn’t mean you should follow suit. In fact, their lack of professional expertise is perhaps the best reason to make sure you have a pro on your team.

“This is where having a buyer’s agent is a good thing,” says Brittany Hovsepian, owner of The Expert Home Buyers. “Your agent will still make sure that all of the required steps get done when they need to. If you don’t work with an agent, it’ll be up to you to be in talks with your loan advisor, and get all the necessary inspections ordered on time.”

Unless you know your way around all the details of buying a home, having an agent will be helpful. Just make sure you know in advance who’s going to pay them.

Ask Early About Buyer Agent Compensation

Since sellers are typically responsible for paying buyer agent fees, with a FSBO it’s less clear. While your budget-minded seller might be reluctant at first to pay your agent’s commission, they may change their mind if they know it’s their best (or only) shot at making a sale.

“If you’re not sure if the seller is willing to pay a buyers’ agent, be sure to ask the seller early in the process — and even better, get it in writing (like email or text),” says real estate agent Leize Gaillard. By asking early, you’ll be able to loop your agent into the process from the beginning. More importantly, you’ll have a game plan in place if the seller says no.

“If the seller is not offering compensation, but you still want an agent to represent you, then you can either offer to pay your buyer’s agent yourself or negotiate a deal with the seller that’s contingent on buyer agent compensation,” she says.

Don’t Expect a FSBO to Be a Steal

One of the biggest myths about FSBO homes is that they can be a good way to score a low price on a house. After all, if sellers aren’t working with an agent, how will they know what their place is worth?

This is true, but not in the ways you’d expect. As mentioned, sellers often overprice their homes (rather than undervalue them) because their emotional attachment can lead them to believe their home is worth more than it is.

“Many buyers think that a FSBO may be a way to get a better deal, but this is often not the case,” says Gaillard. “Sellers primarily sell homes themselves in order to save money, not necessarily to pass savings on to a prospective buyer.”

It might also be the case that your seller was originally planning on working with an agent, but couldn’t come to an agreement on the value of the home.

“Many FSBO sellers are listed as such because they’re asking a price that no good agent would even bother listing the home for,” says Gulch. “It’s rare indeed to find a good deal on a FSBO. But as long as the buyer is represented by a good agent there’s nothing to be afraid of — it’s just unlikely you’ll get some kind of deal on the home.”

Closing the Deal on a FSBO

When it comes time to close on your FSBO deal, you should be prepared to shoulder most (if not all) of the burden. Writing contracts, keeping track of appraisals and inspections, and even hiring the title company are all things that might fall on the buyer — especially if you choose to forgo working with a real estate agent.

Sometimes a seller might have a preference for certain stipulations, as in a particular title company. But for the most part, making sure all the I’s are dotted and T’s are crossed will be up to the buyer.

Whether you work with an agent or not, the closing process is pretty similar in a FSBO to any other deal. Depending on how you plan to pay for the home (with a lender or in cash) there will be more or less paperwork to complete and sign. Lenders often make certain requirements of buyers, such as appraisals and inspections, which the buyer will be responsible for tracking.

If you’re paying in cash, you may not be required to do these things, but it’s a good idea to do them anyway. After all, skipping steps might feel like getting to the finish line faster, but there’s a reason these practices are in place— and often, it’s to protect the buyer.

FROM THE HOME BUYING FORUM

The Bottom Line with FSBOs

Buying a FSBO home does break from tradition in quite a few ways — mainly, how negotiations will be handled. Since most sellers opt to work with a real estate agent, you’re far more likely to find a home you like that’s been listed in all the typical channels. But if you do happen to drive by a drop-dead gorgeous house with a FSBO sign out front?

Just be prepared. Get a feel for your seller early on and ask an experienced agent to get involved. Make sure you know who will be paying them, and keep your expectations in check. While you may not score the deal of a century on a FSBO home, that doesn’t mean it can’t still be a worthy investment — especially if you know what to expect from the outset.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Student Loan Consolidation Guide

Americans owe $1.5 trillion in student loan debt. The average graduate comes out of school with about $30,000 debt.

