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Purchase, Homebuying 101, First time Homebuyer, Finding a Home

Buying a House For Sale by Owner (FSBO)

What You'll Learn: What You Need to Know and What to Avoid about Buying a House for Sale by Owner without a Realtor.

EXPECTED READ TIME: 9 MINUTES

Buying a House For Sale by Owner (FSBO)

When you’re shopping for a new home, you might come across For Sale by Owner (FSBO) listings. Buying a house for sale by owner without a realtor has its pros and cons for both the seller and buyer. Today we’ll discuss what you need to know and what to avoid. 

Benefits of Selling FSBO

The main reason a seller wants to sell their property themselves without real estate agents is to save money. Sellers typically pay 6% in real estate commissions. That comes out of their profit. So, for a $300,000 home — they’d be paying $18,000 in commissions. Of, course some realtors offer a lower commission structure, but 6% is the norm. 

Sometimes a seller already has a buyer lined up, and they feel they don’t need an agent. Additionally, savvy sellers with real estate experience under their belt might not think that they need the assistance of a realtor. And of course, there could be some circumstances where the seller owes almost as much or more than the property is worth, so they need to save in any way they can. 

How to Buy a House For Sale By Owner

As you’re searching for homes online or driving through neighborhoods, you’ll see some FSBO listings. If you already have a real estate agent, you can ask them for their assistance, but often agents aren’t too excited to work on a FSBO because it means more work for them without additional compensation. And keep in mind, with a FSBO — you’ll be paying their real estate commission, not the seller. Since the typical real estate commission is 6% and is split between the buyers’ and seller’s agent, you can expect to pay 3% for a buyers’ agent. So, for a $300,000 home, you’d pay $9,000. That may or may not be worth it to you. You will also need to determine if the seller is willing to work with a buyers’ agent. Some are, and some aren’t. 

Your other option is to buy the property directly from the seller without an agent. The steps to buying a house for sale by the owner are similar to buying one using a real estate agent. But without an agent — you’ll have additional work to do. 

More Tips on Buying a FSBO House

In a purchase, the lender and title company work closely together. But in most cases, they won’t review the contract for you. For that, you’ll need an attorney. Make sure whatever you want is written in the contract. For example, if you're going to keep any appliances like the refrigerator or stove, list them in the contract. Don’t worry about asking for too much, and make sure whatever you want is in writing. Protect your earnest moneyby making sure you can get it back if you’re not satisfied with the inspection results or if you can’t get financing.  

Your lender will need:

  • A sales contract signed by all parties
  • Appraisal — the lender will  order that
  • Title company contact data from the seller
  • Homeowner insurance contact data

Regarding the home inspection — although the lender doesn’t require it, it’s wise to get one.  

Your lender will order the, appraisal, and get the property tax information for you. It is the buyer’s responsibility to request and schedule a home inspection. Ensure you note any contract deadlines for inspections, appraisal, or finance contingencies, and don’t miss them. 

Benefits of Buying a Home For Sale By Owner 

One of the biggest benefits of buying a home directly from a seller is that the price should be lower since they’re saving on commissions. 

Additionally, because there are no agents involved — you’ll be dealing directly with the seller. That can be either an advantage or disadvantage depending on the personalities involved. With real estate agents, they keep the buyers and sellers apart while they do the negotiating. But with a FSBO, you will be dealing directly with the seller. 

With this additional interaction, you should find out more information about the property, neighbors, and neighborhood than you would have using an agent. 

There can also be less competition for FSBOs because real estate agents most likely won’t show these properties to their clients. 

Sale By Owner Online Listings

Most major property listing websites have a section for FSBO. However, some don’t make these listings very easy to find. 

  • Zillow FSBO — this is the most user-friendly site for finding FSBOs. This information is also used on the Trulia website because they are part of the same company – The Zillow Group. 
  • Redfin — to find the for sale by owner listings use the “listing type” functionality to filter through listings.  
  • Trulia’s FSBOs — search the town you’re interested in. You can find the filter under “More.” 
  • FSBO.com — this is another website to check. 
  • Local Craigslist and Facebook Marketplace also have FSBO listings but beware of scams.  

Disadvantages of Buying a FSBO

As a buyer, if you choose to use a real estate agent, you will have to pay for their commission. So that would be an extra expense for you. If you decide not to pay for an agent’s expertise, the due diligence will fall on your shoulders, so you’ll have extra work to do.

Sentimental value can be a problem, too, especially if it was a family home. The seller can have a sentimental attachment to the property and feel like it’s worth more than it is. 

If you don’t use a buyers’ agent, it’s wise to get an attorney to look over your real estate sales contract. Although the fee should be nominal, you’ll have to pay for that. The other point to keep in mind is the seller may not be experienced. That’s where using real estate agents has its advantages.  

FSBOs – What to Avoid

The first thing you’ll want to do is protect your earnest money deposit. It should be given to a neutral third party like a title or escrow company rather than directly to the seller. You want to make sure that you can get your earnest money back if the inspections come back bad or if you can’t get financing. 

Sometimes a seller will price their property higher than it’s worth and be unwilling to come down. In that case, a lender will only lend on the actual market value – not an over-inflated price. You may just have to walk away from the deal and look for another property in that situation. 

Buying a home doesn’t have to be complicated, but it can be. So, if you get stuck – get help. Ask a friend who has real estate experience for guidance, or hire an attorney. And when it comes to the paperwork, many title companies are willing to help out or give you some tips. 

Buying a home directly from the owner can work well for all parties involved, so don’t avoid looking at FSBOs. But make sure to do your due diligence. 

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