Here’s What You Need to Know About Buying a FSBO
For sale by owner homes are homes that are sold without the representation of a licensed real estate agent. One of the main reasons that some homeowners prefer to sell without an agent is because they hope to make money. Another reason that homeowners choose to sell their homes independently is that they believe their property will be on high demand because of favorable market conditions. Their selling process is therefore much more different than if they’d gone through an agent. Similarly, the process becomes different for the buyer as well. With that in mind, here’s what you need to know:
Finding FSBO Homes
When you begin your home search, chances are the first thing you’ll do is head or over to a real estate platform like Zillow or Trulia. Or perhaps you already have an agent in mind, and head over directly to their site. Whatever the case, finding for sale by owner homes is a little more difficult because they cannot utilize multiple listing services (MLS) used on platforms like the aforementioned companies. This is because only real estate agents can create and publish MLS listings. Therefore, FSBO homeowners have to be a little more creative. You might notice them on forum sites like Craigslist, in local newspapers, and on signs in your neighborhood. However, it’s important to understand that even when you find a solid FSBO home for sale, you exercise caution.
Understand the Risks
Buying a FSBO does come with a few risks. This doesn’t mean you should rule it out entirely, but understanding the potential downsides will help you protect your investment. For example, even when a home price seems like a good deal to you, there’s a possibility that the homeowner has priced the property above market value, which could end up hurting you later down the line. You’ll also need help understanding the fine print and contract details, and real estate jargon can be highly complex and if neither buyer nor seller has representation, you could end up making some critical mistakes.
You Should Use an Agent
It would be in your best interest to walk into a real estate transaction with a real estate agent on your side—especially if this is your first time buying a home and the homeowner doesn’t have a representation of their own. For starters, an agent will help protect you and ensure you don’t get swindled in a deal. Your agent understands the market and whether you’re getting a fair price, and will negotiate on your behalf. Even more importantly, they’ll walk you through the inspection process and help you analyze and address any potential issues before you reach the closing stages.
Paying the Agent
In a typical real estate transaction, the commission for an agent is around 6% of the home price, which is split between the listing agent and buying agent. If you have an agent and the home seller does not, the 6% is still expected to be paid. There are various ways you can handle this.
In some cases, a hybrid approach would allow the seller to pay a 2% or 3% commission to the buyer’s agent in exchange for basic, helpful services and a much smoother real estate transaction. This could be seen as a win for the seller, who ends up paying about half the commission they would if they used a dedicated listing agent. If the seller doesn’t want to get involved with the buyer’s agent commission at all, you can work with your agent to build that fee into the off on the home.