If you’ve ever looked at a home with a “for sale by owner” sign out front, you may have a few questions. What does for sale by owner really mean, and how does it affect the buyer? Let’s learn all about for sale by owner homes.
For sale by owner (FSBO, pronounced “fiz-bo”) homes are sold by the homeowner without the help of a listing agent or broker. Sellers typically choose to sell their home FSBO to avoid having to pay the real estate agent the commission fee on the sale of the home. FSBO sales do, however, still require a real estate commission for the buyer’s agent.
If you’re planning to finance a FSBO home, it’s helpful to apply for a mortgage ahead of time. Doing this could help improve your chances of having your offer accepted.
For a potential buyer, a FSBO home can present a variety of benefits and drawbacks. In short, because the property is being sold directly by the seller without help from a real estate agent, the buyer can have a direct line of communication with the seller. This process can lead to the buyer receiving more detailed information about the property from the homeowner’s point-of-view, as well as potentially better negotiating terms.
With that said, this can result in more effort to properly assess the home’s value and any potential defects or issues. It may be best for buyers to consult an experienced real estate agent and attorney for guidance.
With a FSBO transaction, the seller will assume all the responsibilities and risks associated with the sale of a home that a real estate agent would typically take on. These include:
Before you buy a home directly from a homeowner, let’s walk through how buying a FSBO home differs from buying a property that’s listed by a real estate agent.
Here’s a look at some of the major pros and cons of buying a FSBO house.
While dealing directly with a homeowner may sound intimidating, potential buyers can enjoy these advantages:
Unfortunately, a FSBO sale can be more difficult and complex than other real estate transactions for the following reasons:
The process of buying a house can feel overwhelming in general. To make matters less confusing, here are the five main steps most people will follow to buy a home that’s for sale by owner.
Remember: If you’re thinking about buying a FSBO home, make sure to consult with a real estate professional.
With any house purchase, you’ll first need to get approved for your home loan so you know exactly how much you can spend. You can apply online with Rocket Mortgage®. If you’re approved for the mortgage, you’ll receive an approval letter from your lender that you can use to get out there and start shopping. Some home sellers may not let people in the door without preapproval from a lender.
Once you’re approved for your mortgage, you can engage the services of a real estate agent or REALTOR®.
A buyer’s agent can be beneficial even if you already have a specific home in mind. With a FSBO transaction, your agent will negotiate on your behalf and handle the complicated paperwork for you. This is crucial when the seller is doing their own paperwork because your agent will make sure everything checks out, so you don’t run into any problems.
The seller usually pays the commission fees for the buyer’s real estate agent, so working with a buyer’s agent can offer a huge opportunity with very little downside. Just make sure the homeowner agrees to pay your real estate agent’s commission as part of the purchase agreement.
If you’re working with a real estate agent, they can usually arrange showings for you through the multiple listing service, but some FSBO homes won’t be listed there. Instead, you and your agent might have to search for open houses or listings by word of mouth, with a different platform. An established real estate agent may also hear about FSBO homes through their personal networks.
If you’re not using an agent, you can get a showing by contacting the seller directly. If the seller is present at the showing, it’s a great opportunity to ask questions and get to know the home and the area.
When you find a home you like, it’s time to make an offer. If you’re using a real estate agent, they can offer opinions on how the home is priced so you know whether you should bid below, at or above the listing price.
Once you’ve received final approval on your mortgage and completed all the necessary inspections, it’s time to close. This is when the ownership of the home will officially be transferred to you.
At closing, you’ll pay your down payment and closing costs. If you’re immediately taking occupancy of the home (in other words, the seller hasn’t negotiated to stay in the home past closing), you’ll get the keys to the house.