Is your dream home FSBO? Your guide to buying a house for sale by owner

When you plan to buy a house, you probably expect to work with a real estate agent once you find a house you love. However, in your search, you may find some homes that are for sale by owner (FSBO).

Most homebuyers don’t start with the intention of buying a house for sale by owner, but there can be advantages. Buyers who purchase FSBO may get a better price, enjoy more flexibility in the process, and have an easier time arranging showings. However, like most things in real estate, there are drawbacks as well — like an increased risk of a bad disclosure and other snags navigating the complexities of a real estate transaction.

Still, buying a house for sale by owner may be right for you. We break down the process and what you need to know below.

What does FSBO mean?

In most home sales, both buyer and seller have agents. They usually don’t communicate with one another and instead rely on their respective real estate agents to handle the deal.

In an FSBO sale, the seller doesn’t have an agent, likely as a means to save money on commission fees. You as the buyer may still have one. As such, the biggest difference in the house hunting process is just finding FSBOs in the first place.

In the internet age, some sites allow sellers to access MLS listings, so they’ll appear in any of the listings you browse. Any FSBO listing will be marked as such. You can even find  homes on Craigslist. Likewise, you can spot the FSBO signs on the lawn. There won’t be a real estate company’s sign sitting out front; it will simply say “For sale by owner.”

→ Learn more about selling your house without a realtor

How does buying a FSBO house work?

In a for sale by owner transaction, the buyer (and buyer’s agent) deal directly with the homeowner seller instead of a listing agent. The seller assumes all risks and responsibilities for the home sale, including researching comps, setting the listing price, marketing and staging, hosting open houses, negotiating, and closing. 

In many ways, it’s similar to a traditional real estate deal, especially for the potential buyer, with the major caveat that the seller may not have the training and resources of a traditional real estate agent.

Should you buy a house for sale by owner?

A home seller incurs the greatest impact by choosing to forgo an agent, but it does change the process for buyers, too. Before you consider making an offer on an FSBO, weigh these pros and cons.

Benefits of buying FSBO

• Better price possible: In 2022, the typical FSBO sold for $225,000 compared to $345,000 for agent-represented homes, according to the National Association of Realtors.
• Direct communication: Without a seller’s agent, you can communicate directly with the homeowner. This could give you more room to negotiate as agents tend to know more about the market than homeowners themselves.
• Efficiency: In a typical sale, scheduling showings and inspections require you to communicate to your agent, who must communicate with the seller’s agent, who must communicate back to them. It can be a lengthy game of telephone. Removing one step in that equation can expedite the process.
• Greater flexibility: Since an FSBO seller won’t have to pay a commission’s fee, they may have more wiggle room on price.
• Better information: Nobody knows a home better than the owner, who can give you the complete breakdown on the neighborhood, nightlife, schools, and features of the home itself — direct from a local.

Drawbacks of buying FSBO

• Overpricing: Just as you could get a good deal, you may find an owner who overestimates their home’s value. Emotional attachment, belief that improvements are worth more than they are — there are a number of reasons an owner might insist their home is worth more than you’re willing to pay.
• Frustration: Real estate transactions are always complex and complicated. Working with a seller who has little or no experience here can make things even harder.
• Bad disclosures: By law, sellers must disclose any material defects with a home. Part of an agent’s purpose is to ensure sellers follow this law. Whether intentionally or not, some sellers may fail to disclose defects like mold, roof damage, or plumbing issues. That raises the stakes of the home inspection and could cause problems in the future.

→ Learn more about how to walk away after a bad home inspection

How to buy a house for sale by owner in 5 steps

Buying a house for sale by owner isn’t all that different from a traditional transaction. Here’s how to do it:

1. Get mortgage approval

Before you pursue any mortgage purchase, you should get approved for a home loan. Do some research on lenders and mortgage products and get pre-approved to know exactly how much you can afford to spend on a home. Most independent sellers won’t even let you in the door without a preapproval letter.

2. Consider a real estate agent

Again, just because a seller doesn’t want to use an agent doesn’t mean you, as the buyer, have to go it alone, too. A qualified real estate agent is helpful for a number of reasons, from helping you find homes in your budget to negotiating the deal on your behalf.

In an FSBO sale, a buyer’s agent is especially valuable because they’re probably the most knowledgeable person involved in the transaction. They will know a home’s true value, know what to ask for at the negotiation table, and will help ensure the seller’s paperwork checks out.

