For Sale by Owner: The Pros and Cons for the Buyer  - Quicken Loans Zing BlogEarly spring is always a popular time to buy a home, and, if you’re in the market for one, you’ll probably come across some homes that are for sale by owner or FSBO (pronounced Fizzbo). There are some definite pros to buying a FSBO home, but you’ll want to have a good understanding of the negatives before you go to buy a home directly from the owner.

The pros and cons of buying a FSBO home will shift in weight a bit depending on whether you get your information from a real estate agent or a place like Obviously, both have a biased opinion of the situation. There are always home sales with real estate agents that go terribly wrong and sales with the owner that go just fine, but the collective wisdom would suggest that there are a lot of risks to buying a home without any help from a professional.

The Pros

If you’re buying a home directly from the owner, you don’t have to pay agent fees.

You and the seller can talk directly without dealing with the pressure and possibly self-interested goals of an agent. You can discuss your specific goals and attempt to build a rapport with the owner that can really help the process.

You might have a better bargaining opportunity. Since the seller isn’t paying the 5-7% agent commission, he/she can afford to sell the home for less.

The owner knows the home and the neighborhood much better than an agent would, so he/she can point out all of the home’s perks, as well as answer your questions about the neighbors, the area, the schools, etc.

The Cons

In most cases, you and/or the seller won’t have a lot of real estate experience, so, without the guidance of an experienced agent, there’ll be a lot more potential obstacles and pitfalls to navigate while trying to close on the home.

Without legal advice, you can get yourself into some trouble here, potentially being forced to purchase the home when you didn’t want to. The way to avoid this is to include all of the necessary contingencies – the things you want to have/get done before you are willing to buy the home.

Remember, the main reason someone is selling his/her home without an agent is to save money. So, they’re probably going to have their home listed at a higher price to save/make even more money, especially if they’re looking to move into a more expensive home. Many people price their home at what they want or “need” to get out of it, not what it’s realistically worth in the current market.

Some General Tips

Have the home inspected and appraised by qualified, reliable professionals.

Never rely on verbal agreements – get everything in writing.

Don’t give the seller your earnest money deposit; give it to a third party, like an escrow account. Your lender should be able to help you set this up.

If there are any setup fees associated with the escrow account, you can ask the seller to cover them. This is one major point I should make: when it comes to the costs/fees associated with buying a home (aside from the actual purchase of the home of course) there are many negotiables. Ask the seller to cover some of the fees, or ask him/her to lower the price accordingly. All he/she can do is say no.

Here’s a list of some of the many extra fees:

• Owner’s title insurance policy

• Document preparation fee

• Transfer taxes

• Loan fees for FHA or VA loans

• Pest inspection fee

• Unpaid homeowners association dues

• Bonds or assessments

• Delinquent taxes

• Notary fees

Get a Comprehensive Loss Underwriting Exchange, C.L.U.E., report. It shows any insurance claims that have been made on the home in the past five years. This way, you’ll be able to see what kind of damage, especially from water, the home has sustained, so you’ll know to look for things like mold. This report requires the seller’s permission, so, again, ask him/her to order and pay for it.

Specify when you get possession – is it at the time of closing or at a later date.

In the final analysis, if you ask a real estate agent, you’re most likely going to hear that buying a FSBO home on your own is a bad idea. If you ask someone from a FSBO website or other organization, you’re probably going to be told it’s really easy and saves you lots of money.

The best course of action isn’t to shy away from FSBO homes but to be prepared and hire an agent/attorney to help you through the paperwork-heavy closing process, at the very least.

This post should be a great jumping-off point for your research, and if you have any comments or come across some helpful info on your own, please share them with us!


Related Posts

This Post Has 2 Comments

  1. Look at the photos of the FSOB ‘detractors’. They look a lot like the pictures you see on real estate agency signs, don’t they? You don’t even need a high school diploma to become a real estate agent.

    Don’t let them scare you with the words ‘lawyer’ and ‘attorney’. The agent is less likely to even know about potential problems with the home. A home inspector is required in all cases and in all cases, problems with the home will be on paper and the buyer can see that information. The appraisal will also show the good, the bad, and the ugly.

    Real estate agents work on commission and their ‘fee’ will not change so much if they sell it for a lower price than you expected. Their goal is to sell within 2 months. If you have patience and especially if you are still in the home, you will be able to give tours of the home with pride in your voice, while an agent might even talk your property ‘down’ if they have their hearts set on selling ‘another home’ that promises more commission. They will tell you that they will increase the asking price to cover their 5 – 7% fee, but that doesn’t really save you any money if you end up ‘giving in’ for less than you might have. At best, it will be a wash.

    You can even have your home listed on the Multiple Listing Service (MLS) for a flat fee nowadays, when realtors had a monopoly on it before, so you will have the same marketing tools that they have but ‘you care more’ and ‘you will show your home better’.

    I read one realtor claim on another site that the owner would take ‘less’ care in the maintenance of the home than a realtor! Really? I’ve sold three homes in my lifetime and the realtor did ‘nothing’ to care for the property in either case. I was in the military and every time I ended up selling ‘after I relocated’ and neighbors told me that the realtor had let the grass grow out of control. “The outside” matters! First impressions and all that…

  2. I’ve never had a problem selling or buying via FSBO. When flipping houses and commercial properties, I started using one agent who only did the ads and paperwork. I did the showing, etc, when selling, due to me knowing it saved time. It cost more, but was worth not having to use an attorney, which also gave no real problems. I just got lazy in my old age, lol. I’m about to buy FSBO again, but am nervous, due to my age and memory not as great, not to mention so many con artists running amuck lately.

Leave a Reply

Your email address will not be published. Required fields are marked *