When you encounter a real estate listing marked "for sale by owner" (also called FSBO), it simply means that the home is being sold without the help of an agent.
In a typical home purchase, a buyer and seller will each hire a realtor to represent their interests throughout the transaction. When buying a home for sale by the owner, you'll negotiate directly with the seller.
But just because a seller chooses to forego an agent's help doesn't mean you should.
Unless you know the homeowner, there's no way to tell what type of seller you're dealing with. Some sellers might be reasonable and responsive, while others may drag their feet or have unrealistic expectations about what their home is worth — making for difficult negotiations.
FSBO contracts also run a higher risk of falling through due to a seller's inexperience or lack of awareness around the legal requirements of selling a home. While one in five sellers has attempted a FSBO sale, only 7–8% of homes are successfully sold FSBO each year. [1]
Understanding how FSBO sales work — and having an experienced real estate professional to guide you through the process — can help you avoid some costly mistakes when buying a house for sale by owner.
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Buying a home for sale by the owner shares a lot in common with buying any other house. As a buyer, you'll need to:
However, when buying a home directly from the seller — with no agent guiding the other side of the transaction — there may be some gray area around:
A home purchase is a complicated transaction, and we generally wouldn't recommend going it alone. However, there's no legal requirement for either party to work with a realtor when buying or selling a home.
In some FSBO transactions, it may actually make sense to forgo hiring a real estate agent — particularly if you know the seller (e.g., a friend or family member) and/or have already worked out the terms of sale and simply need to make the agreement legal.
Regardless of the circumstances, it's always a good idea to at least hire a real estate attorney to draw up the contract paperwork and oversee the closing.
The following states actually require an attorney to oversee the closing of a home sale, so you might need one regardless.
ConnecticutIf you're not in a state that requires an attorney to handle the contract, a transaction coordinator may also be able to oversee the closing process and ensure the purchase contract is executed as agreed on. Transaction coordinators typically charge about $450 per transaction.
But if you're buying a home from an unknown seller or don't feel 100% confident handling the negotiations and initial paperwork, it's a good idea to get representation from an experienced local buyer's agent who can help you navigate the process.
Generally, as a buyer, you won't be on the hook for your agent's fee (the seller usually covers it from their proceeds) — though this can get tricky with a FSBO seller. Your agent will be able to help you negotiate those fine print details.
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Talk to a top buyer's agent in your area, with zero obligation to commit. View AgentsOne of the benefits of working with an agent is that they're with you through the entire home buying process, from finding a house that fits your needs, to negotiating a fair sale price and seller concessions, to recommending a solid title company to manage the closing.
And since an agent is typically there with you when you tour the home and have an inspector out to verify its condition, they'll be able to factor all those details into the negotiation.
Agents are also deeply familiar with the order of operations for executing on a home purchase and can help you (and the seller, if needed) stay on top of the closing timeline. They can also recommend vendors for different aspects of the home buying process — such as lenders and home inspectors — that have done good work for their clients in the past.
On the other hand, working with a lawyer is often more affordable than hiring a real estate agent.
A buyer's agent will typically collect a commission of 2.5–3% on a home's final sale price ($7,500–$9,000 on a $300,000 home). Lawyers may charge an hourly rate of $250–500 or a flat fee totaling $500 to $3,000 for handling a real estate transaction. [2]
While a lawyer's fees are significantly less than an agent's, they're also involved in far fewer aspects of the transaction.
A lawyer may draw up the home purchase contract, coordinate a title search, and file the transfer of ownership with the county, but they typically won't show up to hold your hand during the home inspection or advise on what repairs to ask for.
While some buyers and sellers in FSBO transactions choose to draw up the contract paperwork themselves, it's a risky business. Generic contracts often leave out important protections for buyers and sellers — such as contingency clauses that relate to specific property types or situations (like needing to sell your house before you buy a new one).
If there's a misunderstanding over the terms of the sale, you may end up paying a lawyer a lot of money to help sort out the details.
Most parties involved in a FSBO transaction will either hire a real estate attorney, or — in states where it's allowed — rely on the buyer's agent to draw up the purchase contract and suggest a title company to handle the closing.
Some states actually prohibit a sole agent from representing both the buyer and seller. Others require a lawyer to preside over a home sale closing, regardless of whether you have an agent.
A real estate agent is often a good source of information on how real estate transactions work in your area.
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Traditionally, sellers cover commissions for both their listing agent and the agent who represents the buyer. But in a FSBO transaction, whether or not a seller pays a buyer's agent's fees may be up for negotiation.
A buyer's agent commission typically runs 2.5–3% of a home's purchase price ($7,500–9,000 on a $300,000 home).
Sellers eager to save on realtor fees may be reluctant to hand over that amount of cash to an agent, especially one working the opposite side of the negotiating table. In that case, the seller may ask you to pay your agent's commission yourself.
