Not every home for sale is listed by a realtor. Many homeowners decide to try for sale by owner (FSBO). This way they don’t have to share the profits. Since it’s up to the seller to pay the real estate agent, the seller comes out the winner on this one. So does it make sense for you as a buyer to buy FSBO home? We take a look below.
What you Might Lose Buying a FSBO
Don’t get us wrong, we are all about saving money, but you should know the downsides of buying a FSBO.
First and foremost, you lose professional advice. That could be worth a lot. Real estate agents have a network of professionals at their fingertips. If they have a question, they can ask someone. They can provide you with knowledgeable advice on the value of a home. They can also provide personal opinion on what they think. This could be worth its weight in gold.
Second, you aren’t dealing with a neutral party. The seller is obviously emotionally invested in the home. They may misguide you without even realizing it. They obviously aren’t going to point out the bad things about the house. It could also make you a little less comfortable asking specific questions. Asking a realtor or other neutral party just somehow seems easier.
Third, you won’t know if you are making a good offer or not. Lenders are not going to give you a loan worth more than the value of the home. You have a lot at stake here. Without the advice of a professional real estate agent, you could bid way out of the ballpark. Worse yet, the seller might accept your bid. The problem is, everything can fall apart in the final hour.
What you Might Like About Buying a FSBO
Of course, there are upsides to buying a home for sale by owner.
First, you can save money. Since the seller doesn’t have a real estate agent to pay, they don’t have to mark the price up. They also have a little more wiggle room when it comes to negotiations. This means even if they ask a high price, they might be willing to come down. The real estate agent commission can cost a seller as much as 5% of the selling price. On a $200,000 home, the seller saves $10,000!
Second, you get more direct communication with the seller. This can be a great thing. You can get more information about the home. You can even get a bit of that warm, fuzzy feeling the seller gives off as they talk about their prized possession. Plus, without a third party in there, you may feel a little better about opening up. Sometimes just letting a seller know why you want the home gives you the leg up on any competing bidders.
When your questions go directly to the seller, you may get to know the neighborhood much better. You can ask direct questions about schools, shopping, churches, and even the dynamics of the neighborhood. The seller will likely be open with you about what you should expect. This could be an important aspect if you are looking for something particular.
Fun Facts About Buying a FSBO Home
Sometimes buying a home for sale by owner gives you a little more leeway with the contract. When you deal with a 3rd party, it tends to be more cut and dry. You don’t have a lot of room for “creativity.” When you deal with the seller directly, though, you can ask for odd requests. This can go both ways too. Sometimes sellers need unique things, like an extra week or two to live in the home even after you close on the deal. These are things you can work out together without a 3rd party interference.
Beware, though, you’ll be knee deep in the transaction. You’ll likely have dealings with it every single day. It can get tiring and overwhelming. But without a real estate agent handling the nitty gritty, it’s necessary.
Lastly, you should always have a real estate attorney. You are talking about a very large investment here. Before you sign any documents, you should have your attorney review them. It’s especially important since you don’t have a real estate agent handling it for you. If no one else looks over the documents, you don’t know what you are signing. Letting a knowledgeable professional look it over first is crucial.
The Process Works the Same
No matter if you buy a home for sale by owner or with a real estate agent, your loan process will be the same. Namely, the house must pass an appraisal. This helps protect you and the lender. You don’t have to worry about paying too much for the home. Even if you do, the lender won’t approve the loan once the appraisal comes back. This is like an insurance policy for you.
Once you sign the contract, you start the process with your lender. Hopefully you had a pre-approval prior to making your bid. The rest of the process should go rather seamless then. You provide the lender with your necessary documents and they process the loan. In the meantime, the appraiser goes out and appraises the property. Once everything comes together, you can close on the loan.
It’s important to note that lenders may require certain things to be fixed on the home. Depending on the mortgage program you use, you may have no choice. FHA and VA loans have specific property requirements. If the property doesn’t meet them, the seller will have to make the home meet them. This could be difficult to manage when you don’t have a 3rd party working for you.
Overall, the FSBO process can work in your favor. It should save you money. It could also be a bit more of a headache than you planned, though. Make sure you do your homework and have the necessary support to make sure the process goes off without a hitch.Click to See the Latest Mortgage Rates»