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Read Time: 5 Minutes|
December 1, 2022
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.
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:
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.
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.
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.
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.
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.
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.
The seller could outright make the fixes out of their own pocket; however, you can’t be assured of the quality without a reinspection.
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.
Of course, you could also simply ask the home’s price to be reduced to make up for the future repair’s cost.
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:
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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