Yet, given that a vast majority of buyers work with a realtor — and many agents won't show their clients listings where a buyer's agent commission isn't specified — some FSBO sellers are prepared to offer some type of agent compensation, whether it's all or a portion of the fee.
Who pays the commission on a FSBO sale really comes down to the individual seller.
Listing agents take on a huge amount of responsibility during the home selling process. Some of their tasks include:
In a FSBO sale, all of that responsibility falls to the seller. Yet, most FSBO sellers lack any formal real estate education — meaning they may not be prepared for all of the responsibilities that come with selling a home.
While a seller's inexperience might work out in your favor, giving you and your agent the upper hand in negotiations, it could also leave you vulnerable to delays, frustrations, and unwanted surprises.
Pros of buying FSBOFor a number of reasons, FSBO listings tend to get a lot less exposure than homes listed by an agent.
When you list a home with a real estate agent, one of the first things they'll do is enter your property information on the multiple listing service (MLS), an agent-only marketplace where realtors list and find properties for their clients. From the MLS, listings get pulled into a variety of consumer real estate platforms, like Zillow, Realtor.com, and Redfin.
However, for a FSBO listing to appear on these platforms, a seller will either need to use a flat-fee MLS service — which only about 6% do [1] — or post a separate listing on each site. Even then, their listing may be hard to find.
On Zillow, the internet's most visited real estate site, FSBO results are located in a separate tab from agent listings. Realtor.com, another popular place to look for homes, doesn't allow for manual FSBO listings at all.
Since many FSBO sellers aren't in a hurry to sell, they may choose not to hire professional photographers or have their homes staged — making them less attractive to online shoppers.
Another reason FSBO homes may face less competition comes down to a simple fear of the unknown. Historically, less than 10% of homes are sold FSBO each year — and more than half of those transactions are between two parties who already know each other.
Given that 94% of home buyers choose to hire a real estate agent or purchase directly from a builder, [1] people simply may feel more comfortable working with a professional to buy a home.
If you happen to come across a home listed by the owner, you're likely to have fewer buyers placing competing bids.
Homes sold without an agent tend to get lower prices than comparable agent-assisted sales — which could be good news for you as a buyer.
The average difference in sale price between FSBO and agent listings is a remarkable 20%, according to the National Association of Realtors. [3] However, some estimates place that figure at a more modest 6%. [4]
The reasons for the lower sale prices on FSBO homes range from poor marketing to inaccurate pricing.
Some FSBO sellers determine their asking price based on the amount of money they still owe on the home. Others intentionally price their home below market value to sell it at a discount to a family member or friend. The occasional seller may simply prefer to see their home go to the right buyer, as opposed to the highest bidder.
Depending on your seller's situation, you may be able to find a FSBO home for a bargain.
Only one in three FSBO sellers uses a formal appraisal to determine their home's list price. [1]
Most simply compare their home to others that are selling in their area or choose an asking price based on the profit they need from the sale.
If a seller declines to get a professional opinion of their home's fair market value, they may have unrealistic expectations about what their home is worth.
Overpricing could create issues for you as a buyer during the appraisal period, since lenders limit the amount you can borrow based on the home's appraised value.
To avoid overpaying for a FSBO home, ask your real estate agent to do a comparative market analysis before submitting your offer. That way, you can be sure the list price is supported by recent comparable sales in the area.
In a traditional home sale, the seller pays a 5-6% commission to their listing agent, who shares a predetermined percentage (usually 2.5-3%) with the buyer's agent. However, 61% of homeowners that attempt FSBO do so to save money on realtor fees. [1]
While some FSBO willingly offer a buyer's agent commission in exchange for a smooth transaction, others prefer to leave realtors out of the equation.
Obviously, that may create a problem when you show up to a sale with your agent.
If a FSBO listing doesn't specify whether the seller is willing to compensate a buyer's agent, have your agent reach out to the seller.
The seller may be willing to negotiate a buyer's agent fee, or ask you to pay it yourself.
If the seller does come around to offering a commission, your agent will ask them to sign a formal agreement specifying their fees and who will be responsible for paying them.
While some FSBO sellers are motivated to sell quickly, others are willing to wait around for their ideal offer. That lack of urgency could put you in a difficult position when it comes to negotiations.
In a typical home sale, it's normal for there to be some back and forth over details such as:
Since most FSBO sellers decline the help of an agent in order to save money, they might be reluctant to budge on their original asking price or make concessions for things like replacing old appliances and taking care of repairs. For them, it would mean sinking more money into a home they're trying to offload as cheaply as possible.
Without the extra nudge from a listing agent, who's usually pretty motivated to keep the deal moving forward, a seller may not be willing to make even the most reasonable concessions.
When you work with a real estate agent, you can be fairly certain that they'll adhere to the rules and regulations governing real estate transactions — their real estate license depends on it.
