When Buying FSBO Without A Realtor There are Many Things to Think About

Purchasing a house for sale by owner, also known as FSBO, can seem like an attractive option for homebuyers looking to save on real estate agent commissions. But going FSBO also comes with risks and challenges. This comprehensive guide covers everything you need to know about buying a FSBO, from finding listings to negotiating a sale price to closing the deal.

Buying a home is one of the biggest financial decisions you’ll make in life. Doing it without the help of a real estate agent or realtor requires careful planning and preparation. Make sure you understand the pros and cons of buying a FSBO before you start house hunting.

What Does Buying A House “For Sale By Owner” Mean?

For Sale By Owner (FSBO) refers to properties being sold directly by the homeowner, without listing the home on the multiple listing service (MLS) or hiring a real estate agent to facilitate the sale. FSBO sellers handle all aspects of the real estate transaction themselves, from marketing the home to negotiating the sale price and terms with potential buyers.

Some key things to know about FSBO properties:

• FSBO homes for sale are often not included in MLS listings that agents use to find available properties for their clients. This can make them harder to find.
• FSBO sellers set their own asking price and handle negotiations directly with buyers, without an agent’s expertise.
• Buyers work directly with the property owner on the real estate purchase, instead of through agents representing the buyer and seller.

Why Do Homeowners Sell FSBO?

There are a few main reasons homeowners decide to sell their property FSBO rather than listing with an agent:

• To save money – Sellers can avoid paying a real estate agent’s commission, which is often 5-7% of the home’s sale price. This can mean thousands in savings.
• Have real estate experience – Some FSBO sellers are experienced real estate investors or have worked as real estate agents in the past. They feel confident handling the sale without an agent.
• Want control – FSBO sellers maintain maximum control over the transaction timeline, pricing, prospect screening, marketing strategy, negotiations, etc.
• Privacy – Owners may prefer restricting showings and keeping their personal information more private.

While FSBO seems tempting, sellers need to weigh these benefits against the risks and disadvantages.

Benefits of Buying FSBO Without a Realtor

As a homebuyer, a FSBO home sale offers some potential advantages:

• Negotiate lower price – Without a seller’s agent, the full commission doesn’t need to be factored into the sale price, which may allow room for negotiating a lower price.
• Faster sales timeline – There are fewer people involved compared to working with agents, which can mean a quicker process from contract to closing.
• Make direct contact – Buyers communicate directly with the seller, instead of through agents as middlemen. This can help build rapport and trust.
• Potentially customizable terms – Buyers may be able to negotiate terms like included fixtures, appliances, and furnishings that an agent-listed property wouldn’t allow.

However, buyers also take on significant risks and hassle buying FSBO. Make sure you understand these before house hunting.

Drawbacks and Risks Buying a Home For Sale By Owner

While FSBO homes can provide big savings and benefits for buyers, they also come with considerable risks and downsides to consider:

• Harder to find – The home won’t be listed in the MLS, so you’ll need to find FSBO listings through other means like Craigslist, Zillow, social media, or driving around.
• No buyer’s agent – You won’t have an exclusive agent looking out for your interests and negotiating on your behalf. The seller won’t pay a buyer’s agent commission.
• Appraisal and inspection risks – An agent helps ensure the offer purchase price aligns with an appraisal. And identifies issues on inspections. FSBO buyers lack this experience.
• Less support during the process – Agents help guide buyers through all the paperwork, deadlines, and requirements to close. FSBO buyers need to navigate this complexity alone.
• No representation in disputes – If any disputes arise during the transaction, you’ll need to either negotiate directly with the seller or get a real estate attorney involved at your own expense.
• Lack of MLS data – Buyers won’t have access to MLS records about past sale prices, days on the market, and neighborhood comps. This puts them at an information disadvantage.

While FSBO sales offer potential savings, they require taking on much more work, stress, and risk as the buyer.

How to Find FSBO Listings when House Hunting

The first challenge is identifying available FSBO listings since they won’t appear in the MLS databases that agents use. Here are some ways to find houses for sale by owner near you:

• FSBO listing sites – Check sites like Zillow, ForSaleByOwner.com, and FSBO.com which let owners list their homes for a small fee.
• Craigslist – The real estate for sale section includes FSBO listings in your local area. Make sure listings look legitimate.
• Social media – Check Facebook Marketplace, Nextdoor, and neighborhood Facebook groups. Owners often post their homes for sale on these local networks.
• Zillow, Trulia, Realtor.com – While mainly agent listings, these major real estate portals include some FSBO properties too.
• Signs – Look for “For Sale By Owner” signs in neighborhoods you’d like to buy in. Call the number on the sign.
• Drive around – Scouting neighborhoods in person helps spot FSBO signs that may not be advertised online.
• Word of mouth – Ask friends, family, coworkers, and real estate pros if they know of any FSBO homes on the market.

Finding FSBO opportunities takes more effort and diligence than buying agent-listed properties. But with consistent research, serious buyers can uncover good options.

