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Most home sellers work with real estate agents to list and market their properties and negotiate with buyers. But about 7% of sellers skip hiring an agent and list their homes "for sale by owner," or FSBO, according to a National Association of Realtors 2021 survey.
Buying a home "for sale by owner" means you, or you and your agent, will deal with the homeowner directly, rather than through a listing agent who represents the property owner. Here's what to know.
Working with a buyer's agent to purchase a FSBO home
You can still have your own agent when buying a FSBO home. A buyer's agent guides you through the entire homebuying process, from finding suitable properties in your price range to negotiating on your behalf with sellers to closing. Besides handling technical details, an agent can also provide some healthy perspective about the local market.
As the buyer, you usually don't have to pay for an agent's services. Traditionally, the seller pays the real estate agent commission, which is typically 5% to 6% of the sale price of the home. The commission is then divided between the listing agent and the buyer's agent and their respective brokerages.
FSBO sellers don't pay for a listing agent, but it's generally expected that they'll pay the buyer's agent commission. However, some FSBO sellers may be unaware of this commission or balk at paying it.
Your agent will verify payment with a FSBO seller at the start. If the seller isn't willing to pick up the tab, then you may need to pay the agent's commission to buy the home.
Buying a FSBO home on your own
You can buy a home without a real estate agent and deal directly with a seller, as long as you haven't signed an agreement with a buyer's agent.
But unless you're well-versed in real estate contract terms, contingencies, disclosure requirements and the myriad other technicalities of a real estate transaction, it's a good idea to have an agent in your corner.
A home could be the biggest purchase you ever make, and you'll be dealing with a seller who may not have any real estate experience. It's critical that things are done correctly.
Here are some of the tasks you'll need to handle if you choose not to hire an agent:
Check the prices of recent comparable home sales to evaluate the asking price.
Contact the seller directly to see the home.
Decide how much you're willing to pay and what contingencies to include in an offer.
Prepare a written offer and negotiate with the seller.
Hire a home inspector to evaluate the home's condition.
Make sure the purchase agreement is drawn up correctly.
You may be required to hire a real estate attorney, depending on state law. But it's a good idea anyway when working without an agent.
Where to find FSBO homes
You can find FSBO listings on general websites, such as Zillow.com and Trulia, which are both part of Zillow Group, and on websites specializing in FSBO listings, such as FSBO.com and ForSaleByOwner.com. FSBO.com is owned by FSBO Inc., an online advertising service, and ForSaleByOwner.com is owned by Rocket Companies, which also owns Rocket Mortgage and Rocket Homes.
FSBO homes aren't always on the multiple listing service, or MLS, the main platform that real estate professionals use to list and find properties for sale for their clients. There are services that will place FSBO listings on the MLS for a fee, but many FSBO sellers post listings elsewhere for free.
Before house hunting, get preapproved for a mortgage
The homebuying process and basic requirements to close the deal are the same for FSBO and other homes. That means it's crucial to get your finances in order before you start shopping.
Apply for mortgage preapproval with at least a few lenders to compare rates and fees. Sellers will want to know that you've got the financial backing to buy a home. And your real estate agent will be interested in that, too.
When you're preapproved, you'll get a mortgage preapproval letter, which will state how much the lender is willing to loan you and under what terms. The letter will encourage sellers to take your offers seriously, whether or not they have agents.