If you’re shopping for a new home, you’ve probably seen countless listings online and in your local newspaper as you search for the perfect purchase price. To save money, you may consider buying a home that’s listed as for sale by owner (FSBO). These homes aren’t sold by your local real estate agent but instead are offered directly from the seller to the buyer.
Read on to learn more about the FSBO home sale process, what’s involved, and how you can purchase a home that’s listed as for sale by owner.
How To Buy A Home For Sale By Owner
It might seem difficult to locate homes that are being sold by the owner, but they’re quite plentiful if you know where to look. One way to locate homes offered this way is to simply drive through neighborhoods you’re interested in living in.
Look for signs that specifically show the property as “for sale by owner” and write the contact information down. The sign should include the owner’s phone number so you can call them directly and ask about scheduling a showing and for more information about the sales price.
There are also websites where owners may choose to list their homes for sale exclusively that aren’t on the MLS. These websites aren’t like Zillow or your local real estate agency. Instead, they’ll be separate and dedicated solely to listing FSBO properties.
After you browse a few homes, start contacting the owners and ask them about the availability and asking price of the home. One perk to buying homes that are sold this way is that the seller won’t have to pay the listing real estate agent’s commission fees. This can leave a bit more wiggle room when it comes to haggling the final price.
As a buyer, it’s recommended that you enlist the help of a real estate professional and a home inspector when you’re ready to buy any home. They can ensure that you’re signing all the proper paperwork and will serve as your representative during the entire home buying and inspection process, respectively.
The seller will be responsible for paying your agent’s fees, but they’re still saving money since they won’t need to pay those fees twice. You can purchase an FSBO home without an agent, but it’s not recommended unless you are a real estate attorney or you have experience in the real estate business.
Steps In Buying A House For Sale By Owner
Once you find a home you love and you’re ready to buy, it’s time to make an offer. Have your agent draft an official offer letter that includes any possible contingencies the seller must meet before you make a deal.
You should include a clause that mentions your request for a home inspection before you agree to purchase any home. You’ll need to pay the home inspection fee, but it’s worth it in the long run. Home inspections can identify any potential problems with the property and it protects you in case there are any major underlying problems.
If you are not using an agent, have a real estate lawyer draft an official contract for you. Most will do this for a fee, and it’s worth it if you’re serious about buying the home. The attorney can also work with your lender to determine and negotiate closing costs.
Don’t be afraid to offer less than the list price when you consider a “for sale by owner” home. Some sellers are willing to go lower since they’re not responsible for many of the fees associated with using an agent.
Include specific contingencies in your offer that protect you in case something goes wrong. That way, you have more protection should issues arise later. The contingencies should include things like a good appraisal, a clean termite inspection, and any repairs recommended in the home inspection report.
If the seller can’t meet these requirements, the contract isn’t fulfilled and you could get a remedy. When you’re ready to submit an earnest money deposit, only give it to a third party (such as a title company or escrow company) and never directly to the seller. Be prepared to negotiate various fees, since many sellers won’t want to shell out the cash required to close that usually comes with traditional transactions.
Make sure you purchase title insurance so you know there are no liens on the property or that it doesn’t have a clouded title. When everything is ready, you can finalize your financing and close on the home so you can move in. Work with the seller about an official move-in date and include this information on your closing paperwork.
The Pros And Cons Of Buying A House For Sale By Owner
If you decide to buy an FSBO home, there are a few perks as well as some drawbacks. It’s important to look at the pros and cons so you can determine if this type of transaction is right for you.
One pro for home buyers looking for a house for sale by owner is that you can get a terrific deal. Many sellers who choose to go this route want to get out of their home quickly or are typically willing to sell for lower than the standard market asking price.
Another perk is that you’ll have direct access to the seller since they won’t have a listing agent serving as the middle man. This can make communication much more open and oftentimes, you’ll get a more timely response if you have questions or concerns.
A downside to buying FSBO is that your seller may have the upper hand. They ultimately determine how much to sell the home for, and they can also say no to your contingencies if they choose. That’s why having an agent can be beneficial since they can represent your best interests and help you negotiate a variety of things including the down payment.
One potential con to these types of homes is that there could be a reason the seller is trying to get out of the home that you don’t know about. Whether it’s a neighborhood in decline or property in disrepair, some people choose the FSBO route to sell the home faster due to a few negative aspects about it.
Ultimately, you’ll need to decide whether or not buying a house directly from the owner is right for you. If you love the location, the property, and the home inspection report comes back clean, it’s worth looking into so you can save money.
Tips For Buying A House For Sale By Owner
Before you drive around and look for FSBO signs or peruse the Internet, there are a few crucial things you should keep in mind. First, never try to make an offer on a home without an official real estate contract, even if you don’t have an agent in tow.
You will need to be pre-approved from a lender, even if you’re planning to buy FSBO within your price range. Get a pre-approval letter from your local bank or credit union and use it as proof to show the seller you will be able to secure financing for the home loan when the time comes.
Be polite to the seller and never make off-handed comments about the sale price. Doing this could squelch the sale since the seller may not want to sell to someone who is already unhappy with the property. When it comes to the open house or a showing, be willing to work around the seller’s schedule so you’re not intruding on their daily activities.
Ask the seller for permission to get something called a CLUE report (Comprehensive Loss Underwriting Exchange). This report will show if there have been any insurance claims against the property within the past seven years so you’ll know if any potential problems are lurking under the surface. An honest seller should have no problem granting permission for the report but if they refuse, you might want to reconsider your offer.
Rely on your buyer’s agent, appraiser, and a real estate attorney to help you navigate the process. They can draft all the appropriate paperwork and ensure that the entire transaction is performed smoothly and legally. Choose an agent who is part of the National Association of Realtors whenever possible.
You probably have lots of questions about buying a home that’s for sale by owner. Here are some common questions that many buyers have:
- How long has the home been for sale? If the home you want has been sitting for a long time, you could have more bargaining power. On the other hand, there may be a reason the home hasn’t sold, such as damage or other problems you can’t see.
- Can I use a real estate agent to buy an FSBO home? Yes, you can and should use a real estate agent to help you purchase an FSBO home. They can help you negotiate, draft the paperwork, and work with the seller on repairs or showing the home.
- If I find an FSBO home by myself, does my agent get a commission? In most cases, your agent will still be entitled to a commission, even if you find the home and make an offer yourself. If you signed a contract with your real estate agent, make sure there’s a clause that allows you to avoid paying commissions in cases like this.
Buying Homes Direct from the Owner
Once you understand the details, you can determine if the option to buy a house for sale by owner is right for you. Consult with a real estate professional who can help guide you through the process to get a great deal on a quality home.
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