Buying a home from a seller may save you money, but it’s not likely to save time. All of those things a buyer’s agent normally does in the home-buying process become your responsibility when you buy directly from the homeowner. That’s not necessarily a bad thing, but is something for which you should be prepared. Whether you’re looking to buy a FSBO home in hopes of saving money or because you simply have not found what you’re looking for in the traditional market, you will benefit from knowing what to expect.
Before You Look
Don’t sign a buyer’s agreement with a real estate agent if you’re going to be looking at FSBO homes. If you have signed a buyer’s agreement with a real estate agent, the contract typically guarantees the agent a commission if you buy a home, even if it’s FSBO. If you are interested in purchasing a FSBO property, avoid signing any agreements with a real estate agent.
Get pre-qualified or pre-approved for a home loan before you shop. Pre-qualified means that a mortgage lender has given you an estimate of how much of a loan you can qualify for based upon your debt-to-income ratio. Pre-approved means that the mortgage lender has checked your credit history and has approved you for a specific mortgage amount. It is free to become pre-qualified, while there is a fee associated with becoming pre-approved. Being pre-qualified or pre-approved serves two purposes: It tells you exactly how much money you’re working with and lets the home seller that you’re a serious buyer.
Know exactly what you’re looking for. Decide which neighborhoods you’re interested in, how many bedrooms and baths you want, and the number of square feet you’ll need to be comfortable. It’s easy to make an emotional decision if you don’t go shopping with a definitive list.
Once You Have Found A Home
Make an offer directly to the seller and make it contingent upon a home inspection. Your offer can be either oral or written, but only written offers that include an earnest money deposit are binding on the seller and buyer. Keep your emotions out of the equation. This is a business transaction and you will either come to an agreement or you won’t. As much as you may like the home, there are others on the market.
Arrange for a home inspection. An inspection will cost you anywhere from $100 to $500, depending on who is doing the inspection, but can save you thousands of dollars in the long run. A home inspection may may uncover hidden flaws that even the seller does not know about. Repairs are generally the responsibility of the seller, but you may want to factor small repairs into a revised, lower price on the house.
Sign a purchase agreement. Make sure this is the property you want to buy as a purchase agreement is a binding contract between the buyer and seller, stipulating that the buyer agrees to purchase the seller’s home at an agreed-upon price. Purchase agreement forms should be available from whichever title company you choose to use for the closing and are also stocked at most office supply or stationery stores.
Close On The Home
Choose a title company. Take the completed purchase agreement, signed by the you and the seller, and your earnest deposit money to the title company office to begin the escrow process. By the time all the inspections are completed and the paperwork is prepared, the typical escrow period is between 30 and 90 days.
Call your mortgage lender. Let them know you’ve found a home you would like to purchase so that they can begin the loan processing. Check in with them periodically to make sure that everything is progressing normally. Make sure that you and the seller are promptly supplying your lender with any required information, paperwork or funds.
Pay to have the home appraised. The mortgage lender will require an appraisal of the home to make sure that it is worth at least what you are paying for it. They will also ask for a pest inspection, for which the seller usually pays.
Close on the property. The escrow agent at the title company will conduct the closing. Her job is to ensure that you obtain a clean title, that the costs of the transaction are paid, that the seller’s mortgage is paid off and that the seller receives his proceeds.