Family at newly sold home, sold sign in yard.

How To Buy A House That’s For Sale By Owner

Emma Tomsich6-minute read
August 13, 2021

While some home buyers don’t set out with the desire to purchase a home that's for sale by owner (FSBO), buying a FSBO house can be beneficial for both the buyer and the seller. Before you decide to buy a house from a homeowner and their real estate agent, let’s talk about what it means to buy a FSBO home and how that's different from the traditional home buying process.

What Does For Sale By Owner Mean?

Before explaining the FSBO home buying process, it’s important to define the term FSBO. FSBO homes are sold by a homeowner without the help of a listing agent. Typically, sellers may choose to sell FSBO to avoid paying commission to a real estate agent. As the buyer, there can be many reasons to buy or not buy a house that is FSBO. Let’s take a look at some of these benefits and drawbacks.

Benefits And Drawbacks of Buying A For Sale By Owner Home

Benefits

Strong Communication

One of the main reasons home buyers prefer purchasing a FSBO home is the direct communication between them and the seller. When buyers can speak directly to the seller, they are able to receive more information in a shorter amount of time. This quick and easy form of communication eliminates the need for a listing agent as a middleman and going back and forth to get questions answered. Having direct communication with the owner of the home will also give the buyer more room to negotiate the final price of the property.

More Information About The Property

When a buyer and seller have effective communication, the buyer is also able to learn more specific information about the property. And no one knows more about the home and its location than someone who has been living there for an extended period of time. If you have questions about a home as the buyer, you'll be able to receive detailed answers from a FSBO seller. You can also get recommendations and advice about popular restaurants, parks, and other attractions in the area.

Drawbacks

Sellers Don’t Always Follow Market Value

Because some homeowners tend to think highly of their homes and have little to no real estate experience, some FSBO sellers can have unrealistic ideas about the value of their property. This can cause FSBO sellers to overprice their homes which may be problematic during the home appraisal and closing. It could also mean that as a buyer, you pay more for the home than you should. Either way, as a buyer of a FSBO home, it’s important to do your research about the market value of the home you’re interested in.

Undisclosed Information

While most FSBO sellers can give detailed information about the property, some sellers may not disclose valuable information if it's negative. By law, sellers are required to disclose all known problems or defects with a home during the sales process before the closing. If you find a problem with the property after closing, you may be able to enter into a difficult and expensive legal process in which you would have to prove that the seller knew about the problem and chose not to disclose it.

Covering Additional Costs

If a FSBO seller is motivated by saving money, it’s possible they might not want to make repairs or cover the costs of any improvements. Unless you can convince a FSBO seller to help out, this would make you responsible for covering additional costs and repairs.

How To Buy A FSBO Home

As a potential, first-time home buyer, I’m sure this is the part you’ve been waiting for. In this section, we will go through the steps most people follow when purchasing a home that’s FSBO.

Step 1: Get Approved For Your Mortgage

Getting approved for a approved for a mortgage is an important step in any home purchase. This will give you information about how much money you can spend on a future home. If you’re looking to start shopping right away, get approved online with Rocket Mortgage® so you can get your approval letter faster than other methods.

Step 2: Consider Working With A Buyer’s Agent

If you’re unfamiliar with the FSBO home buying process, it can be beneficial to work with a buyer’s agent. A buyer’s agent will be able to negotiate on your behalf and keep paperwork in order. They can also help you look at properties if you don’t have any narrowed down.

Typically, the seller pays the commission for the buyer’s real estate agent which can be beneficial to you as a buyer. But just to be sure, make sure those terms are agreed upon in the purchase agreement. Ultimately, whether you choose to hire a buyer’s agent or not, make sure to consult with a real estate professional when purchasing a FSBO property.

If you’re looking at getting a buyer’s agent of friends at Rocket Homes Real Estate LLC (“Rocket HomesSM”)can set you up with an agent who can help you find a property that meets your specifications and negotiate on your behalf.

