Are you considering buying a home directly from the owner, rather than going through a seller’s real estate agent? This approach has its potential upsides and downsides. At Newrez, we believe homeowners should have all of the information as they make decisions toward their homeownership goals. Read on to learn about this alternate approach.
Understanding FSBO Homes
When a homeowner lists their property as For Sale by Owner (FSBO), they bypass the traditional listing agent and market their home directly to buyers. For buyers, this means negotiating and communicating directly with the seller, with or without representation from their own real estate agent.
These types of home sales occur a minority of the time: FSBO sales represented roughly 6% of all home transactions from July 2023 to June 2024, according to the National Association of Realtors® (NAR).1
Possible Pros and Cons of Buying a FSBO Home
Buying a home directly from the owner may just come down to your own preference—whether you enjoy the convenience of working with an experienced real estate professional, or you’d rather communicate directly with the seller and handle more of the process and paperwork yourself.
Potential Advantages
- Lower Prices: 2023 data suggests that FSBO homes sometimes sell for less. The median FSBO price was $380,000 compared to $435,000 for agent-assisted sales per the NAR.2
- More Options: Including FSBO properties in your search could broaden your chances of finding the right home in a competitive market.
Potential Challenges
- Inexperience Risks: FSBO sellers may lack real estate expertise, increasing the risk of errors in contracts and disclosures.
- Commission Disputes: Sellers may resist covering buyer agent commissions.
How Buyer’s Agents Work with FSBO Homes
As a homebuyer, you can still enlist the help of a real estate agent to find listings, even if you open your search to sellers who aren’t using real estate agents. However, be mindful of changes to typical payment practices.
In years’ past, the buyer’s and seller’s agent would often share commission, all of which was paid by the seller. But a 2024 rule change by the NAR has redefined payment possibilities for buyers’ agents. Now, buyers must sign agreements with agents before touring homes. The signed agreement defines how the buyer’s agent is paid. Terms may be negotiated:
- Flat fees, hourly rates or percentages can be agreed upon.
- Buyers can ask the seller to cover commissions as part of negotiations.
- In some cases, the buyer may be responsible for paying their agent directly.
Even in FSBO deals, a buyer’s agent may provide:
- Market analysis for fair pricing.
- Negotiation expertise.
- Guidance on inspections, appraisals, and financing.
- Protection against errors in contracts and disclosures.
Buying a FSBO Home Without an Agent
While it is possible to purchase directly from the seller, this puts a lot on the buyer’s shoulders and may necessitate deep familiarity with real estate contracts, local laws and disclosures. Without an agent, the buyer’s duties may include but are not limited to:
- Research Comparable Sales – Ensure the asking price is fair.
- Contact Seller Directly – Schedule viewings and discussions.
- Draft an Offer – Decide price, contingencies and terms.
- Negotiate – Work directly with the homeowner to finalize details.
- Secure Legal Help – Hire a real estate attorney (often required by law).
- Manage Inspections and Financing – Coordinate all steps leading to closing.
Where to Find FSBO Listings
FSBO homes are not always listed on the MLS (Multiple Listing Service), the main platform used by real estate agents. But buyers can likely find them on many popular home listing platforms.
Preparing for a FSBO Home Purchase
If you feel that buying a home directly from the seller is a good fit for you, be ready to take these steps:
1. Get Pre-Approved** for a Mortgage
- Reach out to Newrez and provide basic documentation of your income and assets. We will perform a full credit check. Learn more about pre-approval.
- If you are pre-approved, you will receive a pre-approval letter showing sellers you have the finances to buy a home.
2. Inspect Thoroughly
- Hire licensed inspectors to check for hidden issues.
- Ensure compliance with local building codes.
3. Secure Legal Support
- Real estate attorneys ensure contracts, contingencies and disclosures meet state requirements.
4. Negotiate Carefully
- Understand who pays commissions, closing costs and transfer fees.
- Use appraisal results to guide final offer adjustments.
Looking for the Right Mortgage for You?
However you’d like to execute your home search, Newrez is here to help you find a great mortgage that fits your lifestyle and your goals. If you’re not sure where to start, reach out to one of our home loan experts and we’d be glad to walk you through your options.
References:
1 First-Time Home Buyers Shrink to Historic Low of 24% as Buyer Age Hits Record High