Individual sellers may not be fully aware of what those rules are. For example, some sellers may not realize their legal obligation to disclose any known defects or issues with the property — such as an unpermitted addition or past water damage.
Even an innocent mistake, such as misstating the materials used to construct the home, could lead to costly surprises and even affect resale value down the road.
Having an experienced agent by your side can help to mitigate some of those risks.
The process of buying a home for sale by owner is similar to that of a traditional home sale. That main difference is that you'll be working directly with the seller or their lawyer instead of a listing agent.
Touring a FSBO home is going to be slightly different than touring an agent-listed home. For one thing, you'll have to coordinate the timing directly with the seller. And, the seller may even be there when you show up to look at the home (which may feel a bit weird and uncomfortable).
This is another reason an agent may be a good idea. A seller may agree to let you tour the property on your own if a seller is there to conduct the tour. Or, the agent may simply make note of things that they see with the property that a less experienced eye might not pick up on their own.
Either way, you and your agent can discuss the property's and potential flaws privately after the tour.
If you decide you want to pursue FSBO-listed property, the first step to securing it is to submit an offer.
An offer forms the basis of the final purchase contract and is generally negotiable until both parties come to an agreement on the terms. Items outlined in an offer include:
Along with your offer, the seller may request proof of funds — either in the form of a mortgage pre-approval letter or bank statements, if you're planning to purchase the home in cash.
Once the seller has vetted your offer and the details are finalized, both parties will sign on the dotted line, and you'll officially be under contract.
When putting together your offer, you'll need to decide what contingencies to include. Contingencies are essentially safeguards that let you out of the contract if the sale hits a major snag. Common buyer contingencies include:
When buying a home for sale by owner, you may want to make your offer contingent upon review of what's called a Comprehensive Loss Underwriting Exchange (or CLUE) report.
CLUE reports show the past seven years of insurance claim history on a home. They're primarily used by insurance providers to determine how much you'll pay for home insurance. But as a buyer, you can use a CLUE report to see whether a home has suffered any invisible damage, such as structural problems, that the seller hasn't disclosed.
When purchasing a home, sellers may make concessions to help with closing costs as a way to entice you, the buyer, to close the deal. Seller concessions can cover a variety of expenses, such as:
Keep in mind that there are limits to how much a seller can contribute to the buyer's closing costs. And, just because you ask a seller to pay for something doesn't mean they'll agree. The more reasonable you are, the better chance you'll have of getting your offer to go through.
Once a home purchase agreement is signed, things move quickly. Within the first few days of being under contract, you'll have quite a few tasks to check off.
In a real estate transaction, a title company is used to run a title search and serve as the escrow agent — the person in charge of ensuring that all contract requirements have been met and disbursing the funds after closing.
Typically, it's in the buyer's court to choose a title company, since you'll be paying for the title search and recording fees. Your real estate agent will be able to recommend one they work with on a regular basis.
However, if the seller is paying closing costs, they may want a say in which title company you use.
As a buyer, you'll need to make a deposit — usually 1% of the sale price — to reserve the home and take it off the market. If you cancel the sale for any reason other than the grounds laid out in the purchase contract (i.e., a problematic home inspection), the seller gets to keep the money.
Under no circumstances should you give your earnest money directly to the seller — or before you actually sign a legally binding contract. Either scenario could make it hard to get your money back if the sale falls through (or you could even get scammed). Instead, it should be transferred to your title company or lawyer, who will deposit it into an escrow account to disburse at closing. Generally, it will be applied toward your closing costs.
Once under contract, don't delay in applying for a mortgage. The loan approval process can take anywhere from 30–45 days to complete.
In addition to pay stubs, bank statements, and other financial documents, you'll need to provide your lender with proof of homeowner's and title insurance. Your lender will also have a professional appraisal done to ensure they're not doling out more than the home is worth.
If the home appraises for less than the asking price, you may need to reopen negotiations with the seller or find a way to make up the difference out of pocket.
Before purchasing any home, you want to have it thoroughly inspected. Depending on the age of the property and where it's located, you may want to order additional inspections to check specifically for mold, termites, radon, foundation issues, etc.
If any red flags turn up on the inspection report, you can try to renegotiate the sale price or ask for credits to cover the costs of repairs. If issues become deal breakers, you're free to walk away — just so long as you're still within the inspection period specified in the purchase contract. Otherwise, you risk losing your earnest money.
Seller disclosure requirements vary somewhat by state. However, some of the more common disclosures include a property condition disclosure, lead paint disclosure (for homes built before 1978), and flood zone statement.
If you're purchasing in an area belonging to a homeowners' association (HOA), you'll also need to review and sign off on the HOA documents (e.g. bylaws and financial statements) provided by the seller.