Questions to Ask the Seller Before Viewing a Home For Sale By Owner

Once you’ve identified a FSBO listing you want to see, have an initial phone conversation with the seller to get more information and screen the opportunity. Some key questions to ask:

• Why are you selling FSBO instead of listing with an agent?
• How long have you owned the home?
• When are you looking to close on a sale?
• Have you sold a home FSBO before?
• How many buyers have viewed the home so far?
• Are there any existing liens on the property that will need to be cleared at closing?
• Will you provide recent home inspection reports to potential buyers if you have had one performed?
• Is the home currently tenant-occupied or vacant?
• What items (fixtures, appliances, furniture) are included in the sale price?
• What contingencies are you willing to accept in a purchase agreement?
• Are you willing to pay for closing costs like the buyer’s title insurance policy?

Getting this information upfront before scheduling a showing helps you evaluate if the FSBO listing is worth pursuing and identify any red flags.

10 Key Steps for Making an Offer When Buying A House Without A Real Estate Agent

If you find a suitable FSBO home and are ready to move forward after viewing, follow these key steps to make an offer directly to the seller:

1. Determine your price – Decide what you’re willing to pay based on comps, included items, needed repairs, and room to negotiate.

2. Get pre-approved for financing – A pre-approval letter shows the seller you can obtain a mortgage.

3. Submit your written offer – Draft an offer letter detailing your proposed purchase price, desired closing date, contingencies, earnest money amount, and other terms.

4. Negotiate the offer – Expect some back-and-forth negotiating directly with the seller on the purchase price, including fixtures, appliances, responsibilities for repairs, etc.

5. Agree on contract terms – Once reaching an agreement, use a real estate purchase contract. Have an attorney review before signing.

6. Conduct due diligence – Schedule a home inspection to uncover any issues with the property. Review title records.

7. Finalize financing – Work with your lender to get the mortgage formally approved.

8. Make contingencies – Exercise any contingencies in the contract like for home inspection results or appraised value.

9. Schedule the closing – Set a closing date with the title company handling the transaction.

10. Close on time – Bring your down payment and closing costs. Final walkthrough. Sign papers. Get the keys!

Having a real estate agent on your side helps greatly in navigating this complex process. FSBO buyers take on much more responsibility.

Should You Hire a Real Estate Attorney or Agent for a FSBO Purchase?

Even if you are an experienced real estate investor looking to buy a for sale by owner home, you may still desire the help of a knowledgeable real estate attorney to represent your interests in the transaction and review all the contracts. Here are some key ways an attorney can help protect buyers:

• Ensure sales contract terms fully protect your rights as the buyer
• Review title records to confirm there are no liens or ownership issues
• Advise you on contingencies like financing, inspection, and appraisal to include
• Explain state property disclosure requirements and what to watch out for
• Review required disclosures from the seller about the home’s condition
• Analyze inspections and help renegotiate prices if major issues found
• Ensure the seller provides a clear title and fulfills all contract responsibilities
• Review documents at closing and flag anything suspicious before signing

While still saving thousands by not paying a full agent commission, the one-time fees are worth it for the protection.

Getting a Mortgage Loan for a Home For Sale By The Owner

One complicating factor when purchasing a FSBO property is obtaining financing. Since there’s no licensed real estate agent representing the transaction on the seller’s side, many lenders view these deals as higher risk.

Here are some tips for securing a mortgage to buy a FSBO home:

• Shop around with multiple lenders familiar with FSBO deals. Local banks and credit unions may be more flexible.
• Ask the seller to allow your lender to appraise the home before finalizing the contract. This verifies the sale price aligns with the appraisal.
• Get the seller to agree in writing to a mortgage financing contingency in the purchase contract allowing sufficient time to obtain approval.
• Tell your lender upfront you are buying FSBO and provide all documentation to prove the legitimacy of the sale.
• Ask your lender if they are able to assist with providing a sales contract. Some lenders have a standard contract that they offer customers

With proper preparation, buyers can overcome the extra hurdles mortgage lenders present for FSBO purchases.

Negotiating Price and Terms When Buying Without An Agent

One major disadvantage of buying FSBO is the lack of experienced representation to negotiate price, contingencies, included items, repairs, and other contract terms on your behalf. The seller won’t look out for your best interest.

To negotiate effectively as a buyer without an agent:

• Do market research – Gather sales data for recent comps so you know fair value. The seller may overprice.
• Ask about needed repairs – Don’t assume the seller will fix or lower the price for issues found on inspection. Get commitments in writing upfront.
• Request permits and disclosures – Ask to see permits for any renovations done by the seller and required property disclosures.
• Build-in contingencies – Finance, inspection, and appraisal contingencies protect you if issues arise. Make sure they are generous.
• Get promises in writing – Don’t trust verbal agreements. Include fixtures, appliances, and items included in the sale price in the contract.
• Be ready to walk – Without an agent invested in the deal, you have more power to walk away if you and the seller can’t agree on fair terms.

Going in armed with information and being prepared to walk away if your conditions aren’t met will also strengthen your position.

