As compared to a traditional sale, purchasing a home for sale by owner carries an entirely different experience. A for sale by owner takes place when the seller decides to list their home without the use of a real estate broker. In turn, this means that the buyers may have to forgo their representation and negotiate directly with the sellers.
While buying home without a realtor can be daunting, it shouldn’t be avoided entirely. In doing the correct homework, you can learn how to best maneuver this type of transaction and find your dream home.
If you’ve fallen in love with a home listed for sale by owner, you’re going to want to read this. To help, we’re sharing everything you need to know about this type of transaction and how to best protect yourself.
1. Representation and Commissions
First things first, you’re going to want to speak openly with the sellers about representation.
If you’ve been working with a real estate broker, this broker will expect to make a commission on your purchase. However, if the seller isn’t willing to pay your real estate broker a commission, you may be left without representation.
This can be risky and pose a number of challenges to buyers who are now left to fend for themselves throughout the transaction. When we consider that one-third of buyers in 2019 were first-time homebuyers, it’s easy to see how not having representation would be intimidating. Without a real estate broker, buyers have to mitigate the transaction on their own from beginning to end.
However, it’s important to note that a small number of sellers will be willing to pay a co-operating commission. This means that they’ll allow the buyer to be represented by the real estate broker. With this, you’ll want to understand exactly how much commission they’re willing to pay your real estate broker and under what terms.
2. Pre-Determine Your Loan
According to top Florida lenders, as with a traditional home purchase, you’ll be required to arrange your home loan before signing on the dotted line
To start, you’ll need to be pre-approved for the best home loans possible. This will involve working with a home loan officer and submitting a number of financial documents. In turn, the home loan officer will determine how much they’re willing to lend you and require a deposit.
Once you’re pre-approved, you can officially begin to house shop within your given budget!
3. Study the Home in Careful Detail
In viewing a home for sale by owner, it will often be the owner who shows you the home.
While some will allow you to view the home on your own terms, this isn’t the case for most. With this, you’re going to want to prepare all of your questions for the seller in advance.
You’re also going to want to ensure that you still open every door, lift the rug and peek into the nooks and crannies of the home. While touring the home alongside the seller can be uncomfortable, you still deserve the right to a full and open tour.
4. Learn About the Market
Does the asking price of the home make sense?
Let’s face it, trying to understand the current market can be challenging without a real estate broker. To learn about the market, you opt to work privately with a real estate broker and pay them on your own terms. However, you can also study the market through reading real estate articles, studying trends and familiarizing yourself with past sales data.
The more information you gather, the more confident you can feel in offering a fair yet competitive purchase price.
5. Get a Home Inspection
A home inspection is always a good idea when it comes to purchasing a house.
However, doing so is even more important when purchasing a house that is listed by the owner. In representing themselves, sellers may feel less inclined to make buyers aware of any problems pertaining to the home. While real estate professionals are often more forthcoming in voicing these issues, this isn’t always the case for the sellers.
This is why making a point to get a home inspection before you make things official is encouraged. Here, you can walk through the home with a certified home inspector that will examine both the interior and the exterior of the home. Assuming the health of the home is deemed satisfactory, you can move forward in making your offer official.
6. Use a Lawyer
When submitting an offer on a home for sale by owner, it’s always best to use a lawyer to draw up your paperwork.
While you can access home sale contracts online, this isn’t always the best route. In using a lawyer, you’re taking the steps necessary to protect yourself and your finances. Doing so is also a simple way to make certain that your paperwork is correct. In submitting your paperwork, even one small mistake can be incredibly costly.
Your lawyer will also help you to determine any clauses or conditions that you should include in your offer. While this is most costly than using paperwork available online, it’s sure to benefit you in the end.
What to Know: Buying a Home for Sale by Owner
Buying a home for sale by owner can be a totally different experience than buying a home in the traditional sense.
For one, you’ll likely lose the ability to be properly represented by your real estate broker. When we take into account that 88% of buyers purchase their homes through a real estate broker, it’s easy to see why this is an important consideration. As a buyer, you’re also going to have to negotiate and plan viewings directly through the seller.
To help minimize the confusion that often accommodates such an experience, allow this guide to lead the way. With this guide, you’ll be well aware of the questions that you need to ask and the red flags to be wary of.
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