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How and Why to buy a for sale by owner property - Tips for Successfully Purchasing a For Sale by Owner (FSBO)

Writer's picture: StartritehomesStartritehomes

Updated: Jan 14


So you've found what may be the perfect home at a great price... but it's an FSBO, now what? Purchasing a For Sale by Owner (FSBO) property can be a unique and rewarding real estate experience, offering potential cost savings and direct communication with the seller. However, it also comes with its challenges, from navigating the process without a listing agent to ensuring all legal and financial aspects are properly addressed. Here’s a comprehensive guide to help you understand why FSBO properties can be beneficial, how to buy them effectively, and what pitfalls to avoid.


Brick house with white door, green plants, and a "House for Sale" sign in red and white. Lush garden, sunny day, inviting mood.
For Sale by Owner (FSBO)

What Is an FSBO Property?

A property listed as For Sale by Owner (FSBO) means the homeowner has chosen to sell without hiring a listing agent. Instead, they handle all aspects of the sale themselves, including pricing, marketing, negotiations, and closing paperwork. According to a recent Canadian Real Estate Association (CREA) report, FSBO sales account for approximately 10% of transactions annually in Canada.


FSBO sellers often cite several reasons for choosing this route:


  • Saving on commission fees: Sellers aim to avoid the 5-6% commission typically paid to real estate agents.

  • Control over the process: Some sellers prefer to manage showings, negotiations, and pricing independently.

  • Familiarity with the buyer: FSBO transactions often occur between friends or family members.


Benefits of Buying an FSBO Property


  1. Potential for Cost Savings: Sellers may price their home lower than market value to attract buyers or due to the lack of commission costs. This can create opportunities for buyers to secure a better deal.


  2. Direct Communication: Negotiating directly with the seller allows for clearer communication and faster decision-making.


  3. Less Competition: FSBO properties often receive less attention than those listed with agents, reducing bidding wars.


  4. Transparency: Direct conversations with the seller can offer insights into the property’s history and condition, enabling better decision-making.


Challenges of Purchasing a For Sale by Owner


  1. Limited Professional Guidance: Without a seller’s agent involved, the buyer must work with a real estate lawyer to ensure all due diligence and paperwork are completed properly.


  2. Emotional Sellers: Some FSBO sellers may overvalue their property due to personal attachment, making negotiations challenging.


  3. Complex Legalities: Buyers must navigate contracts, disclosures, and legal obligations with a real estate lawyer.


Working with a Buyer’s Agent

Even when purchasing an FSBO property, you can still benefit from hiring a buyer’s agent. A buyer’s agent acts exclusively in your best interest, guiding you through the process and helping you avoid costly mistakes.


Advantages of Using a Buyer’s Agent:

  • Market Expertise: Buyer’s agents provide valuable insights into the market, ensuring you don’t overpay for the property.

  • Negotiation Skills: They can negotiate effectively on your behalf to secure the best terms.


Private Seller’s Fee Agreement:

If the seller isn’t paying a commission to a buyer’s agent, some agents may ask you to sign a Private Seller’s Fee Agreement. This document ensures the agent is compensated for their services, either through a buyer’s fee or a negotiated amount included in the purchase price. Be clear about this arrangement upfront to avoid surprises.

Form titled "Private Seller's Fee Agreement" with fields for seller and realtor details, terms, and conditions. Logo: HomeClosers.ca.
Private Seller's Fee Agreement

A free download of the Private Seller's Fee Agreement can be found on HomeClosers.ca website.



Buying Without a Buyer’s Agent

If you decide to purchase an FSBO property without a buyer’s agent, you must be prepared to take on additional responsibilities.


Tips for Navigating the Process Alone:


  1. Do Your Research:

    • Understand the local market to ensure you’re paying a fair price. Use tools like online listings, recent sale data, and property tax records.

  2. Hire a Real Estate Attorney:

    • An attorney can review the purchase agreement, ensure all disclosures are complete, and address legal concerns.

  3. Order an Independent Inspection:

    • Always hire a licensed home inspector to identify any potential issues with the property.

  4. Obtain Pre-Approval for Financing:

    • Secure a pre-approval letter from your lender to demonstrate your credibility as a buyer.

  5. Negotiate Effectively:

    • Approach negotiations professionally and use comparable sales data to justify your offer.


Pro Tips for Buying an FSBO Property


1. Establish Clear Communication:

  • Build rapport with the seller early on and maintain open lines of communication to avoid misunderstandings.

2. Request Full Disclosures:

  • Ask the seller to provide a full disclosure statement outlining any known issues with the property.

3. Include Contingencies:

  • Add contingencies to your offer, such as inspection and financing clauses, to protect yourself if issues arise.

4. Verify Property Boundaries:

  • Consider or ask for a Real Property Report or a property survey to confirm boundary lines and avoid future disputes.

5. Secure Home Warranty:

  • Negotiate for the seller to include a home warranty covering major systems and appliances.


Addressing Concerns About Working Directly with the Seller


Concern: Lack of Objectivity

  • Some sellers may be emotionally attached to their home, making them less flexible during negotiations.

  • Solution: Use data-driven arguments and remain patient to help bridge gaps in expectations.


Concern: Unfamiliarity with Legal Requirements

  • Sellers may unintentionally omit required disclosures or paperwork.

  • Solution: Work with a real estate attorney to ensure all legal obligations are met.


Concern: Overpricing

  • FSBO properties are sometimes overpriced due to the seller’s lack of market knowledge.

  • Solution: Research comparable sales and consider an independent appraisal.


Why FSBO Properties Are Worth Considering


Buying an FSBO property can be advantageous for buyers seeking affordability and a direct approach. While these transactions require extra diligence and effort, the potential rewards—including cost savings and a more personal buying experience—often outweigh the challenges.

By leveraging professional advice, conducting thorough research, and approaching the process methodically, you can successfully purchase an FSBO home and enjoy a smooth transition into homeownership.


Ready to start your journey? Visit Pro Search for access to expert guidance and resources to simplify your home-buying experience.


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