{"id":32229,"date":"2022-07-25T17:05:28","date_gmt":"2022-07-26T00:05:28","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=32229"},"modified":"2022-07-25T17:05:28","modified_gmt":"2022-07-26T00:05:28","slug":"buyer-buying-a-home-from-owner","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-buying-a-home-from-owner\/","title":{"rendered":"What You Need to Know If You\u2019re Buying a Home from the Owner"},"content":{"rendered":"

You\u2019re driving around a neighborhood you love, and then up there in the distance, you see a sign in a yard. Is it a yard sale? A political sign? A contractor\u2019s information?<\/p>\n

No\u2026it\u2019s a for sale sign!!!<\/p>\n

But this sign looks different from the real estate agent signs you usually see and it lists the homeowner\u2019s contact information. You\u2019ve found yourself a FSBO home.<\/p>\n

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What is a FSBO home?<\/h2>\n

A \u201cfor sale by owner,\u201d or FSBO (pronounced \u201cfizz-bo\u201d) home, is a home that is being sold by its owner who hasn\u2019t hired a listing agent. In this case, the homeowner will be taking care of the home sale process and negotiations themself.<\/p>\n

You can usually find these homes by driving around the neighborhoods in your area and scoping out \u201cfor sale\u201d signs, but they can also be found on real estate websites and social media platforms like Facebook Marketplace. If you decide that you want to buy a FSBO home, the buying process tends to look a little different than a traditional sale.<\/p>\n

In this guide, we\u2019ll walk you through just about everything you need to know about buying a FSBO home. We even talked with top real estate agent Jesse Allen<\/a>, who sells properties 51% faster than the average agent in Jeffersonville, Indiana<\/a>, to get the inside scoop on what you need to know about FSBO homes and whether or not you<\/i> should hire an agent, even if the seller doesn\u2019t.<\/p>\n

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Why would a seller want to list their home FSBO?<\/h2>\n

When a seller hires a listing agent, that agent will collect a commission from the proceeds of the home sale, usually somewhere between 2.5% and 3%<\/a> of the home\u2019s sale price. When a seller decides to forgo hiring an agent, saving on the commission is a big consideration.<\/p>\n

Another reason someone may consider selling their home themselves could be that they already know a buyer and want to cut out the middleman. In fact, 57% of FSBO sellers<\/a> knew the buyer of their home.<\/p>\n

Allen finds that \u201cwe see more [FSBO homes] in a neighborhood where you can pretty easily tell what the house is worth.\u201d For sellers in neighborhoods with many recently sold homes, it can be easier to determine what their asking price should be based on estimated market value. In these cases, sellers may feel more comfortable handling the pricing and selling themselves.<\/p>\n

The housing market can also play a role in the seller deciding to sell the home themselves. In a hot seller\u2019s market<\/a>, it might be easier for a seller to sell their home themselves rather than in a buyer\u2019s market when they may have to give in to more buyer demands. If the market gets too hot, however, sellers might be more inclined to work with a listing agent.<\/p>\n

Allen recalls, \u201cwhen the housing market was at an all time high about a year and a half ago where things were selling extremely fast, we saw a lot of people doing for sale by owner.\u201d But once sales started getting more complicated with multiple-offer situations, cash offers, and more creative offers<\/a>, \u201cthey knew they could sell their home themselves, but it\u2019s so much easier to let somebody handle the entire transaction, so they started reaching back out to us.\u201d<\/p>\n

According to the National Association of Realtors\u00ae, in 2021, only seven percent<\/a> of home sales were FSBO, so there is a relatively small chance that you\u2019ll be in a position to buy one. But in the event that you are, let\u2019s look at some pros and cons.<\/p>\n

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Should I buy a FSBO home?<\/h2>\n

There are definitely pros and cons to buying a FSBO home<\/a>. Ultimately, you know your situation best, but you can use this list as a starting point to help you make a decision that\u2019s best for you.<\/p>\n

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Pros of buying a FSBO home<\/h3>\n

