For Sale by Owner Homes
Interested in buying a home for sale by the owner? The only thing to remember is that the people selling them are just like any other seller — only more so!
What sellers want: To make the most they can
For sale by owner (FSBO) sellers figure they can save money by not paying a commission to an agent. Contrary to what many buyers believe, however, this doesn’t mean the FSBO seller wants to pass any of those savings on to you.
This is certainly the case with a seller who, for whatever reason, doesn’t have much equity in the home; he doesn’t feel he can afford to pay the agent’s commission, much less give you a break on the sale price.
In a hot “seller’s market,” when homes are selling at or above the listing price, the FSBO seller has even more incentive to pocket as much of the sale price as possible.
All sellers want every penny of the asking price
FSBO sellers often set that price by looking at listing prices in the area, not at comparable actual sales prices. As a first-time buyer, you should be armed with good comps when you enter negotiations.
If the housing market is slow in your area, even a FSBO seller should be willing to negotiate. With a set of comps in hand, you should feel comfortable making an offer that might be well below the asking price. Make your case using sold properties – not homes currently listed for sale.
Do your due diligence
As a buyer you need to do all the same things you would if the house were being sold through a real estate agent:
- You still need to know if the asking price is fair (get comps!).
- You still want to inspect the property yourself and have a professional inspection done.
- You still need to make an offer and negotiate a contract.
Potential anomalies to bear in mind
Sellers who are not using a real estate agent may be doing so for reasons that can make for truly difficult dealings. Some sellers are so stubborn and unrealistic about pricing their property that they have passed from one agent to another until no agents will take the listing.
Or the seller may have been told that he needed to bring the home up to code, or to make sufficient repairs to bring it up to an acceptable standard to put on the market. Rather than go to this trouble and expense, the seller may have decided to sell the home himself.
With a FSBO you need to get answers to some additional questions:
- How long has the home been for sale?
- Was it listed with an agent or agents before the seller took over and, if so, for how long?
- Why does the seller believe the house has not sold (especially if he’s been trying to sell the home for a year or longer)? If he’s blaming lazy real estate agents, you may want to look at the house with an eagle eye before making an offer.
FSBO and your agent
Say you’ve been surfing the FSBO sites online and have found one or two homes that look interesting, or you’ve seen some while driving around your desired neighborhood. Let your agent initiate contact with the seller and get all the usual information about the home. (If not, you can approach the seller yourself, of course.)
A qualified buyer is nothing to sneeze at, so in many cases, the FSBO seller will be willing to work through your agent. The agent would handle all the paperwork and ensure that the closing process moves along smoothly.
This arrangement — a “one person listing” — means the agent will be paid a small commission, or a flat fee (ranging from $500 to $1,500), if the sale goes through to the specific buyer (you) named by the agent. (Check with your agent to be sure this type of listing is allowed in your state.) Flat fees are not unusual in situations where the buyer and seller have found each other independently of an agent, but where one or both parties want a real estate professional to handle some or most of the rest of the transaction.
Usually the agent will negotiate his or her fee with the seller. If the seller refuses to compensate your agent, however, and if you think this is the house for you, you can work out an agreement to pay the agent yourself. As a buyer’s agent, working for you and not the seller, the agent is obliged to do his or her best to get you a good price.