How to get a mortgage
Want to buy a house? Here’s everything you need to know about how to get a mortgage, from the preapproval process to the closing details. Learn more.
Kathryn Parkman
While many home sellers prefer listing their properties with the help of listing agents, others like to work directly with prospective buyers. Homebuyers who go the for-sale-by-owner (FSBO, pronounced fizz-bo) route can avoid agent fees by taking this more straightforward option, but it’s important to know that savings aren’t guaranteed when you buy directly from the owner.
In a typical home sale, real estate agents represent both sellers and buyers — but a FSBO seller doesn’t have an agent. Whether you choose to hire your own real estate agent is up to you.
In a traditional home sale where both parties have real estate agents, the combined commissions will be about 6% of the sales price. So, if you buy a home for $300,000, the real estate agents will split about $18,000 of that before the seller is paid.
FSBO sales give both parties flexibility to negotiate while still getting what they want.
If you also choose to not use an agent in a FSBO sale, you can avoid paying any real estate commissions at all. There’s generally no legal requirement to go through an agent, so you and the seller can negotiate the sales price and other relevant matters directly.
If you want to split the difference, you can use an agent for a FSBO transaction — you’ll just have less wiggle room in negotiations because the purchase price would have to include your agent’s fees (about $9,000 in the example above). However, some FSBO sellers choose to pay a 2% or 3% commission to the buyer’s agent to increase their chances of finding a buyer.
It’s also important to note that if you’ve already begun working with an agent and signed an agreement with them, you’ll need to see that contract through.
Keep in mind that working with an agent can make the process significantly simpler, especially for first-time homebuyers. A buyer’s agent can help find the best homes for you, negotiate your price and demystify the closing process.
The steps involved in buying a FSBO property aren’t too different from the typical homebuying process. Here’s a breakdown:
The homebuying process often begins with mortgage preapproval, which typically lasts up to 90 days. You’ll want this approval before you start visiting FSBO homes to show sellers you’re a vetted buyer — some sellers will only show their homes to potential buyers who’ve been preapproved. The seller may also request that you include the preapproval letter along with your offer.
If the seller you’re working with is an amateur in real estate procedures — especially if you're also new to the process — going without an agent can be risky.
If you do choose to work with an agent, it’s a good idea to find one with experience in FSBO transactions. You want a reliable and professional agent who can help you find a FSBO home that best fits your needs.
Make sure to discuss commission before hiring an agent so you understand the fees attached. Then confirm that the buyer’s agreement specifies these commission fees and the circumstances in which you will or will not pay them.
You may need to dig through some off-market homes to find the best FSBO options for you. Though there are plenty of options on various listing platforms, some owners just post a sign in their yard (this could be due to a lack of marketing know-how or simply their preference).
If you’ve chosen to work with an agent, they can help schedule showings — otherwise, you’re on your own.
Once you’ve found the right home for you, it’s time to prepare an offer. The offer is a type of contract that details the amount you’ll pay for the home, the down payment and the terms of the sale. If you don’t have an agent, you can appoint a lawyer or a title company to manage the escrow.
The last stage of the homebuying process is closing. At this point, you’ll complete the requested documentation from your insurance company and mortgage lender. You can sign all the paperwork and pay for the closing costs after you finish the title work and get final approval.
While some prefer the seemingly straightforward nature of for-sale-by-owner transactions, there can be some downsides in terms of logistics and costs.
You’ll want to ask why they're selling the house, the previous sale price and how long the property has been on the market. It’s also a good idea to ask about potential hazards and any past issues with the home.
You can find FSBO listings through various real estate platforms and websites. You can also search for real estate signs in neighborhoods you’re interested in.
To find a FSBO seller, you can check the website of your town assessor’s office or search public records.
Buying a FSBO home comes with specific challenges. Dealing directly with an amateur seller can leave both parties floundering, especially first-time homebuyers. If you find the right FSBO property for you, though, you could save a good amount of money by avoiding agent fees. This route can also help you close faster.
It’s important to weigh the pros and cons of buying a FSBO property before jumping into the process. If you’re an experienced buyer and know the ins and outs of real estate transactions, this option might make more sense for you.
Want to buy a house? Here’s everything you need to know about how to get a mortgage, from the preapproval process to the closing details. Learn more.
Kathryn Parkman
Looking to buy a house this year? ConsumerAffairs has 12 steps to help you land your dream home in 2021. See our guide for more information.
Sara Coleman
Before you buy a condo, you’ll want to check the amenities, fees, rules and more. Learn what other tips to keep in mind as you shop for a condo.
Sara Coleman
No-down-payment mortgages can be an appealing path to homeownership. Read the pros and cons, how to qualify and if they’re worth it.
Emily Moore
Steps to choose a lender, according to a loan officer: Consider mortgage options, get pre-qualified, compare offers and ask the right questions.
Ashley Eneriz
Looking to buy a home with a bad credit loan? Read our guide to learn about mortgage options and find out which one is best for you.
Ashley Eneriz
We’ll start sending you the news you need delivered straight to you. We value your privacy. Unsubscribe easily.