The home price might be lower<\/h4>\n

Knowing that they will save money by not paying the listing agent\u2019s commission, a seller might list their home at a lower price than they would if they had hired an agent. The seller may also be trying to sell their home quickly and the price might reflect this.<\/p>\n

The buyer pool could be smaller<\/h4>\n

One of the benefits of hiring a listing agent<\/a> is their marketing expertise. FSBO sellers don\u2019t have access to a marketing team and the resources that an agent does, so the home might stay on the market longer and have fewer interested buyers. This could reduce the likelihood that you\u2019ll have a bidding war or need to offer more than their asking price<\/a>.<\/p>\n

Negotiate directly with the seller<\/h4>\n

When a seller works with a listing agent and a buyer works with a buyer\u2019s agent, the agents do the negotiating. When you buy from a FSBO seller, either you or your buyer\u2019s agent will negotiate with the seller directly. This can have some advantages because you\u2019re not going through multiple people to get your requests to the seller.<\/p>\n

It could be more efficient<\/h4>\n

In a best case scenario, negotiations go smoothly, the inspection doesn\u2019t reveal any major issues, the appraisal comes in right where it should, and the whole process is very efficient (we\u2019ll get into what could create some hiccups later on).<\/p>\n

When both parties work with agents, you\u2019ll likely go through them to schedule showings, inspections, appraisals, and offer submissions. These things can take time to coordinate. When you buy a FSBO home and choose not to use a buyer\u2019s agent yourself, you\u2019ll be doing all the scheduling directly with vendors which can potentially save time.<\/p>\n

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Cons of buying a FSBO home<\/h3>\n

Negotiations can be tricky<\/h4>\n

When both the buyer and seller work with an agent, the agents can act as an intermediary to help mitigate buyer and seller emotions. If a seller is unwilling to compromise on certain things like repairs or come down in price, a listing agent can advise them on whether or not they\u2019re being unreasonable. Similarly, a buyer\u2019s agent can advise you if it\u2019s time to walk away.<\/p>\n

The home might be overpriced<\/h4>\n

Sellers who do not understand the market may not know how to price their home appropriately. Emotions can also factor in<\/a> if they feel a connection to their home and feel like it\u2019s worth more than it actually is. While a seller\u2019s memories in their home are priceless, the home itself is not.<\/p>\n

The seller may not pay buyer\u2019s agent commissions<\/h4>\n

Often, buyer\u2019s agent commissions<\/a> are a set percentage that the seller pays out of the total sale price of the home. If the seller doesn\u2019t work with an agent but you do, they may not be willing to pay the buyer\u2019s agent commission, meaning that it would have to come out of your pocket.<\/p>\n

Seller\u2019s disclosures may be incomplete<\/h4>\n

One thing that a seller\u2019s agent helps a seller with is filling out their seller\u2019s disclosure so that it is complete and complies with state requirements<\/a>. If the seller isn\u2019t working with an agent, or if the state you\u2019re in doesn\u2019t require a seller\u2019s disclosure, you may not be informed of pertinent information or defects that could surface during the home inspection<\/a>. While a FSBO seller might not be intentionally deceitful, they are not experts and might not know what to look for.<\/p>\n

You might be more susceptible to frauds or scams<\/h4>\n

It would be terrible to find a home you love, meet with the seller, get excited about buying, and then find out that the seller can\u2019t actually sell their home. Maybe there are liens or judgments against the title \u2014 or maybe they don\u2019t actually own the home they\u2019re trying to sell.<\/p>\n

Either way, you don\u2019t want to get yourself stuck in a situation where you waste your time attempting to purchase a home, only to be disappointed. If the seller is working with a listing agent, their agent will more than likely have already done their due diligence to make sure they are able to sell their home.<\/p>\n

\n [Agents] provide the contract, we\u2019ll make sure everything is signed and dated just like it needs to be, we\u2019ll make sure their lender gets it, and it gets sent to the title company. We do everything on the back end for the transaction just as if we represented both sides. The only difference is that we have no part in negotiations.<\/span><\/b><\/q>\n
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