Step 3: Attend A Showing Of The Home

Once you find a property you’re interested in, it’s time to attend a showing. As with most real estate transactions, it’s important to get an in-depth look at the home before you commit to it. If you’re working with a buyer’s agent, you can have them schedule a showing of the home for you. But if you’re working on your own, you can directly contact the seller and arrange a showing. During the showing, make sure to evaluate the property and ask the seller questions about the home and its location. If you aren’t working with a buyer’s agent, this might also be a good time for you to ask the seller to disclose any problems or issues with the property.

Step 4: Make An Offer, Negotiate and Agree On A Price

If you’re still interested in the home after you attend the showing, you can make an offer. If you’re using a real estate agent, they can give you advice about the home’s pricing to know if you should bid below, at or above the home’s asking price. If you’re not using a buyer’s agent, make sure to do research about the home’s market value and prices of comparable homes in the area.

It’s likely that you'll need to negotiate with a FSBO seller before deciding on a final price.

You and the FSBO seller will also need to execute a purchase agreement. A purchase agreement is a contract between a seller and a buyer that lays out the terms of the home sale. Typically, the seller’s agent is responsible for the purchase agreement, but if the house is FSBO, the buyer might be responsible for the agreement. If you’re working with a buyer’s agent, they'll handle the purchase agreement. If you’re not using a real estate agent, then you and the seller can hire someone to draft the agreement or draw it up yourselves.

If you choose to draw up your own purchase agreement, here’s what it needs to include:

  • The full names of the buyer and the seller

  • The full property address, including the county and unit number, if applicable

  • The purchase price of the property

  • A description of the property’s condition at the time of sale

  • An indication that you’re satisfied with the property’s condition

  • Removable fixtures and appliances sold along with the home, if any

  • Conditions or repairs that need to be completed before the sale can go through

  • The target closing date for the sale

  • Signatures from the buyers and sellers involved with the transaction

 

But before you take the purchase agreement into your own hands, make sure you consult a real estate professional.

Step 5: Hire A Lawyer And Home Inspector

Before purchasing a FSBO home, it’s crucial that it has a home inspection. During a home inspection, a trained home inspector evaluates the home’s systems, appliances and structures.

It’s important to note that a home inspection is different from a home appraisal. While both are important, an appraisal assesses the home’s value, while an inspection looks for problems. Also, a home appraisal is a required part of the mortgage process, but the inspection isn’t, so you’ll need to hire an inspector yourself.

If any problems do arise during the home inspection, make sure to consult a real estate professional. From there, you have a few options. You can ask the seller to fix the problem, ask for a credit to fix the problem, ask for a reduction in the sale price, or cancel the sale (if an inspection contingency is included in the purchase agreement).

Step 6: Close

Once your mortgage has been approved and you’ve completed the home inspections, you'll be able to close on the property. This is an exciting time because it means the home will officially become yours!

At closing, you’ll pay your down payment and closing costs. You'll also get the keys to your new home if the seller didn’t negotiate to stay past closing.

Summary

If you’re considering buying a house that's FSBO, make sure to do your research ahead of time. Be aware of the benefits and drawbacks of purchasing a FSBO home, and determine how they might affect you and your personal home buying experience. If you’re worried about problems that might come up along the way, consult a real estate agent. Working with a real estate agent can protect you from overpaying, help you stay organized, and give you home buyer tips.

Apply Online with Rocket Mortgage®

Get approved with Rocket Mortgage® and do it all online. You can get a real, customizable mortgage solution based on your unique financial situation.

1Rocket Mortgage®(also doing business as Rocket HQ) and Rocket Homes Real Estate LLC are separate operating subsidiaries of Rock Holdings Inc. Each company is a separate legal entity operated and managed through its own management and governance structure as required by its state of incorporation, and applicable legal and regulatory requirements.

Emma Tomsich

Emma Tomsich is a student at Marquette University studying Corporate Communications, Marketing and Public Relations. She has a passion for writing, and hopes to one day own her own business. In her free time, Emma likes to travel, shop, run and drink coffee.