With a legal, medical, or other advanced degree, the debt can could easily hit $100,000-200,000.

Paying that off is not easy for anyone.

Loan consolidations can make things easier. But they also have risks.

Here’s a guide to what student loan consolidation is, how it works for both federal and private loans, and which student loan companies offer the best deals. 

What Is Student Loan Consolidation?

The first thing to know about student loan consolidation is that there are two main types depending on what kind of loans you have, federal or private.

If you have mostly private loans, you’ll probably see student loan consolidation referred to as “refinancing.” There are a lot of potential benefits to refinancing your private student loans, including reducing interest rates and combining several different loans from various lenders into one manageable payment.

Federal student loan consolidation is a bit different, these loan consolidation programs only accept federal loans. In other words, you can’t put private loans into a federal loan consolidation program.

Federal loan consolidation is handled by the U.S. Department of Education. Additionally, the goal of federal loan consolidation isn’t always reduced interest rates.

While consolidating your federal loans may lower your monthly payments, you might end up paying a bit more in interest over time. Consolidating your federal loans might also help you qualify for certain federal loan repayment programs.

What If You Have Federal and Private Student Loans?

Many borrowers graduate with a combination of federal and private student loans. In this case, you have the option of combining all your loans, including those serviced by the federal government, into a single private loan.

The federal government only offers consolidation for federal loans. While some private lenders will let you consolidate both federal and private loans.

In a nutshell, you have two options:

  • Consolidate all your loans, federal and private, through a private lender
  • Consolidate your federal loans through the Department of Education and your private loans through a private lender

It’s also important to note that transferring your federal loans to a private lender could mean waiving your right to certain borrower protections and programs under federal loan. Most notably, you might lose access to federal student loan forgiveness programs or income-based repayment programs offered exclusively by the federal government. 

How Private Student Loan Consolidation Works

If you have multiple private student loans serviced by different lenders, refinancing could help you reduce your overall interest as well as streamline the repayment process by moving all your loans to a single lender.

Applying for private student loan refinancing is a lot like applying for any other type of loan or even a credit card. When deciding whether to approve you and what interest rate to offer, lenders will consider the following information:

  • Credit score
  • Income
  • Employment
  • Education, including whether you’re still in school or have already graduated 

Your credit score is a big factor in the refinancing process. The higher your credit score, the better terms and conditions, including interest, you can expect to receive. You could get a much better interest rate if your credit score has improved a lot since you originally took out the loans. In this case, refinancing is worth considering and it’ll likely work in your favor.

Once you’re approved for private loan refinancing, your lender will pay off your individual loans. From there, you simply make a single monthly payment to your new lender. 

How Federal Student Loan Consolidation Works

Unlike private lenders, the federal government doesn’t require a certain credit score to qualify for federal student loan consolidation.

If you consolidate, you’ll also get the peace of mind of making just one payment, and you might even end up paying less each month. In some cases, you might be required to consolidate if you want to qualify for certain federal student loan forgiveness programs or income-based repayment programs offered solely for federal loans.

Keep in mind, however, that consolidating federal student loans won’t necessarily reduce your interest. While it can lower your monthly payment, you’ll probably pay more interest in the long run.

Federal consolidation loans also offer a fixed interest rate, which can be reassuring. The government will calculate your interest by averaging the interest rates of all your existing federal loans and then rounding up by one-eighth of 1 percent. For example, if the average of your current interest rates is 6.15 percent, your consolidation interest rate will be 6.25 percent. 

It’s also worth noting that the federal government never charges a fee to consolidate federal student loans. Be wary of any third party companies that charge to consolidate federal loans.  

The Benefits of Consolidating Your Student Loans

Refinancing or consolidating your student loans can offer a number of benefits.

Simplified Repayment

If you have a bunch of different loans, you might feel overwhelmed by the task of keeping track of them all.

When you consolidate, you only have to worry about one payment. Maybe two if you decide to keep your federal and private loans separate. This can help you avoid late or missed payments, which will hurt your credit score.  

