Buying a house that’s for sale by owner (FSBO): gold mine or headache?

Buying a house that’s For Sale By Owner (FSBO) can either be a gold mine or a headache, depending on how you approach it. Here’s the deal:

The good

1. No realtor commissions: FSBO sellers aren’t working with an agent, which means there’s no need to pay a listing agent commission (typically 3% of the home’s purchase price). That commission is usually factored into the sale price, so its absence could give you room to negotiate a lower price or save money overall.
2. Direct communication: dealing directly with the seller can cut out the middleman. This gives you an opportunity to get answers faster, make quick decisions, and tailor negotiations to your preferences. If you’re good at reading people, this transparency can give you insight into the seller’s motivations or urgency.
3. Potential for a lower purchase price: since FSBO homes might not get as much exposure (more on that later), sellers could be willing to negotiate more aggressively, especially if the property has been on the market for a while. If you’re good at negotiating and know your market, you could score a lower price or better terms.
4. Faster decision-making: without agents mediating the process, FSBO transactions can sometimes move quicker. The seller doesn’t need to consult their agent for every little decision, and that can speed up negotiations and paperwork, especially if you both have clear goals in mind.
5. Sellers may be more flexible: FSBO sellers may be willing to make concessions or throw in extras (like appliances or closing cost coverage) if they’re motivated.

The bad

1. If you don’t use your own realtor, you’ll need to navigate the legal, financial, and steps of buying a home on your own. This includes handling things like contingencies, disclosures, and offer structuring. This can get risky if you’re unfamiliar with the process.
2. Risk of overpaying: FSBO sellers may price their homes emotionally rather than based on market data. Make sure, if you have your own agent, that they pull the comps (comparable sales data) and verify that the home is prices at a fair market value.
3. Negotiating with an emotional seller: After having spent years or a lifetime in a home, selling a property can bring up all types of emotions. Negotiations can become tense if the seller feels insulted by a lower offer or if they’ve priced the home unrealistically high. An agent typically acts as a buffer in negotiations.
4. FSBO properties may not appear on the Multiple Listing Service (MLS) where most buyers search. Limited exposure can mean fewer competing offers, but it also means less market data and potentially fewer details about the property.
5. Liability issues: FSBO sellers might not be aware of all the legal disclosure requirements (such as disclosing known issues with the property). If the seller fails to disclose problems, you could end up with expensive repairs or legal battles. A realtor helps protect you by ensuring the seller complies with all legal requirements, another reason why if you’re choosing to buy a home that is FSBO, having your own agent to pressure test and verify that everything looks sound could be a big help.

To wrap it up

FSBO homes can save you some money and give you more control, but make sure you’re prepared to take on extra responsibilities like vetting the home’s price, condition, and title. Using your own agent can smooth over these rough spots, and if you negotiate right, you won’t even have to pay their commission. Just be aware of the extra diligence required on your end to make sure everything checks out.

Pro Tip: Whether or not you use an agent, always hire a home inspector and a real estate attorney to review documents—these professionals can save you from expensive surprises down the line.

If you’re ready to start your journey to homeownership, get pre approved with Tomo Mortgage today.