Occasionally, homeowners opt to list their property without the assistance of a real estate agent. This is commonly known as a For Sale By Owner (FSBO) sale. This choice is often made to minimize expenses associated with listing agent fees. While these FSBO homes (pronounced “fiz-bo”) may not always appear on widely-used real estate platforms or the Multiple Listing Service (MLS), they present a potential opportunity to broaden your home search. Exploring FSBO listings could be a beneficial way to discover hidden gems and potentially reduce competition from other buyers.
What is For Sale by Owner?
In the world of real estate, a FSBO home is one where the seller takes charge of the entire selling process without involving a listing agent. This includes managing the marketing, paperwork, and legal aspects of the home sale independently. While this approach offers autonomy, it can pose challenges, particularly for those new to the process.
Usually, homeowners choose to navigate the selling process independently for a key reason: cost savings. After all, sellers are responsible for covering the entire real estate agent commission.
When it comes to FSBO (For Sale By Owner) sellers, their homes might not always pop up on the MLS. This makes it a bit trickier for buyers to discover them.
Now, here’s the scoop for buyers: FSBO sellers, not being real estate pros, sometimes face challenges in pricing their homes and sealing the deal. That’s where a savvy buyer’s agent comes in! With the right guidance, buyers can often score better deals, as a skilled agent can help navigate negotiations and secure favorable terms.
If you’re on the hunt for one of these homes, you might need to put in a bit of extra effort. Check out the local newspaper or keep an eye on real estate fliers scattered around town where sellers often place ads. Another option is exploring websites where sellers can pay to list their properties.
Pros and cons of buying FSBO homes
Expanding your home search to include FSBO homes comes with several advantages:
- More choices — Incorporating FSBO homes in your search broadens the possibilities, reaching homes not necessarily listed on the MLS or traditional home search sites.
- Less competition — As only 70% of home buyers consider FSBO homes, exploring these listings may mean encountering less competition and receiving fewer offers.
- Cheaper sale price — According to some studies, FSBOs tend to sell for tens of thousands of dollars less than homes sold through agents.
- Negotiation advantage — Many buyers believe they or their agent can negotiate more effectively than novice sellers, potentially resulting in favorable terms.
- Direct contact with the seller — For some buyers, the appeal lies in the personal touch of communicating directly with the homeowner, rather than solely through agents
If you’re partnered with a real estate agent as a buyer, the risks are quite low. However, if you’re navigating the process without an agent, exercise caution.
The drawbacks of purchasing a home directly from the owner:
- Inexperienced sellers — FSBO sellers may lack professional expertise. This may mean to potential issues with paperwork and legal matters that could jeopardize the sale.
- Excessive listing price — Due to personal attachment, FSBO sellers might overvalue their homes, resulting in mispricing.
- Unwillingness to compromise — FSBO sellers, aiming to minimize costs, may resist property improvements or negotiations.
- Inadequate disclosure — FSBO sellers may not be fully aware of disclosure requirements, emphasizing the need for thorough inspections and appraisals.
- Low or no buyer’s agent commission — In an effort to save on commission, some FSBO sellers may offer below-average or zero buyer’s agent commission. This potentially leads to buyers to cover their agent’s fees in certain cases.
Getting help from a buyer’s agent to buy a FSBO home
You can still have your own agent when buying a FSBO home. A buyer’s agent helps you through the homebuying process, finding homes, negotiating with sellers, and closing the deal. They also give you insights about the local market.
Usually, as the buyer, you don’t have to pay for your agent. The seller traditionally covers the real estate agent commission, which is around 5% to 6% of the home sale price. This commission is divided between the listing agent, the buyer’s agent, and their brokerages.
For FSBO sellers, they don’t have a listing agent, but they’re expected to pay the buyer’s agent commission. Sometimes, FSBO sellers may not be aware of this or hesitate to pay it.
Your agent will confirm payment with the FSBO seller at the beginning. If the seller won’t cover it, you might need to pay your agent’s commission to purchase the home.
- Step 1: Find an agent
- Step 2: Get pre-approved
- Step 3: Find a property
- Step 4: Make an offer
- Step 5: Discuss and agree on the terms and conditions.
- Step 6: Get a home check and find out its value.
- Step 7: Negotiate repairs or getting a discount
- Step 8: Close