5 FSBO Tips for the First Time Home Buyer

FSBO or For Sale By Owner properties may not be too common but buyers may find these homes to be more affordable than others. While most FSBO sellers make 6% more by selling the property without an agent, buyers can benefit from this too!

Most FSBO sellers are amateur realtors. Although some FSBO properties are overpriced, most of these homes sell for less than the market value. As a buyer, this allows you to buy a home at an advantageous price. But, dealing with an FSBO seller is not always a smooth journey because you’re not talking to a professional!

Here’s a list of five tips that may help you mitigate risks when dealing with an FSBO seller.

1.     Find a Real Estate Attorney to Guide You Through the FSBO Sale

Several states require the presence of an attorney during the closing of a property sale transaction. But when dealing with an FSBO seller, it’s better to hire one from the start.

For instance, you found a property which looks like your perfect home from your initial inspection, so you decide to offer for the property. If the seller accepts your offer, you would enter a contract and put down some cash as earnest money.

This earnest money, which is typically 1 to 2% of the contract price, should be with a third-party, not your seller, and placed in escrow. At the same time, you have to sign a contract. Just like most contracts, expect to encounter a document full of confusing legal terms. If you’re a first time home buyer, this guide in buying a home could be useful too.

Understanding Real Estate Contracts 

An agent can help you go through the contract but having an attorney would be better. Among the things you should look into in a real estate contract are the contingencies.

Contingency clauses refer to circumstances where you can back out of the contract without losing the earnest money. Some of the most important contingencies include the inspection and the disclosure.

Inspection Contingency

Most contracts allow buyers to back out of the contract if the inspector finds major issues during the inspection. Usually, buyers have to accompany the inspector while they assess the property. The inspector will then provide a report detailing the issues found in the property.

If the inspection finds big issues with the property, the buyer can back out without breaching the contract. The buyer can also use the inspection report to decrease the cost of the property.

Sometimes, contracts also have a cost-of-repair contingency. This contingency specifies a certain percentage or dollar amount of repairs required. If the inspector determines that it will cost more to repair the property, the buyer may terminate the contract.

Pro Tip: Never waive the inspection contingency or you might be stuck with a problematic property if you don’t want to lose your earnest money.

Ace the Bidding War Without Sacrificing the Inspection Clause

In case you’re worried about losing to other buyers, including a one to two-day inspection in your offer

While there are risks in FSBO, you may find yourself making more concessions to get the property. However, you should never waive the inspection -just because a home looks more than serviceable to you, doesn’t mean it actually is. Asbestos, HVAC leaks, and termite infestation are some things which may escape you.

If you buy a property while being blind to these problems, you could end up paying so much more for repairs and renovation along the road.

So, what can you do if there is a tight bidding war between you and other buyers?

FSBO sellers would most likely want to sell the property fast. To help them keep things moving, you can schedule the inspection as quickly as possible and include it on your offer.

Even if you are in the risk of losing the bid, you should always do your due diligence.

Take note that the results of the inspection could also be useful when you are negotiating with the buyer.

Loan Approval

Also referred to as the financing or mortgage contingency, this contingency specifies how much time the buyer has to secure financing for the property. After the specified date, the buyer may request for extension or cancel the contract. For an extension, the seller needs to agree in writing. If the specified date passed and the buyer did not request for an extension or termination, the buyer would be obligated to purchase the property even if the financing company had not approved the loan yet.  

In most cases, loan approval will take 60 days. Prior to approval, the financing company will appraise the property through the help of a third party and check the title.


Depending on the state where you live, the required disclosures could vary. These disclosures were designed to help the buyer learn about the property for sale. Some FSBO sellers have something to hide that’s why they are avoiding going through an agent. So, it would be best to have a disclosure contingency.

Most sellers will use the state forms or a template to list everything they know about the property and their experience in the residency.

Buyers often receive the disclosures when the seller accepts their offer. Aside from disclosures check the local building department documents for flood zones, earthquakes zones, and proximity to airports.

Before you sign the contract, it’s better to review it with your real estate attorney or an agent if you have one. These professionals can comb through the contract and possibly see things you might have missed. There could also be clauses hidden in the fine print which may be unfavorable for you.

As a buyer, you should protect your interests especially when you are dealing with a real estate contract. An attorney would be necessary if it is a short sale or if there are legal issues related to the property.

