Buying a House for Sale by Owner
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Most home sellers work with real estate agents to list and market their properties and negotiate with buyers. But some sellers skip hiring an agent and list their homes "for sale by owner," or FSBO (pronounced "fizbo").
Buying a home for sale by owner means you, or you and your agent, will deal with the homeowner directly rather than through a listing agent who represents the property owner.
About 7% of homes sold between July 2022 and June 2023 were FSBO sales, according to a National Association of Realtors (NAR) 2023 survey.
Pros and cons of buying FSBO homes
Pros
Including FSBO properties in your search will increase the odds of finding a suitable home, a considerable plus in today's tight market in which buyers far outnumber homes for sale.
You could get a bargain. The median sale price for FSBO homes was $310,000, compared with $405,000 for homes sold with an agent's help, according to the NAR's survey.
Cons
A FSBO seller might be reluctant to pay your agent's commission.
FSBO sellers may not have any real estate expertise, which could put more burden on you and your agent to make sure everything is done correctly.
Working with a buyer's agent to purchase a FSBO home
You can still have your own agent when buying a FSBO home. A buyer's agent guides you through the homebuying process, from finding suitable properties in your price range to negotiating on your behalf with sellers to closing. Besides handling technical details, an agent can also provide some healthy perspective about the local market.
Following a recent legal settlement with the NAR, you now have to sign a contract with your buyer’s agent to determine how they get paid. Historically, the seller paid the commissions for the buyer’s and listing agents by splitting 5-6% of the home sale price. But now, buyers can negotiate those terms: For example, the buyer’s agent might charge a flat fee or an hourly rate instead of the traditional percentage. Buyers can also request that sellers pay their agent via a seller’s concession.
FSBO sellers don't pay for a listing agent — a major cost-saving perk of going this route. When making an offer on a FSBO property, you’ll have to negotiate who pays your buyer’s agent. Some FSBO sellers may be unaware of the buyer’s agent commission or balk at paying it. So when buying a FSBO property, be prepared to negotiate or pay the buyer’s agent commission yourself.
Buying a FSBO home on your own
You can buy a home without a real estate agent and deal directly with a seller — as long as you haven't signed an agreement with a buyer's agent.
But unless you're well versed in real estate contract terms, contingencies, disclosure requirements and the myriad other technicalities of a real estate transaction, it's a good idea to have an agent in your corner.
A home could be the biggest purchase you ever make, and you'll be dealing with a seller who may not have any real estate experience. It's critical that things are done correctly.
Here are some of the homebuying steps you'll need to handle if you choose not to hire an agent:
Check the prices of recent comparable home sales to evaluate the asking price.
Contact the seller directly to see the home.
Decide how much you're willing to pay and what contingencies to include in an offer.
Prepare a written offer, and negotiate with the seller.
Hire a home inspector to evaluate the home's condition.
Make sure the purchase agreement is drawn up correctly.
You may be required to hire a real estate attorney, depending on state law. But it's a good idea anyway when working without an agent.
» MORE: How to make an offer on a house
Where to find FSBO homes
You can find FSBO listings on general websites, such as Zillow and Trulia, which are part of Zillow Group, and on websites specializing in FSBO listings, such as FSBO.com and ForSaleByOwner.com. FSBO.com is owned by FSBO Inc., an online advertising service, and ForSaleByOwner.com is owned by Rocket Cos., which also owns Rocket Mortgage and Rocket Homes.
FSBO homes aren't always on the multiple listing service, or MLS, the main platform that real estate professionals use to list and find properties for sale for their clients. There are services that will place FSBO listings on the MLS for a fee, but many FSBO sellers post listings elsewhere for free.
Before house hunting, get preapproved for a mortgage
The homebuying process and basic requirements to close the deal are the same for FSBO and other homes. That means it's crucial to get your finances in order before you start shopping.
Apply for mortgage preapproval with at least a few lenders to compare rates and fees. Sellers will want to know that you've got the financial backing to buy a home. And your real estate agent will be interested in that, too.
When you're preapproved, you'll get a mortgage preapproval letter, which will state how much the lender is willing to loan you and under what terms. The letter will encourage sellers to take your offers seriously, whether or not they have agents.
