If you’re in the market for a new home, you may have come across a For Sale By Owner (FSBO) home. You might also be wondering what goes into the process of buying a home for sale by owner. By definition, a FSBO is a home listed for sale without representation of a realtor or broker on the selling side.
No representation on the selling side can leave buyers worried they’re not getting the best deal, while some buyers tend to avoid FSBO all together. If you fall in love with a home that’s For Sale By Owner, it should not hold you back from pursuing the purchase. With the right preparation and guidance, you can make it happen.
How is the FSBO process different?
To better understand the ins and outs of FSBO properties, its important to know how the process is different than if there were realtor or broker representation. Some homeowners choose to sell their home on their own to avoid having to pay an agent commission for selling their home (typically fees are about 6% for sellers).
But keep in mind just because the seller doesn’t have a real estate agent, doesn’t mean you can’t have agent representation. Unless you have a lot of experience buying homes, a real estate agent will help you get the best deal possible and can also help you avoid FSBO scams. In an FSBO scenario, your agent will work directly with the homeowner to negotiate the price of the home on your behalf.
Additionally, homes that are for sale by the owner can take longer to close. With a lack of representation by a listing agent, communication can lag between your agent and the seller, depending on the seller’s situation.
Things to consider before buying an FSBO
There are a few things to keep in mind when considering a FSBO home purchase. General awareness of these potential setbacks can help you better prepare for your FSBO purchase.
Lack of negotiating expertise.
If both the buyer and the seller go without real estate representation, they run the risk of not getting a fair price for the transaction, whether the buyer overpaid for the property or the seller is not getting fair market value for their home.
Risk of FSBO scams.
Unfortunately, some sellers are not as honest as they may seem. FSBO scams are becoming more common. They typically consist of the seller offering to “hold” funds as a deposit for the home. If this is done before the lawyer signs a contract, the seller can back out of the transaction and pocket the funds. If you are looking to purchase an FSBO, be sure to hold all funds in an escrow account to avoid losing your hard-earned dollars.
You could miss issues with the home.
Although you should still always have an inspection of the home conducted before the purchase is complete, if the seller does not have the experience, they could avoid disclosing issues that they should tell the buyer upfront. This could cost the buyer hundreds or thousands of dollars.
Tips for buying an FSBO
- If you are not an experienced buyer, have real estate representation on your side to help guide you through the process.
- Get a preapproval from your OVM Financial loan officer to help your buying potential.
- Don’t let a low purchase price trick you into buying a home. There could be underlying issues that the seller did not disclose in the beginning. If the property sounds too good to be true, it probably is!
- Have a real estate lawyer on your side to catch items in the contract you may not catch.
- Purchase title insurance to protect your investment.
The bottom line
Buying an FSBO does not have to be a scary process as long as you prepare. Understanding the benefits and pitfalls of the transaction can help determine if a FSBO purchase is right for you. But it’s important to remember that if you are inexperienced, having representation on your side can help ensure you’re getting the best deal. As always, we’re here to answer any questions you have and help guide you through the process!
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