Related Article: For Sale By Owner Struggles and How to Solve Them 

2.     Request a CLUE 

Not all homes are insurable and that’s one of the worst things you can find out after getting locked into a sales contract.  This is where CLUE comes in.

CLUE stands for Comprehensive Loss Underwriting Exchange. This document is a report detailing the insurance history of the property for the past five years including claims made and the company involved.

From a CLUE report, you can see if any claims have been made for major damage like mold or water damage. If you see one, ask about any renovation or repair to the property.

So where can you get a CLUE report?

Not anyone can request a CLUE report -only the property owner and the insurer. So, you have to request this document from your seller.

The owner can even request a CLUE on your primary residence from their website. Take note that CLUE is part of LexisNexis, so don’t be surprised to see the LexisNexis logo on their website. If you are interested in a rental or vacation property, you have to make the request by mail. Every year, the property owner can get one CLUE report for free! Additional reports would cost $19.95.

If a seller is not willing to provide a CLUE report, there may be something wrong with the property. Some sellers find the information in these reports interesting especially if they did not order a CLUE when they bought the property less than five years prior to selling it.

If you are considering a property, get a CLUE as early as possible and apply for insurance coverage for contingencies. This way, you will save yourself from nasty surprises.

3.     Seek for Pre-Approval

Most FSBO properties are sold in two weeks after listing. If you like an FSBO but can’t pay the spot cash, it would be better if you have pre-approval.  

Many FSBO sellers prefer buyers pre-approved for a mortgage because it means they can do the sale quickly. This also gives you additional leverage when there are multiple offers for the property.

4.     Be Tactful During an FSBO House Tour

For an FSBO property, the owner would most likely give you a home tour. Had you been going through the property with an agent, you could comment on the design and fixtures with much freedom. However, you have to keep all your reactions bottled up with an FSBO seller. The person you are dealing with may have fond memories about the property so you should save your criticism for later.

In some cases, you may be dealing with a reluctant seller who couldn’t help but gush about the features of the property. Some sellers, especially those who are hesitant about parting with their home, may become emotional.

While the house tour process may turn out to be more personal than you expected, don’t let the owner’s presence deter you from being thorough. Look through the entire place.


Open all the doors, try turning the lights on and off, inspect the closets, and check all the ductwork. Don’t slack off in inspecting the property in the name of decorum. If you have questions, ask the owner although you have to choose your words wisely.

5.     Hire an Agent to Assist You in Transacting With an FSBO Seller 

Yes, you can hire an agent even if the seller does not! If you have a realtor but you decide to buy an FSBO, you may still have to pay commissions.


Real estate agents are experts in their field, and you pay them for their assistance in the whole process. If you don’t have expertise in entering real estate transactions, it’s better to have someone help you go through the sea of information.

Check the contract you signed with your agent to see if you have to pay their commission for an FSBO. For a for sale by owner transaction, you may have to pay the agent if:

  1.     You bought a home through another agent after you signed the Buyer Broker Agreement.
  2.     The seller refused to cover the costs of hiring your agent. In this case, the obligation to pay the agent lands on your shoulder.
  3.     Your seller agrees to pay a fraction of your agent’s fee. For this situation, you have to cover the fraction which was not paid by the seller.

There are also instances where agents decide to waive the portion your seller refuses to pay.

Some FSBO sellers are looking to sell their home at the most expensive price without paying fees to any third party. Given the nature of the transaction, it becomes even more necessary to have an agent to look out for you.

While an attorney can provide legal advice, your agent may know more about the property and the neighborhood. Plus, you will have someone to help you with all the paperwork. These professionals are also more conscious of disclosures which should be in the document from the seller.

Buying FSBO May Take More Work, But It Could Be Worth It

If you are buying For Sale by Owner properties, expect the entire process to take more time. Your seller would most likely be charting new territory and may struggle on how to go about with the entire process.

Based on stats from the National Association of Realtors only 3% of FSBO sellers found it difficult to make time, which may be because most of these people want to dispose of the property as soon as possible. If you do find a seller who is always busy, you may have to adjust your schedule and the paperwork encounter several hurdles due to scheduling conflicts.

Even when you have an agent, the process can take much effort from both parties. Your agent would most likely be doing the job of two people since he or she needs to impart much-needed advice for an inexperienced seller.

No matter how stressful and tiring the process can be, finding your dream home through an FSBO seller is not just possible it can be the best bargain ever. 

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