Lower Interest Rates

Consolidating or refinancing can lower your interest rate and maybe even your monthly payment. You might also be able to extend your repayment period, which can reduce how much you have to pay each month.

This can free up some resources so you can focus on other financial goals rather than dedicating a large portion of your income to your student loans. 

Avoid Default   

About 1 million student loan borrowers default each year, and some estimates predict that 40 percent of all borrowers will default by 2023.

Defaulting on your student loans can have serious consequences. For one thing, student loans are one of the few debts that can’t be discharged in bankruptcy. If you default, your lender could pursue collection or even a court judgment against you. Armed with a judgment, they can garnish your wages or seize your tax refund.

Defaulting on a loan will also sink your credit score. This can have a domino effect on other areas of your financial life. You might find it difficult to get a credit card, buy a car, rent an apartment, or qualify for a home loan. In some cases, a bad credit history can even hurt your job prospects, as many employers look at candidates’ credit scores during the hiring process. If finances are really tight, it could be worth paying a larger amount over time in exchange for a lower monthly payment right now. That’s definitely a better alternative than defaulting.

The Best Student Loan Consolidation Companies

You have a lot of options when it comes to student loan consolidation. The following lenders consistently rank among the top choices when it comes to student loan refinancing. 

1. Earnest

In business since 2013, Earnest is known for its flexible repayment terms, including the option to extend the repayment period up to 20 years. You can also make extra payments with no penalty, and Earnest doesn’t charge fees for late payments.

One of the biggest drawbacks, however, is that Earnest doesn’t accept borrowers who need a co-signer. If you can’t qualify on your own, you’ll have to work with another lender.

Pros:

  • No hard pulls on your credit, so you can apply without worrying about hurting your credit score
  • Loan repayment periods up to 20 years, which is longer than other lenders
  • Variable interest rates as low as 1.89%

Cons:

  • No co-signer option
  • Not available in Delaware, Kentucky, or Nevada
  • Variable interest option not available in Alaska, Illinois, Minnesota, New Hampshire, Ohio, Tennessee, or Texas

Earnest is owned by Navient, which has come under scrutiny in recent years for deceptive student loan practices. The student loan servicer was sued in 2017 by the Consumer Financial Protection Bureau.

Overall, Earnest receives positive reviews from borrowers, making it difficult to say if Navient’s legal issues have spilled over to Earnest.    

2. SoFi

SoFi was the first private lender to allow borrowers to consolidate both federal and private loans. The company also offers refinancing loans to individuals with an associate’s degree, whereas most lenders require a bachelor’s degree.

Pros:

  • No hard credit inquiries
  • Refinance private and federal loans
  • Parents can transfer parent PLUS loans to their children

Cons:

  • No co-signer option
  • Minimum loan amount is $5,000

SoFi has earned an impressive 4 out of 5 stars out of more than 2,300 reviews on Trustpilot, making it worth a look if you’re considering refinancing your student loans. 

3. Education Loan Finance

Education Loan Finance is a great option for folks that increased their credit score since graduating, have flexibility with repayment, and want a better rate at a well-respected company. You’ll get paired with a loan advisor during your application and the Education Loan Finance has some of the best customer reviews out there.  

Pros:

  • Great customer service reputation
  • Great customer reviews, 4.9 out of 5 stars on Trustpilot
  • Soft credit check when you apply
  • You’ll be assigned a personal loan advisor to walk you through the whole process

Cons: 

  • No postponements if you return to school
  • Limited options for repayments
  • Must have graduated with at least a bachelor’s degree

Check Those Fees

If you’re drowning in student loans and feel like you’re barely managing to keep your head above water, refinancing or consolidating might help you breathe easier by lowering your interest rate and streamlining your payments.

Before you apply, however, do your homework and check multiple lenders. Not only do you want the best rate, you want to avoid unnecessary fees. Read the fine print and make sure there aren’t any hidden fees before you agree to consolidate.

Student Loan Consolidation Guide is a post from: I Will Teach You To Be Rich.