For Sale By Owner: Is it Right for You?
If your dream home is for sale by owner, here’s what you need to know before making an offer.
Selling a home is a large task, but some homeowners feel they’re up to it. Because only 6.2 percent of home sales are for sale by owner (also known as FSBO), according to Trulia data, it’s not something most buyers encounter. But if you find a dream home that happens to be listed this way, the sales process will be a little different, so it’s helpful to know how to navigate it.
What’s different about for sale by owner?
You’ll want to check comps extra carefully.
Whether it’s due to a lack of experience or owner optimism, for sale by owner homes are priced an average of 2 percent higher than agent-listed homes, according to Trulia research. This means it’s even more important to look at comps in the area and double check price accuracy.
You may need an attorney or another third-party expert.
Seller’s agent or not, some states require attorney representation at closing to protect the interests of both parties. You will also need a third party—either an attorney or a title company—to hold onto earnest money placed in escrow (something a listing agent would typically do).
You’ll need to pay attention to seller disclosure requirements for your state.
While anyone opting to sell their own home should be well-versed in the disclosure requirements for their state, you shouldn’t assume they are. It’s important to do your own research into what the seller should be telling you about the home—including things like structural problems, past flooding issues, and the use of lead paint.
You may be communicating directly with the seller.
Without an agent to act as a buffer, a for sale by owner situation could mean you or your agent is communicating—and negotiating—directly with the seller. While this could go any number of ways, there’s a good chance there will be more emotion on the part of the seller, which could affect your deal. After all, they have a direct tie to the property and the life they lived there.
What’s the same about for sale by owner?
You can still work with an agent.
The seller may have decided to do the work themselves, but that doesn’t mean you have to. You can still work with a buyer’s agent to negotiate on your behalf, and—depending on your contract—the seller may pay at least a portion of their commission at closing. Having a buyer’s agent is smart because they’re a real estate pro and you’re probably not. They’re especially helpful when it’s time to draft the purchase agreement (the document outlining all aspects of the offer) since this is usually a task for the listing agent.
You should still consider getting pre-approved for a mortgage.
In a multiple-offer situation, it’s important to show you have your financial ducks in a row and you can make a move quickly. This is the same regardless of whether it’s agent or seller sorting through the offers.
You will likely still need an appraisal.
Unless you plan on forking over cash, your lender will require an appraisal to ensure you aren’t paying more than what the house is worth. An inspection, on the other hand, is optional—but if you want to make sure you aren’t taking on major issues with your purchase, it’s always a good idea to get one.
You will still make an offer and negotiate a final sales price
In a for-sale-by-owner situation, many of the basic steps are the same—including making an offer and negotiating a final sales price. Although in this case, the negotiating parties—typically the two agents—will vary.