Buying a home for sale by owner

When the home is for sale by owner (FSBO), this means that the homeowner is selling the home without the help of a real estate agent. The most common reason someone chooses to sell their home on their own is because they want to save money on broker fees. By selling the house without an agent, they do not have to pay the agent’s commission.

Buying an FSBO home has advantages and disadvantages, but knowing more about the process can help you decide if it’s the right option for you. Whether you’re specifically looking for a FSBO home or simply fell in love with a home that was for sale by the owner, follow these guidelines when buying an FSBO property.

Buying a home for sale by owner

Buying a FSBO home requires knowledge of the home buying process and attention to detail. A home for sale may allow its owner more room in negotiating prices. In 2020, a typical FSBO sold for $260,000, compared to $318,000 for agent-assisted sales, according to the National Association of Realtors.

While the seller may be responsible for the broker’s fee, the fee is usually factored into the selling price of the home. Real estate agents typically earn a commission of 5 to 6 percent based on the final sale price of the home – this amount is divided equally between the seller’s agent and the buyer’s agent. Selling for $250,000, 6 percent is $15,000. But with only a buyer agent, the commission fee would be half that: 3 percent, or $7,500.

But buying an FSBO home also comes with some risks that buyers won’t face when buying a traditional listing. When a seller uses an agent, that agent helps prepare the listing for sale. This includes critical steps such as determining a price list based on research and knowledge of the local market, completing all necessary paperwork and disclosure forms, and drafting an accurate list. An owner who sells without this professional help may miss some steps. With an FSBO home, the buyer must be vigilant to make sure all of these things are completed correctly and legally.

Can You Buy a FSBO Home Without a Buyer’s Agent?

FSBO House does not have a registration agent involved in this process, but you may be wondering if you need your own to purchase it. Buyers are not required to hire a real estate agent, but it is a good idea. With no agents at either end of the transaction, it would be very easy to miss the steps in the process.

The buyer’s agent is there to help protect your best interests. “It’s helpful for buyers to have an audited and licensed realtor,” says Keri Rizzi, realtor at HomeSmart Homes and Estates in White Plains, New York. “With a realtor to guide them through the process, buyers can rest assured that they are taking the appropriate steps to ensure they are treated as honestly and fairly as possible.”

However, you will need to make sure the seller is willing to work with a buyer who has a real estate agent, as the agent means that commission must be paid. Ask your agent to contact the seller to find out. If they are willing to work with you, ask the seller to sign a fee agreement outlining how much your agent will be paid and who will pay it.

If you want to buy an FSBO home without using a realtor, Rizzi recommends doing your research and following these steps:

  • Pull data from businesses close to home with the same size, style, school district, and price range.
  • Visit the town hall in person or online and file a FOIL request for all miscellaneous documents, deeds, plans, permits, surveys, and reports on file for the home.
  • Visit FEMA.gov to check if the property resides in a flood zone.
  • Look at the current status of seller’s mortgage payments and taxes to see if there are any arrears yet.
  • Ask the current ownership status of the property – whether the sellers are in the middle of a divorce, if the property is a property sale or if anyone else can claim their ownership.
  • Perform a thorough inspection of the entire home, inside and out, including testing the water, well and sewage.

Pros and Cons of Buying FSBO

There are some advantages to buying a home for sale by owner. However, not everything is better in buying a FSBO home.

Advantages

  • You can save time by avoiding having an extra person in the communication process.
  • You may be able to pay a lower price for the house.
  • You may face less competition from other buyers compared to a traditional listing. “Because FSBOs tend to sell with very limited marketing, and sometimes are only posted on one website, fewer buyers may be aware of these properties in the market,” says Rizzi.

Negatives

  • A seller who is not working with an experienced agent in the local market may have unrealistic expectations.
  • Without a seller’s agent to compile all relevant information about the home, the buyer will likely have to do more research and due diligence.
  • There is a greater potential for legal problems. If the seller is not familiar with the intricacies of the home buying process, you may have difficulty completing the transaction properly.

How to buy a house for sale by owner

1. Get informed consent

Getting pre-approved for a mortgage means that the lender has found you suitable for a home loan against the price of the house. Pre-approval helps you stand out as a buyer and lets the seller know that you meet the financial requirements for the purchase.

2. Consider the buyer’s agent

The buyer’s agent works with the seller on your behalf. Their job is to make sure that the home buying process is in your best interest. Find an agent to tap into, and don’t be afraid to interview several before making a decision.

3. Find a home

If you work with a buyer’s agent, they will talk to you about your preferences for a home and help you find matching listings. Other than that, you can search online or even drive around the area you’re interested in to search for homes.

4. Make an offer

Once you find the home you want, you will need to make an offer. Look for similar listings in the area to determine if you should bid above or below the list price.

5. Emergency election

You will need to decide if you want to include any contingencies in your proposal. An emergency allows you to back out of a home sale if the criteria are not met. For example, many offers contain an emergency home inspection. One of the common contingencies with FSBO sales is a Comprehensive Loss Insurance Interchange (CLUE) report. This report details up to seven years of property insurance claims. A CLUE report can let you know about issues that could cause problems later, such as flooding or damage to your foundation.

6. Apply for real estate financing

Even if you’ve been pre-approved, you’ll need to formally apply for a mortgage—and formal approval—as soon as the seller accepts your offer.

7. Get a home inspection

If the home inspection is part of your emergency offer, set up the screening as soon as your offer is accepted. Your agent can help you arrange this.

8. Lock in the house

Once everything is fine, it’s finally time to lock down the house. You will want to work with a title agency to help transfer the title and complete the closing process. And don’t forget to be prepared to close costs.

Frequently Asked Questions

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