Buying a home that's for sale by owner? 5 tips to keep in mind

Most often, homebuyers and sellers enlist the help of real estate agents to guide them through the purchase process. But some sellers opt to sell FSBO — for sale by owner. Buying a home that’s FSBO doesn’t necessarily change the process for you as the buyer, but there are a few tips to keep in mind to make sure the process goes smoothly.

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5 tips for buying a for sale by owner home

1. Get preapproved for a mortgage

Regardless of whether the seller is working with a real estate agent to sell their home, it’s critical that you get approved for your mortgage before you make an offer. First, this ensures you’re shopping for homes you can actually afford. But coming ready with preapproval letters shows the seller you’re really ready to buy.

There’s a lot of competition in today’s housing market, and sellers are more likely to choose a buyer who already has their financing sorted out. You can use an online marketplace like Credible to compare multiple mortgage lenders and get prequalified.

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2. Work with a real estate agent

Just because the home seller has chosen not to work with a real estate agent doesn’t mean that you as the buyer have to follow suit. A buyer’s agent can help walk you through the home buying process, handle the paperwork, and negotiate on your behalf.

A home buyer’s agent may be even more critical in the case of an FSBO home, so you know for certain that a professional is overseeing the process.

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3. Determine the value of the home

When a real estate agent is listing a home, they use comparable sales in the area to determine a fair price. But when a home is for sale by owner, the seller may not have the same level of knowledge of the local market. As a result, it’s especially critical that you and your agent do your own research to determine the value of the home.

In your research, you might find that the home is actually worth far less than the seller is asking for. In that case, you can try to negotiate a lower purchase price to ensure that a home appraisal wouldn't put your mortgage at risk. Sure, you might lose out to someone willing to pay the asking price, but that’s likely better than drastically overpaying for a home.

It’s also important to make sure you make an offer that fits within your budget. You can use an online mortgage payment calculator to estimate your monthly cost and determine whether the house price fits within your budget.

4. Use a third-party escrow service

In most cases, when a buyer puts up earnest money, the listing agent is responsible for placing it in an escrow account where it stays during the home buying process until the closing. If there’s no listing agent, find a third party to handle this instead. Don’t give the money directly to the seller. If you do, you risk an unfortunate situation where the contract falls through for legitimate reasons, and they refuse to return the money.

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5. Get a thorough home inspection

Sellers have a legal obligation to disclose any material defects the home may have, and in a perfect world, they always would. Unfortunately, that may not always be the case. And without a seller’s agent to manage the process, some disclosures may slip through the cracks.

A home inspection can help to uncover any problems a seller failed to disclose. Your purchase agreement should also include a contingency that allows you to renegotiate or back out altogether if anything comes up during the inspection.

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Is it cheaper to buy a home without a realtor?

Whether you’re buying or selling, you don’t technically need a real estate agent to buy a home. But the truth is, there aren’t many benefits to going it alone as a buyer. An agent can help you through the process of finding the right home, writing a purchase agreement, negotiating the purchase price, and more.

If you still have questions about the home buying process, get in touch with a home loan officer at Credible to learn more about making an FSBO transaction.

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