What is For Sale By Owner?

For Sale By Owner (FSBO) is a method of property sale where a homeowner sell their home directly, without the services of a real estate agent or broker.

A Longer Definition: For Sale By Owner

For Sale By Owner is a real estate term to describe properties sold directly by the homeowner, bypassing traditional real estate agents and brokers. For Sale By Owner is shortened into the mortgage acronym “FSBO.”

Because a FSBO doesn’t require commissions to real estate agents, one or both parties may save money in a For Sale By Owner transaction. However, that’s not a given – especially for first-time home buyers who may be at an informational disadvantage.

Buying a For Sale By Owner means self-navigating your purchase, including finding a fair market value for the FSBO home, negotiating its price, and working through the legal and financial obligations of a real estate transaction.

With a home listed on the MLS, the buyer’s agent handles these responsibilities in service of the buyer. In a FSBO transaction, the buyer takes care of themselves.

First-time home buyers interested in FSBO properties may benefit from and should seek professional advice from a real estate attorney and independent appraiser before bidding to purchase a home.

For Sale By Owner: A Real World Example

Imagine a first-time home buyer who wants to buy a For Sale By Owner home. The buyer knows that buying a home without a real estate agent is more difficult, but they’re ready for the challenge.

The buyer finds a FSBO home they like and, to estimate a fair price for it, they search public records to find similar homes and the prices at which they recently sold.

Next, the buyer visits the FSBO home and asks the owner about the property’s history and condition. The buyer also talks to a real estate attorney for advice on making an offer for the home, and commissions an exterior-only home appraisal to get a sense of the home’s market value as part of negotiations.

With their research complete, the home buyer presents the seller with a purchase contract with standard contingency clauses and a mortgage pre-approval letter. After a few rounds of negotiation, the buyer and seller agree on a price and terms for the closing. The seller hires a title company to oversee the transaction and the buyer’s mortgage company and real estate attorney help keep the transaction on track through move-in day.

Common Questions About For Sale By Owner

What are the advantages of buying a FSBO property?

FSBO properties can sometimes be more affordable due to the absence of agent commission fees. Direct negotiation with the owner can also allow for more transparent and flexible dealings.

Is it necessary to hire a lawyer for a FSBO transaction?

While not mandatory, hiring a real estate attorney is advisable to ensure the legal aspects of the transaction are handled correctly, especially for those unfamiliar with real estate law.

Can I get a mortgage for a FSBO property?

Yes, buyers can obtain a mortgage for a FSBO property just as they would with a property sold through an agent. The process of mortgage approval remains the same.

Are there risks involved in buying a FSBO property?

Yes, there are risks in buying a For Sale By Owner home, including the potential for overpricing, legal complexities, and the owner’s lack of experience in real estate transactions. Buyers should conduct thorough research and seek professional advice.

How can I determine the right price for a FSBO property?

Researching comparable properties in the area, understanding the current market conditions, and potentially seeking an independent appraisal can help in determining a fair price for a FSBO property.