Who Pays the Realtor Fees For Sale By Owner |
How Does FSBO Work for the Buyers?

Hi. I am Jennifer Yoingco of Texas Home Group. I have been getting a lot of questions lately from buyers who are interested in purchasing properties directly from their owners. In real estate terms, this is called For Sale by Owner or FSBO (pronounced as fizbo). It is a type of sale wherein the property owner does not engage the representation of an agent or a broker to save on commission and increase their profit. Sounds good right?

But! What if you have been working with a realtor for quite some time then you found a home that you extremely like only to find out that it is For Sale by Owner? What will you do? Who will pay the realtor fees? How does FSBO work for homebuyers?

We will address these questions today. So, stick around.

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Let us now dive into our questions for the day.

Question #1. Let’s say you have been working with a realtor for quite some time. Then one day, while driving around a certain neighborhood, you found a home that you fell in love with right on the spot. The problem is, the sign says For Sale by Owner. What will you do?

I suggest that you check your Buyer’s Broker Contract or Buyer’s Broker Agreement that you signed with your realtor. In most cases, it will cover all purchases by the buyer during a specific period, usually, it can go anywhere from 30 days up to a year. In that case, contact your realtor and let them handle the transaction on your behalf.

What if the contract states otherwise? Or what if you did not sign anything? I will still suggest that you engage the services of a real estate agent, not because I am a realtor myself, but because it will save you a lot of time and effort in doing so in the long run. It is better to get representation. Purchasing a home is one of your biggest assets and you will need a competent real estate agent on your side who will assist you in the process.

Question #2. Who will pay the realtor’s fees then?

First, check if the seller will agree to cover the cost. Although they might want to increase their profit, most of them will cooperate with a buyer’s agent to facilitate a smooth transaction and ensure the buyer’s eligibility to acquire a property. Your Real estate agent will provide the FSBO seller with a document to sign. ). A disclaimer that I am not a licensed attorney, seek legal advise if needed. This is for informational purposes only.

The document is called the “Registration Agreement Between Broker and Owner”. This document will detail as to who is responsible for paying the brokerage’s compensation (seller or buyer). If the buyer decides to choose a FSBO (not represented by an agent),  the FSBO owner needs to sign the document.  This document will detail as to who is responsible for paying the brokerage’s compensation (seller or buyer).  In addition, the buyer needs to sign a buyer representation agreement to further clarify that if the FSBO seller refuses to pay the commission, the buyer maybe responsible for payment based on the signed representation agreement. If you have signed an agreement with your agent, this may mean you are bound to pay your broker regardless of who found the property or whether or not the property owners are represented by an agent or not. In this case, work with your agent. Discuss how you could go about this situation. In most cases, the commission is often added to the sale’s price or incorporated into the offer. In this way, it will be paid from the proceeds at closing and it will not increase your cost.

Question #3. So, how does FSBO work for homebuyers?

For us to understand how FSBO work, let us first discuss the entire home buying process. The first thing to do after you decide to acquire a property if you do not have enough cash to buy one is to get prequalified and preapproved for mortgage credit. Then you can go ahead and search for your dream home. At this point, it is best to acquire the services of a real estate agent or a broker. Why? A competent agent can provide you with helpful information on homes that are not readily accessible to the public especially coming soon listings that are not available in the public but are available online for agents like them. Now, when you finally find a home that you like, you can make use of their negotiating skills in making a fair offer based on comparable homes in the same neighborhood. Once the seller accepts your offer, your realtor can then assist you in doing your due diligence and that is to recommend you home inspectors. If you have your own trusted home inspector, feel free to use them. The goal here is to check the total condition of the house. If any structural defects are found or if repairs will be needed, your realtor can renegotiate the offer for you. After final negotiations are made and both parties are moving forward, then you can work with your lender and provide all the needed items to get into underwriting approval. If it is a loan, appraisal needs to be ordered by the lender. This will also be the best time to shop for home insurance, home warranty and more. Your realtor can also assist you in this process by pointing you to the right people. They can also help you understand the final terms of the loan before the sale is closed.

Now, can you imagine doing all that by yourself? Before you think of doing away with your broker’s commission, think of the value they can bring to you. Think of all the help and guidance you can get in every step of the buying process – you do not only have someone as an informational resource but they could also serve as a trusted advisor. They will not only save you time but can also save you money in the long run.

Remove the Realtor in the picture, then that is how FSBO work for home buyers. You will be dealing with the FSBO directly and if you are not aware on what needs to be done you will most likely be frustrated. I am not saying that there is no successful transaction when working with a FSBO directly without using a Realtor, for sure there is. I only want to point out that it is recommended that you seek the services of an agent.

I hope you have learned a lot in this video. If you are looking to relocate in the greater Houston area, and have some questions, feel free to complete my home buyer questionnaire below. If you are a seller and have questions about the home selling process, complete my home seller questionnaire. I have a no pressure approach. Think of me as your consultant.

If you have any topics, that you would like for me to cover, indicate it in the comments line below.

Again this is Jennifer Yoingco, you are my priority for anything Real Estate. Serving Houston, Tomball, Spring and the surrounding cities.

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Resources:

1. https://www.homelight.com/blog/buyer-buyer-broker-agreement/
2. https://www.realtor.com/advice/buy/3-types-buyer-broker-contracts/
3. https://www.tylerbursch.com/courtside-news/real-estate/buyer-broker-representation-agreements
4. https://www.thebalance.com/buyer-s-broker-agreements-and-contracts-1798335
5. https://www.thebalance.com/how-do-buyer-s-agents-get-paid-1798872
6. https://www.realtor.com/advice/buy/what-is-fsbo-for-sale-by-owner/
7. https://www.mortgageloan.com/5-things-to-remember-when-buying-a-for-sale-by-owner-home#1-Understand-how-much-you-re-saving-on-commission
8. https://homebuying.realtor/content/5-need-knows-buying-fsbo-home
9. https://resources.ownup.com/fsbo