There are several reasons you might be wanting to purchase a home without a real estate agent. Maybe you’ve gone through the home buying and selling process several times before, or maybe you’re a DIY person. Whatever the reason, if you want to purchase a home without a real estate agent, there are a few things you need to know.
How to Find Homes For Sale By Owner
First of all, you need to actually find a FSBO home! There are several good ways to do this:
Drive Around – If you’re not sure the exact neighborhood you want to live in, do some research (schools, shopping, transportation, etc.) online and narrow it down. Once you have a few neighborhood options in mind, get in the car and drive around. Get a feel for them – and keep an eye out for yard signs. A sign in the yard is still one of the best ways for FSBO sellers to let them know they’re on the market.
Check Newspaper Ads – This is also old school, but some FSBO sellers still place ads in the local newspaper. Check them out – and then drive by them. No matter how great it sounds in the ad, you need to actually see the home in person before you take any further steps.
Go Online – While you won’t have access to the houses on the MLS (Multiple Listing Service) without a licensed agent, these days many (if not most) FSBO properties will have some kind of online presence. Over the past few years, a number of sites have arisen listing FSBO properties (Fizber.com is one). Most of these sites allow you to search the specific area you’re interested in, and will not only include pictures, but all the details about the property. Some even include video tours. While you’ll still want to see the home in person before making an offer, these sites can give you an excellent idea of what is available, and allow you to do price comparisons from the comfort of your home. This will allow you to gather the information you need to make an informed decision.
How to Buy A House Without a Realtor
Finding a house you’re interested in is one thing, but going through the buying process is another. One of the key services that a buyer’s agent provides is guidance through the home buying process. But without an agent, you’ll need to navigate yourself through the process. So what do you need to do?
Get Pre-Approved for a Loan – This may seem obvious, but make sure you get pre-approved for a loan before you put in an offer. In order to get pre-approved, you first need to know how much you can afford to borrow. Before you approach a seller, you will want to have a pre-approval letter from a lender. . A seller – FSBO or otherwise – is not going to consider you a serious buyer if you make an offer without a pre-approval letter (or at least a pre-qualification) to give you credibility. The exception to a pre-approval letter is if you are making an all-cash offer! Cash is king, regardless of whether or not you’re purchasing FSBO or not. If you’re planning on making a cash offer, instead of a pre-approval letter, come to the seller with either a bank statement or a letter from your bank verifying funds.
Write Up an Offer – After you’ve found a house you would like to put an offer on, and have gotten pre-approved, you’ll need to make an offer. There are a number of online resources for writing up your own purchase offer. You may even have drafts of offers you’ve submitted on other properties that you can adapt for this purpose. Or, you can engage an attorney at a reasonable fee to write it up for you. Whoever creates it, make sure it covers the basics:
- Offer price— start on the low side to give you room to negotiate.
- Contingencies —you want to be able to back out if there are unforeseen issues with the house or with obtaining your financing. (You may want to read Contingencies: What a Home Buyer Needs to Know.)
- Terms— everything from who will pay for what, to when you would take possession of the property.
Don’t Be Afraid to Negotiate – The next thing you need to do is to be prepared to negotiate. Without the buffer of agents, you’ll be dealing directly with the house sellers, or with the seller’s agent, on ALL of the issues involved in the purchase offer. While many of the terms of the contract are fairly standardized in a particular area (who pays what with regard to inspections, closing costs, etc.), almost everything else is open to negotiation – and price, of course, most of all. If you are intimidated by asking for what you want, or are uncertain about your negotiating skills, you may need to rethink your decision to go through this process without a buyer’s agent. Although it might not be something you’ve considered, hiring a buyers’ agent may pay for itself with their experience with negotiation.
Don’t Skip the Home Inspection – Any lender will require a home inspection, even if you’re buying the house in “as is” condition. Even if you are paying cash, you STILL want the home inspection. No matter how well you think you know houses, there are problems and issues that only a thorough home inspection will uncover – and you need to know about them before you enter negotiations
Even if the seller has made it clear they are unwilling to do repairs, you need to know the full situation in order to make an informed decision, as well as to be prepared for facing negotiations. Maybe you’ll still want to buy the house knowing it needs a new roof – but you may want to pay $10,000 less than you otherwise would have.
Get an Appraisal – Again, if you’re getting a home loan, this will be mandatory. But even if you’re not, it’s still a good idea. Without an agent, you’re an amateur when it comes to determining the market value of a property. You may think you’re getting a good deal, but you should ensure that a trained and licensed professional agrees. The cost of an appraisal (usually $300-$400 for a single-family home) is minimal compared to what over-paying on a property will cost you.
Think About Hiring an Attorney – There is a LOT of paperwork involved in buying a home. Even if you’ve been through the process before, the laws are constantly changing (and in any case, are different in different areas). Hiring an attorney (either at a flat-rate or hourly) to review your paperwork before closing could save you from expensive headaches down the road. If you don’t have an attorney, check out the article on How to Find a Real Estate Attorney.
Agree on a Title Company – When realtors are involved in a buying and selling process, they have title companies that they are used to working with. But if you’re doing the process without realtors, you will still need a title company to handle the closing. If you’ve worked with a title company before – and were happy with them – there’s no reason not to use them again. Or maybe the seller has a title company they trust. If neither of you do, then ask around for recommendations. Anyone who has bought or sold real estate will have used the services of a title company.
Get Title Insurance – Again, if you’re buying with a lender, you will be required to have title insurance. But again, even if you’re doing an all-cash deal. You need clear title to the property you’re buying! (You may also want to read Title Insurance: Why Is It So Critical?)
The title company will also handle escrow, which should be opened with the deposit of your earnest money. Even though this is mostly a DIY transaction, the seller should not be directly holding onto your earnest money. Put it into an escrow account and both you and the seller are protected.
Buying a FSBO Home
There are a lot of benefits if you’re planning to buy a FSBO home without a realtor. But don’t be overconfident. Make use of professionals when you need to, and make sure you’re doing your due diligence. As long as you do your research and are well informed, both you and the seller can come out ahead!
