You’ve found the perfect home. But the sign out front says boldly, “For Sale By Owner.” What does this mean? And how does this affect the buying process?
If you see a house that’s for sale by owner (FSBO), don’t be intimidated. This might require some more careful planning and preparation on your end, it can still lead to a successful deal.
We will dive into what FSBO means, what’s required of you, and how you can ensure the process goes as smoothly as possible.
What’s involved in buying a house for sale by owner?
An FSBO listing means the owner of the home wants to sell the property without a real estate agent or broker.
A seller usually does this to avoid paying the agent a commission on the sale, which can potentially save thousands of dollars.
So for a seller, FSBO is to save money. For you, the buyer, FSBO means you will be working directly with the owner of the home. This is helpful to learn more about the neighborhood and the home’s features. But it also can require a careful eye.
Here are our best tips for carefully and thoughtfully moving through the FSBO process.
Get pre-approved for a mortgage
The first step after deciding to start the homebuying process is always to get pre-approved* for a mortgage.
Working with a mortgage loan officer will ensure you understand how much home you can afford, and prove to sellers that you’re serious about buying.
With pre-approval, the professionals at Homefinity can also help you pinpoint financial areas that need strengthening. All of these factors make you a more prepared and informed buyer.
Hire a real estate agent or attorney
The seller of the home may not want to work with a professional agent. But that doesn’t mean you can’t.
Experienced buyers may choose to navigate the process on their own, but new buyers have a lot of unfamiliar territories to navigate.
When a seller chooses to list their own property, they are taking on all of the legal risks and responsibilities of completing the sale themselves. This includes accurately determining the listing price and preparing all the legal documents.
If the seller isn’t entirely accurate in any of these areas, it would be up to you to fact-check. If you’re not comfortable navigating this territory, a real estate agent or attorney can handle this paperwork. That includes the purchase contract and they’ll make sure there are no issues or errors.
Research the value of the home
Whether or not you choose to enlist the help of an agent or attorney, researching the value of the property will be a top priority. In an FSBO transaction, the seller determines the listing price.
If the seller has inaccurately listed the price or failed to take any determining factors into account, this could mean you’re overpaying or putting your mortgage at risk.
Listing agents use their local market and industry knowledge, plus comparable area sales, to determine a fair list price. You and your agent will need to perform your own research to determine the value of the property.
Arrange for a home inspection
Even if you trust the seller, there may be something wrong with the home that they are unaware of. A proper home inspection will make sure everything is as great as the seller claims so you both can confidently move forward.
You also might consider asking the seller to request a Comprehensive Loss Underwriting Exchange (CLUE) report. This report details any insurance claims made on the property in the past five to seven years.
Why buying a house for sale by owner can be beneficial
Buying a home FSBO allows for direct communication with the owner of the home, rather than through an agent. This means if you happen to build a relationship and trust, there may be more room for negotiation.
This also means you can learn about the neighbors, schools, local entertainment, and the features of the home and property.
If the home has been occupied by the owner for many years, you could learn about its history and any major updates to the property.
Is the process worth it?
Most people choose to purchase their home through a real estate agent or broker. So why would you want to pursue a different route?
Opening yourself up to buying a FSBO home could expand your search options and your real estate knowledge, and lead to a deal that’s better than you could’ve imagined.
Only you can decide whether going this route is right for you. Now that you have a deeper understanding of the FSBO process, you can make a stronger decision.
If you’re ready to get started with your mortgage loan pre-approval, reach out to the professionals at Homefinity. Our honest, knowledgeable loan officers will help you get a loan that’s right for you.
*Pre-approval is based on a preliminary review of credit information provided to Fairway Independent Mortgage Corporation, which has not been reviewed by underwriting. If you have submitted verifying documentation, you have done so voluntarily. Final loan approval is subject to a full underwriting review of support documentation including, but not limited to, applicants’ creditworthiness, assets, income information, and a satisfactory appraisal.