Buying a House That Is for Sale by the OwnerInformation for
A house that has a “For Sale by Owner” sign in the front yard is also referred to as an FSBO home. The process of buying this house is the same as purchasing one that is listed by a real estate agent. There are a couple of differences though, which revolve around the logistics and you have to handle them on your own.
In addition, you have deal with several professionals. Lastly, a few important steps that you need to deal with include placing an offer on the house, negotiating a contract, home inspection, securing finances and the closing process.
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Following is a short guide on how to buy an FSBO house:
Making an Offer – The Purchase ContractNow that you have decided to buy an FSBO house, the first document that needs to be signed is the purchase agreement. This document outlines the sale terms such as the sales price, closing date and contingencies like the buyer going through with the home inspection successfully and securing financing.
Typically, this document is drafted by the seller’s agent and the seller pays for it. Since you are dealing with an FSBO home, your real estate agent can act as a dual agent and work both sides. In some states, agents are not allowed to do this, so make sure to check beforehand.In case you are not handling the purchase through a real estate agent, then you have the following options:
• Approach a title company for drafting the documents
• Hire a contract preparation service for creating the documents
• Work with a real estate attorney for legal advice and creating the documents
• Write your own contract and then consult a professional
Tips on What to Include in the Contract When Writing It on Your OwnThere are a few things you need to keep in mind when writing a contract. Real estate laws differ from county to county. Following are some tips that will help you draft the contract and not make any errors:
Place an Offer That Is Below the Listing PriceThe trick to offering below the house’s listing price is to find its value. To know if the house is priced according to the market value, find out the price of houses sold in the neighborhood. When relaying your offer price to the seller, include your research to justify the numbers.
Don’t Forget to Include ContingenciesContingencies allow you to break the agreement if the seller goes back on his word. One of the biggest contingencies is home inspection. You can add this clause into the contract that if the home inspection reveals big repairs, the seller will pay for them.
Mention How the Earnest Money Deposit Will Be HandledYou need to protect your earnest money, which is the advance payment you make when you are set on buying the property. The money should either go into a trust held by the title company or escrow.
Hire a Reputable Home InspectorA reputable home inspector will describe the condition of the house as it is. This will help with the negotiations on repairs.
Add Title Policy in the Contract
A title policy provides you with coverage in case the seller is a fraud and not the owner of the property. If you are challenged for the titles, this will help you cover the costs.As you can see, buying a house is not that difficult if you do your research and hire licensed professionals. As a newbie, we suggest that you hire a real estate attorney to make sure that the purchase process goes smoothly.