In most transactions, the seller pays the buyer’s real estate commission fees, so it’s a very low-risk, high-reward choice. That said, some agents don’t like the liability or the work required in FSBO sales since they usually do the work of both buyer and seller agents. State from the outset that you’d like to look at FSBOs so you don’t blindside an agent.

3. Attend a showing

Once you’ve found an FSBO home that you love, set up a home showing. An agent can do it for you or you can reach out to the seller directly. If your seller wants to be there, that’s great. You can ask questions to get to know the home and the area better.

→ Here’s what questions you should ask a home seller

4. Make an offer

When you’re ready to make an offer on an FSBO home, the calculus is a little different than a traditional home sale. In lots of cases, you won’t have to compete with many other buyers since FSBOs tend to have less publicity. That means you likely have flexibility to do the following:

• Consider offering less than list price: If you start low, negotiations can only go up. You can’t come down from a high offer unless there are serious issues with the home. An agent can help you analyze comparable properties with a CMA  to find a good starting number.
• Don’t give any money to the seller: This is an important caveat when buying an FSBO. In a normal transaction, the listing agent places your earnest money deposit in an escrow account. Obviously, there is no listing agent in this transaction so you should not give any money to the seller upfront. Doing so will make it very hard to get that money back if something goes wrong with the sale.
• Write in contingencies: Some common contingencies in a traditional home sale include appraisal, inspection, title, and insurability contingencies. If the home fails to meet requirements, a buyer has recourse to exit the sale. Many buyers waive contingencies in a competitive market, but when buying an FSBO, you don’t have the security of a seller’s real estate agent keeping them honest. You definitely want an out if a problem with the house or your finances arises.
• Negotiate payments: Real estate transactions have a lot of fees. You can choose to negotiate these yourself or through your agent. Figure out who will pay for transfer taxes, escrow, title fees, and other associated fees.
• Write the purchase contract: The purchase contract establishes the terms of sale. A seller may choose to do it themselves or enlist a lawyer. As a buyer, your real estate agent can help you make sure everything checks out. You’ll also want to enlist a real estate attorney to look over the final details, as well.

5. Close on the home

Finally, at closing, just like any other transaction, you’ll pay your down payment and closing costs, sign the final paperwork, and officially assume title of the home. If the seller hasn’t negotiated to stay in the home past closing, you’ll get the keys to the house here, too.

Buying a house for sale by owner isn’t all that different from buying a house the traditional way. Contrary to some concerns, there isn’t really any major disadvantage or advantage for buyers. You may find a great deal, or you may have to deal with a difficult seller. If you do choose to buy a FSBO home, however, it’s a good idea to keep a real estate agent on your side unless you’re an experienced home buyer.

Houses for sale by owner FAQ

We answer some of the most common questions for buyers purchasing a home directly from an owner:

Where can I find FSBO listings?

Most FSBO listings can be found online, either on traditional real estate websites like Zillow and Trulia or specialty FSBO listing sites like FSBO.com and ForSaleByOwner.com. However, sellers have to pay to have their homes advertised on these sites, so not all FSBO listings may be available there. Driving around and looking for yard signs may be the most comprehensive way to search FSBO homes for sale.

Do I need an agent to buy a house that’s FSBO?

You don’t need a real estate agent to buy a house that’s FSBO, as long as you haven’t already signed an agreement with a buyer’s agent. That being said, it’s probably a good idea to have a buyer’s agent represent you, unless you’re experienced in real estate. Home sales are complicated transactions and it's best to have at least one experienced party present to ensure that the contract terms, contingencies, and financing are handled appropriately.

If I find a sale-by-owner listing, does my agent still get a commission?

The answer will depend on your contract. If you have an exclusive buyer-broker agreement, you will likely have to pay your agent their commission, unless your agent is willing to void the contract.

What are other alternatives to traditional real estate?

If buying a house for sale by owner appeals to you because it’s different from the way real estate transactions usually work, but the risk and extra work involved are holding you back, working with a property tech company may be right for you. These companies, like Orchard, are radically simplifying the way homes are bought and sold by putting the needs of buyers and sellers first. We’ll help you buy a house before selling your old one, and even give you a guaranteed cash offer on the sale of your old home.

Learn more about how Orchard works or get started with a free home valuation — our estimates are 30% more accurate.