Buying a Home Directly From the Seller? Here's What You Need to Know

Buying a home is exciting, and finding a property that's being sold directly by the owner may seem like an opportunity to simplify the process. With fewer people involved, you might assume the transaction will be faster, less expensive, and easier to navigate.

While many "For Sale By Owner" (FSBO) transactions are completed successfully, they also require buyers to take extra steps to protect themselves throughout the homebuying process.

Think of it this way: buying a home directly from the seller is a little like purchasing a used vehicle from someone's driveway instead of a dealership. The price may be attractive, but it's your responsibility to verify the condition, review the paperwork, and make sure everything is in order before moving forward.

The same principle applies to real estate.

Why Contracts Matter

One of the most important parts of any home purchase is the sales contract.

In a traditional transaction, experienced real estate professionals often help ensure the contract includes the language needed to protect both parties and satisfy mortgage lender requirements. In a direct sale, buyers should make sure the agreement addresses important items such as:

• Financing contingencies
• Home inspection provisions
• Appraisal requirements
• Title and ownership verification
• Closing timelines
• Other lender-required terms

Missing or incomplete contract language can create delays during the mortgage process and may even require revisions before the loan can move forward.

Understanding the Appraisal Process

Another important consideration is the home's appraised value.

Your lender will base financing on the lower of the purchase price or the appraised value. If the appraisal comes in below the agreed-upon sales price, several outcomes are possible:

• The buyer may choose to bring additional funds to closing.
• The buyer and seller may renegotiate the purchase price.
• If the contract includes an appraisal contingency, the buyer may have the option to terminate the agreement.

Having the proper protections in your contract before signing can help prevent unexpected financial challenges later in the process.

Before You Sign

Whether you're purchasing from an owner or through a real estate agent, it's wise to take a few important steps before moving forward:

• Obtain a full mortgage pre-approval.
• Carefully review all seller disclosures.
• Order a professional home inspection.
• Verify the property's title and ownership.
• Make sure the purchase contract meets lender requirements.
• Consider working with a qualified real estate professional or attorney to review the transaction.

These steps can help reduce surprises and keep your purchase on track.

A Direct Sale Doesn't Mean Fewer Responsibilities

Buying directly from the seller isn't necessarily better or worse than a traditional transaction. Many buyers and sellers complete these transactions successfully every year.

The key is understanding that when fewer professionals are involved, it's even more important to make sure every detail is handled correctly.

At BankFirst Mortgage, we're here to help guide you through the financing process and answer your questions before you sign a purchase agreement. A little preparation today can help make closing day much smoother.

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.