For Sale by Owner: How to Buy FSBO Homes

A Guide to Buying a ‘For Sale by Owner’ Home

If you're in the market to buy a new house, you'll likely look over many listings to find their next home. One thing you may see when searching is listings marked as "for sale by owner" (FSBO).

What exactly does this mean? Does it complicate the homebuying process?

Let's walk through what it means to buy a house being sold directly by its owner without a real estate agent, and what to keep in mind.

What Does 'For Sale by Owner' Mean?

FSBO is when a home's owner puts the property up for sale without working with a real estate agent. Sellers do this to save money on agent commissions and gain more control over the selling process. But it typically requires more work from them—from start to finish—to sell their home.

For homebuyers, a house for sale by owner might offer savings because the seller can offer a lower price since they aren't paying agent fees. FSBO also lets the buyer and seller speak directly, allowing the buyer to ask specific questions about the property. However, some buyers prefer having their own real estate agent—known as the buyer's agent—to handle negotiations and other crucial conversations.

Ultimately , FSBO homes offer advantages and disadvantages to both sellers and potential buyers.

How Do You Buy a Home Sold by Owner?

When you choose to buy a house that a seller has listed without an agent, you'll find the buying process to be very different than if the seller had an agent. First, you work directly with the seller, unless you hire a real estate agent yourself. From there, here's what it could look like for you as a potential buyer:

Step 1: Get Prequalified

When you plan on buying a new home, it's often a good idea to get prequalified. Prequalification gives you an estimate of how much you can spend on a home. While it doesn't guarantee you'll get a mortgage, you'll have an idea of the price range you should be looking in.

Step 2: Consider Hiring a Buyer's Agent

There are many legal aspects to consider when buying a home that can make the process challenging, especially if you're unfamiliar with it . You may want to hire a buyer's agent, who is usually an experienced real estate professional. They'll guide you through the transaction and coordinate with appraisers, inspectors, and other professionals you'll work with.

Step 3: Search Listings and View Available Homes

Typically, you'll use multiple online resources to find homes for sale. Once you've found a few houses you're interested in, you'll schedule time to view and learn more about them. With an FSBO home, you can have your agent interact with the seller on your behalf, or you can ask the seller any questions directly.

Prepare ahead of time so you know what types of questions to ask to help protect yourself and avoid any surprises after the deal closes.

Step 4: Get Finances in Order and Make an Offer

Your next step in buying an FSBO home may be getting preapproved for a mortgage. Now, not all lenders offer preapprovals. Some only offer prequalifications, and others do both. At Freedom Mortgage, we offer prequalifications. While there are some differences between prequalification and preapproval, having either will improve your chances of getting a home.

With prequalification or preapproval, you'll know if the home is within your budget, and you can make an offer on a house. Once the seller accepts the offer, you'll move on to the home inspection.

Step 5: Get the Home Inspected

As with most home purchases, it's a good idea to get an FSBO house inspected. A home inspection protects you from hidden problems and identifies issues that need to be fixed before completing the sale. If the home inspector finds issues, you may decide not to move forward with the sale, or you may negotiate for a lower price or request the seller make repairs.

Step 6: Negotiate the Final Aspects of the Sale

Once the inspection is complete, you can negotiate the final price and ask the seller to make repairs based on the inspection report. Negotiating can be tricky if you've never done it before, but a buyer's agent can make this part a little easier.

Step 7: Finalize the Purchase and Close

After any potential negotiations, you can move forward with purchasing your new home. This is when you'll complete your formal loan application, provide any documentation needed to finalize the transfer of ownership, and pay closing costs.

FSBO Buyer Considerations

If you're interested in a home being sold by its owner, here are some considerations to keep in mind:

Advantages of Buying an FSBO Home

Potential advantages of buying an FSBO home include:

• Cost savings: In many cases, an FSBO house will cost less than a house listed by an agent because it doesn't have agent fees wrapped into it.
• Direct communication: You'll have the opportunity to talk directly with the seller to get your questions answered.
• Less competition: FSBO homes aren't always widely advertised, so they may have fewer viewers.
• Streamlined negotiations: Having a direct connection with the seller can build a better rapport, which can help during negotiations.

Disadvantages of Buying an FSBO Home

Potential drawbacks of buying an FSBO home could include:

• Unrealistic expectations: An inexperienced seller may have set some incredibly high expectations for their home—pricing it too high, being emotionally attached to home, etc.
• Greater potential for legal issues: If you don't work with a real estate agent on your end, important legal aspects can be missed, including critical paperwork.
• Higher risk of disclosure problems: A seller may not have experience in real estate and may overlook required disclosures, leading to problems for the buyer.

Buying FSBO Homes: What to Know

While they're not as common as houses listed by an agent, FSBO houses can be a good find for the right homebuyer and may have some benefits. However, it's important to understand the risks of buying an FSBO home and consider all your options, including hiring a buyer's agent.

If you're thinking of buying a house for sale by owner, start the process by getting prequalified today.