Buying a For Sale By Owner (FSBO) Home

Finding a home or property that is “for sale by owner” is a lot like hitting up Facebook Marketplace© or Craigslist© looking for antique furniture or building salvage for a renovation.

When a home goes FSBO, the homeowner has decided to sell their home without the help of a real estate or listing agent. After all, by not bringing in one of these professionals to help sell their home, the owner doesn’t have to cut them a commission.

Question: If a property is For Sale by Owner, can I finance the purchase with a traditional mortgage?

Answer: Yes! Even if a property is FSBO it can be financed with a mortgage loan.

Question: Do I need to work with a real estate agent to buy an FSBO home?

Answer: Not necessarily, but if you work with a real estate agent, you’ll end up paying a commission.

When buying an FSBO property the process isn’t that much different than working with the seller’s real estate agent. In fact, you should have the additional buffer of working with a qualified real estate agent who will work with the seller to seal the deal.

The good news is that many real estate agents will likely have worked with similar sales before, and the process shouldn’t be that much different.

Buying an FSBO Home

During the process of selling their home, an FSBO property owner will act as their own real estate agent.

The owner is saving the commission cost, yes, but now the property owner will have a few duties to undertake, including:

• Researching the price to set the home at
• Marketing the home for sale
• Having the property added to the multiple listing service (MLS)
• Hosting open houses
• Guiding showings
• Staging the home for showings
• Negotiating the sales price
• Negotiating sale terms and conditions
• Adjusting the price if not selling on the current market or threatening to sell too low
• Having all legal documents created
• Setting appointment times
• Carrying out the deed process such as having it notarized and signed
• Carrying out the closing process

The Pros of Buying an FSBO Home

• By working directly with the seller, you stand a chance of developing a personal connection that can help to seal the deal if other buyers or interested or if negotiations are required. Sometimes, especially if a property is unique or historic, sellers are hesitant to sell to buyers who want to make sweeping changes – for some sellers, knowing that the property is going to the “right steward” can make the difference.
• When working with an FSBO seller you get a firsthand guide not only to the home but also to the neighborhood and area around it.

The Cons of Buying an FSBO Home

• Laws vary in each state around what disclosures are required when selling real estate. Real estate agents are stringent about hitting all the requirements; however, sellers may be willing to bend the truth in their favor when disclosing or may not know what disclosures are necessary.
• Since you’re dealing directly with a seller who is already price-conscious, coming to an agreement on what repairs and changes will be made to seal the deal may be difficult, and they aren’t legally required to accommodate any asks from your end as the buyer – in fact, it may be an “as-is” sale, meaning the seller outright will not be making any changes, repairs or otherwise.

Purchase Agreements, Inspections, and Repairs

Purchase agreements, inspections, and repairs are part of the standard homebuying experience. After all, you want to be sure that the sale is legal, the property is safe, and everything is up to code, right?

When working with an FSBO arrangement, things can be a little different.

Drafting a Purchase Agreement – You Have Options

Question: Who drafts the purchase agreement if the property is FSBO? The seller?

Answer: Drafting the purchase agreement may fall on your real estate agent since the purchase agreement is usually a duty that a seller’s agent takes on. If you aren’t working with a real estate agent, you have a few ways to go about completing your purchase agreement.

Hire Out

You can always contract out a real estate agent, real estate lawyer, or similar professional to draft the paperwork for both you as the buyer and the seller. This is a great option since these professionals will know how to cover all bases.

Create the Purchase Agreement Yourself

Of course, you can create the agreement yourself – there are many templates available online to follow. While this is a great way to save some cash when it comes to experts being involved, it is critical that you have a professional review the document and ensure that it fits all legal requirements and that you aren’t accidentally writing yourself into a corner.

Inspections – You Should, But You Don’t Have To

Question: Do I have to get an inspection for an FSBO property?

Answer: While there is no legal requirement for a home to be inspected before a sale, it's important to note that each lender may have their own set of specific requirements. Most professionals will strongly encourage getting an inspection as there is little action you can take after you sign on the dotted line, should something be wrong.

Repairs – Your Choice of Fixes

Question: If the home inspector finds problems, how do they get fixed?

Answer: If problems are found, you’re going to need to work with the seller to fix the issues at hand. This can be done in a few ways.

Seller-Provided Repairs

The seller could outright make the fixes out of their own pocket; however, you can’t be assured of the quality without a reinspection.

Seller Credits

You could ask for a post-closing “credit” to solve the problem, but some sellers won’t agree since they don’t want to agree to pay for a service without knowing the price upfront.

Price Reduction

Of course, you could also simply ask the home’s price to be reduced to make up for the future repair’s cost.

To Buy or Not to Buy?

You can buy a house that is for sale but doesn't have an agent, for sure – it will just take a little more legwork and some personal skills.

Follow these simple steps:

• Ask your agent about the listing and be open to seeing it and treating it like any other opportunity you or your agent finds. If you don’t have an agent, proceed with caution, and get in contact with the property’s owner.
• Go in with your eyes wide open and know that, like any negotiation, it may or may not work out.
• Be ready to carry out the traditional process. You’ll need to visit the home, arrange for an inspection, and enter negotiations.
• You’ll need to have a purchase agreement drawn up – you have options.
• Should the sale go through, follow the terms of your purchase agreement, and wait for the day when you get the keys!

The big idea is that FSBO arrangements can be worth it in the end as long as you’re smart about your decisions through the process.

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