FSBO Meaning: Buying A House That’s For Sale By Owner

If you’ve ever looked at a home with a “for sale by owner” sign out front, you may have a few questions. What does for sale by owner really mean, and how does it affect the buyer? Let’s learn all about for sale by owner homes.

What Does For Sale By Owner (FSBO) Mean?

For sale by owner (FSBO, pronounced “fiz-bo”) homes are sold by the homeowner without the help of a listing agent or broker. Sellers typically choose to sell their home FSBO to avoid having to pay the real estate agent the commission fee on the sale of the home. FSBO sales do, however, still require a real estate commission for the buyer’s agent.

If you’re planning to finance a FSBO home, it’s helpful to apply for a mortgage ahead of time. Doing this could help improve your chances of having your offer accepted.

What Does For Sale By Owner Mean For Buyers?

For a potential buyer, a FSBO home can present a variety of benefits and drawbacks. In short, because the property is being sold directly by the seller without help from a real estate agent, the buyer can have a direct line of communication with the seller. This process can lead to the buyer receiving more detailed information about the property from the homeowner’s point-of-view, as well as potentially better negotiating terms.

With that said, this can result in more effort to properly assess the home’s value and any potential defects or issues. It may be best for buyers to consult an experienced real estate agent and attorney for guidance.

How Does For Sale By Owner Work?

With a FSBO transaction, the seller will assume all the responsibilities and risks associated with the sale of a home that a real estate agent would typically take on. These include:

• Researching real estate comps in their neighborhood
• Setting a fair asking price for the home
• Marketing the sale of their home, which may include listing it on the multiple listing service (MLS)
• Staging the home
• Hosting open houses and other showings
• Negotiating the sale price, terms and conditions
• Gathering and having all legal closing documents drawn up
• Having the deed prepared, signed and notarized
• Coordinating the closing process

Before you buy a home directly from a homeowner, let’s walk through how buying a FSBO home differs from buying a property that’s listed by a real estate agent.

The Pros And Cons Of Buying A House For Sale By Owner

Here’s a look at some of the major pros and cons of buying a FSBO house.

Benefits Of Buying A House For Sale By Owner

While dealing directly with a homeowner may sound intimidating, potential buyers can enjoy these advantages:

• Direct communication: When you buy a FSBO home, you eliminate the intermediary (the listing agent) and communicate directly with the homeowner. This might give you more room to negotiate.
• Detailed information about the home: No one knows more about a home than its owner. When you buy a FSBO home, you can learn more about the neighborhood, local hot spots and home features by speaking directly with the owner.

Drawbacks Of Buying A House For Sale By Owner

Unfortunately, a FSBO sale can be more difficult and complex than other real estate transactions for the following reasons:

• Inflated sense of home value: Most homeowners who sell their houses have no experience in real estate. These homeowners may have unrealistic ideas about their home’s value. This could spell trouble when it’s time for the home appraisal – and it could mean you’ll pay more for the home than you should.
• Shaky disclosures: Sellers are required by law to disclose known problems with a home during the sales process. Unfortunately, independent sellers aren’t always honest, or they may be unaware of disclosure requirements.
• Difficulty getting repairs made or costs covered: You may have a tough time convincing FSBO sellers to make repairs or add a contingency to the sale. FSBO sellers typically don’t want to spend more money on a property they’re trying to get rid of.