One of the advantages to buying property that’s for sale by owner, aka FSBO, is that you won't pay realtor commissions or fees. However, there are a few things to consider when purchasing an FSBO property.
Use this article as a quick reference if you're in the market to buy a home from the owner directly, and contact our office for personalized home lending advice.
The Purchase Agreement and "For Sale by Owner"
If you decide to move forward and purchase an FSBO home, you'll first want to complete the purchase agreement. If you’re not working with a realtor, you will need to complete this information on your own. After it's complete, provide us, or the lender you are working with, with a copy of the purchase agreement.
It should include:
Your full name along with the seller's full name – if there’s more than one of either, include those names as well
Property address with county – don't forget the unit number, if applicable
The agreed purchase price
Proof of satisfaction with the inspection
Target closing date – talk to us if you need help determining what’s a realistic time range
Signatures from all buyers and sellers
There may be more items required for your purchase agreement, call for details.
If there’s additional property to be transferred, such as appliances, it also needs to be included in your purchase agreement.
Keep in mind that while these items are in the purchase agreement and the seller agrees to include them in the sale, they have zero value.
Another item to include in the agreement are any closing cost credits that the seller is giving you, such as prepaid loan interest points or title insurance. Closing costs credits go from the seller to you at closing. So if at closing the seller agrees to a $7,000 credit, that means you'll provide $7,000 less at closing.
The credit is often reflected in the seller’s sale proceeds and not necessarily directly out of pocket. However, doing it in this fashion can move it along faster.
Title insurance is a legal way to ensure anyone who has an interest in the property is satisfied, and others cannot return at a later time to stake a claim on the property.
There are two standard types of title policies. While both protect against financial loss or damage related to the title, the different policies will indicate who is the insured.
Lender title policies protect the lender against loss or other problems that could impact the mortgage. Note that the lender’s policy does not protect you, the buyer, from loss. An owner’s policy is optional and is paid for with a one-time payment due at closing. If another party makes an unbeatable claim to the property, the title insurance will pay off the mortgage for you.
Homeowner's insurance is often required as it protects the lienholder from loss. Shop around since different homeowners insurance policies vary in their limits and stipulations. Have your insurance in order before closing as you will need to show proof.
Appraisal and Inspection
The appraiser is an independent third party vendor who determines the value of a property. This process is necessary as the lender will not approve a loan for more than the property is worth. In the case that the appraisal is lower than the sales price, you will need to renegotiate or provide the difference at closing.
The appraiser will also look for repairs needed before the loan can close and will help make sure that any repairs that are part of the purchase agreement, are completed. Safety and repair requirements can vary depending on the loan program.
Call us for full details on appraisal requirements and home loans.
We want you to feel confident with your home purchase and empower you with the knowledge of your mortgage options.
Call us today to learn more or click on the "apply now" link to get started now!