What to Know Before Buying a FSBO Home

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Don't go into an FSBO transaction unprepared.

Buying a home can be a complicated process under the best of circumstances. To find the home of your dreams, you'll need to go through a number of steps, including:

In most cases, you'll have a real estate agent to help you through these steps -- and the seller will as well. But that's not always the case. Some people don't end up working with a real estate professional to sell their properties. Instead, they list the property as For Sale by Owner (FSBO).

If you're considering making an offer on an FSBO home, there are a few things you need to know before you go forward.

1. You'll be dealing with the seller directly

A seller who has listed their property FSBO doesn't have an agent. That means there's no professional to act as a buffer between you and the seller. That most likely means:

  • You'll need to ask questions directly of the seller
  • The homeowners will probably be the ones who show you the property
  • You'll submit the offer directly to the homeowner

There are good and bad parts to that. Obviously, the seller is in the best position to know the details about the home. But, they'll also have an emotional attachment to the property that a real estate agent wouldn't have. That makes it harder to treat the purchase as a straight business transaction.

Sellers who aren't advised by an agent may be more offended by lowball offers or criticism of their home. They also may not be as informed about the steps involved with closing on a house.

Your real estate agent may be the one who is primarily left to deal with the consequences of this. That's because they'll be the ones working with the seller on your behalf. However, the absence of a listing agent can still impact your sales process.

2. Sellers may choose FSBO because they're on a tight budget

Listing a home FSBO can be a lot of work and an intimidating process. People may choose this approach not because they want to but because they can't afford to pay the standard commission to a real estate agent.

If you're dealing with a cash-strapped home seller, you should be aware they may not be able to negotiate much on price or pay for repairs if problems come up in an inspection. If they've been having cash-flow issues for a while, there could also be problems with deferred maintenance.

On the other hand, if they need to sell quickly because of financial difficulties, you may be able to get the home for a bargain price.

3. You'll need to do more due diligence

If your state has disclosure laws mandating that sellers disclose problems, those laws still apply even if the homeowner doesn't have a real estate agent. Still, sellers may not always be fully aware of the laws if they don't have an agent to advise them. So it's especially important to insist on a comprehensive home inspection.

FSBO homes are also routinely priced improperly, so you'll also want to ensure that you check out comparable sales. That way, you can hopefully avoid overpaying.

By keeping these pitfalls in mind, you should be able to successfully buy a home sold by its owner. You just need to go into the transaction with the knowledge that dealing directly with an owner is a different ballgame so you can protect your interests during the process.

Our Research Expert

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