Conducting Due Diligence When Buying A Home Without A Real Estate Agent

Once your offer is accepted, you’ll need to conduct due diligence by digging deeper into the property’s condition, value, and financial obligations tied to the home that will carry over after purchase.

Key steps in this due diligence process include:

• Hiring a home inspector to thoroughly inspect the property and identify any structural, electrical, plumbing, or other issues.
• Reviewing the preliminary title report to spot any easements, liens, judgments, or other encumbrances on the home that could affect ownership rights.
• Evaluating the included appliances, systems, and fixtures to assess their condition and whether costly repairs or replacements will soon be needed.
• Researching permits to confirm renovations/additions were properly permitted and up to code.
• Examining property tax records, zoning restrictions, and HOA rules to understand costs and limitations tied to the property.
• Ordering termite, radon, and other specialized inspections if conditions warrant.
• Re-checking comparable sales to confirm the home’s value supports the purchase price.
• Reading seller disclosures detailing known defects they are required to provide in most states.

Taking advantage of contingencies in the purchase agreement gives you leverage to address issues uncovered during due diligence through renegotiating or opting to walk away.

Pros and Cons of Buying FSBO vs. With an Agent

Let’s recap the key trade-offs and considerations when deciding whether to purchase a home for sale by owner or work with a real estate agent:

Potential benefits of buying FSBO:

• Save on real estate commissions (tho may pay attorney fees)
• Possibility to negotiate lower purchase price/better terms
• Make direct contact with the seller without going through agents
• Faster timeline without coordinating agents’ schedules

Risks and drawbacks of buying FSBO:

• Lose experienced representation negotiating in your interest
• Harder to find off-MLS listings and arrange viewings
• Must handle all paperwork/transactions with less guidance
• No commission incentive for sellers to accept your offer
• Potential skepticism from lenders about “non-MLS” sale
• Lack of access to MLS data for pricing, value, history

If the right FSBO opportunity comes along, the potential to save on commissions may outweigh the disadvantages and risks. But buyers should weigh both sides carefully before proceeding.

Key Takeaways – Buy a house without a Realtor

While for sale by owner properties do present an enticing opportunity to save on real estate commissions, buyers need to take extra precautions:

• Understand why the seller is going FSBO and the risks/limitations it creates
• Vet the seller thoroughly and evaluate if they are trustworthy negotiating partners
• Expect to do much more research and legwork without agent support
• Make your offer contingent on financing and inspection approval to allow outs
• Consider hiring a real estate attorney to represent your interests for a flat fee
• Know your walk-away point if negotiations reveal undisclosed issues or red flags
• Be prepared to invest more time and effort for a successful FSBO home purchase

For the sophisticated buyer willing to do their homework, a FSBO sale offers financial upsides. However, working with an agent is still the far less stressful route for most home purchasers.

Frequently Asked Questions About Buying a FSBO Home

What is a FSBO home?

A FSBO (For Sale By Owner) home is a property being sold directly by the homeowner, without listing it on the multiple listing service (MLS) or hiring a real estate agent. The owner handles all marketing, showings, negotiations, and sale paperwork themselves.

How do I find homes for sale by the owner?

Since FSBOs aren’t listed on the MLS, you’ll need to search dedicated FSBO listing sites, Craigslist, Facebook Marketplace, driving neighborhood streets looking for “For Sale By Owner” signs, and ask friends or real estate agents if they know of any off-market FSBO listings.

What are the risks of buying a FSBO house when home buying?

Risks include lack of representation in your interests, missing key property disclosures, completing the sale agreement, complex negotiations without an agent mediator, challenges getting financing, and taking on the workload/stress of the transaction.

Should I make an offer on a FSBO home?

If it’s the right property at the right price and you are prepared to take on more responsibility in the transaction, making an offer on a home without a real estate agent can make sense. But carefully weigh the risks and get protections in the contract and be sure you understand the terms of the sale. Drawing up a purchase contract is not an easy thing to do.

How much below asking price should I offer when buying a house without a realtor?

When buying a home for sale a good rule of thumb is to open 10-15% below the list price of the home to leave room for negotiation. But base this on recent comps for the area and needed repairs. Depending on the market, you may need to pay the full asking price of the house or above.

Can I work with a buyer’s agent on a FSBO purchase?

Yes, you can still partner with a buyer’s agent on a transaction, though typically for a lower commission instead of 2-3%. Their expertise is still valuable. Be sure to negotiate with your real estate professional to get the best rate.

What contingencies should I include in the purchase offer?

Important contingencies are for financing approval, home inspection results, appraised value, and clear title. This allows you to back out if issues arise.

Should I have a real estate attorney review a FSBO contract if buying without a real estate agent?

Absolutely. Paying an attorney for an hour or two of contract review provides huge protection and is worth the few hundred dollars of fees.

Is it harder to get a mortgage loan for a FSBO home?

No, lenders are very familiar with working with customers buying a home without a listing agent. They are a great resource throughout the home loan