One thing to keep in mind with a FSBO sale is that sellers operating independent of an agent may not know what disclosures are required in their area. This is where having a reliable agent of your own could definitely come in handy. An agent will immediately notice a missing disclosure or any other issues that could impact the sale and closing timeline.
Once the underwriting requirements for your loan have been met, the title search has been completed, and all the closing paperwork gathered together, it's time to close on your home.
Ahead of signing the closing paperwork, you'll need to wire the down payment and closing costs to your designated escrow account. Your mortgage lender will provide you with a breakdown of the total funds needed to close.
You'll also do a final walkthrough to ensure the home is in the same condition as when you made your offer (plus any repairs you may have negotiated with the seller).
Once you've reviewed and signed the final closing paperwork, you'll get the keys to your new home. Your title company or lawyer will take care of filing the transfer of ownership with the county.
⚡️ Quick Tip: Finding a buyer's agent is a good first step!
Connecting with an experienced local agent is a good way to kickstart your home buying process. Agents can help you set a budget and recommend trusted lenders so you can compare rates, get preapproved, and start touring houses.
We recommend trying out Clever Real Estate’s free agent matching service. Clever matches you with the best local buyers agents with no obligation. And you can qualify for cash back on a home purchase! Get Started.
Buying a home requires a LOT of paperwork.
When you hire a title company, the escrow agent assumes responsibility for gathering the paperwork and funds for closing, including the title and mortgage documents from your lender. However, if you choose to work with an attorney, they can also ensure that the paperwork is properly completed and filed.
That said, putting your signature on a closing document indicates that you've reviewed it for accuracy and accept it as legally binding. Making sure that the information is correct is ultimately on you.
Finally, if you're buying the home from a family member or close friend, there may be some extra paperwork involved. For example, if a parent is making a gift of equity by selling you the home at less than fair market value, they'll need to provide documentation noting the appraisal vs. sale price and a signed statement indicating that the gift amount doesn't need to be repaid.
If you and the seller have already agreed to an offer price, or you're fairly comfortable negotiating the offer terms on your own, you might consider simply hiring a real estate attorney to draw up the paperwork and oversee the closing.
However, if you're new to home buying or don't feel comfortable dealing directly with the seller, you may feel more comfortable having a full-service agent represent you through the process.
In any real estate transaction, earnest money deposits and all other funds required to close on a home will need to go through a 3rd-party escrow account. NEVER send money directly to the seller — if you do, you may have trouble getting it back if the deal hits a snag.
An escrow account may be set up by your title company or lawyer, depending on who you hire to handle the transaction.
In many locales, it's normal for the seller to chip in for a home warranty as a safeguard against legal issues in case something goes wrong within a short time of closing on the home. If you're concerned about old appliances breaking down or a roof springing a leak, asking for a home warranty is a good idea.
Only about 6% percent of FSBO listings are posted to the MLS, making them somewhat difficult to find — unless you happen to drive by a yard sign or simply know where to look.
In a for sale by owner arrangement, buyers and sellers have three options for drawing up a purchase contract: They can hire a real estate lawyer, have the buyer's agent write the contract, or use a generic sales contract and fill in the information themselves — though, it would be wise to have an attorney review it.
In some states, like Georgia and New York, it's illegal to have a single agent draw up the contract on behalf of both parties — since it could potentially result in a conflict of interest. In states where dual agency is prohibited, hiring a real estate lawyer to oversee the paperwork may be the best option.
Maybe. It all depends on how accurately the seller has priced their home — and whether they're willing to negotiate. Some homeowners want to sell their home at the same price that a real estate agent would list the home for, so they can pocket the portion that would otherwise go to paying an agent's commission. This type of seller is probably not going to pass the savings to you.
A homeowner who is selling their home due to divorce, death, impending foreclosure, or just wants to make a clean break is probably more willing to negotiate the list price.
Homeowners who have occupied their home for a number of years and do not have a pressing reason to sell are probably more willing to wait for the 'right' offer. The same goes for sellers who are downsizing with plenty of equity in their home.
To submit an offer on a FSBO home, you can write up a generic sales contract, go through an attorney, or hire a real estate agent.
Generic sales contracts may not contain specific language for your state, and may not have enough protections for you (or the seller). Therefore, it's probably best to skip this option and hire a real estate attorney or agent — even if you're buying the home from someone you know.
Real estate attorneys tend to be more affordable than agents but also offer less hands-on support. However, some real estate brokers will accept a lower commission if all you need is for them to prepare a contract. You and the seller can split the cost.
ARTICLE SOURCESNational Association of Realtors. "2021 Profile of Home Buyers and Sellers." Accessed August 8, 2022. Updated November 11, 2021.
National Association of Realtors. "Quick Real Estate Statistics." Accessed August 7, 2022. Updated November 11, 2020.
Black Knight. "Saving Real Estate Commission at Any Price." Accessed August 10, 2022. Updated August 16, 2017.