How to Make an Offer on a House That's for Sale by Owner

Buying a home that’s for sale by owner, known as a FSBO, takes more time, patience and research than you’d invest if a real estate agent handled the sale. The burden of providing the correct documentation, disclosures and warranties falls on the seller. As a buyer, you’re faced with negotiating, looming contingency deadlines and providing the seller with proof that they’ve been met. The offer you make is just the beginning of the process and sets the tone for cooperation at the onset.

Get to know the owner of a home you’re interested in buying and spend time inside the property carefully inspecting its condition. Ask if the owner would mind a home inspector going over the property before you make an offer; his response should either alert you to potential problems or make a statement of the owner’s willingness to expose the home to inspection.

Research property tax rolls for the neighborhood to get a sense of purchase prices for the past six months. Use online real estate sources to study the selling prices of nearby homes. Make your offering price reasonable and base it on your research. Don’t use the fact that the home is a FSBO to discount the price further, knowing the seller won’t have to pay a real estate commission; there are other costs involved in selling and buying.

Agree with the seller as to the type of purchase contract that’s acceptable; most states have legally vetted contracts that lay people use successfully. Ask the seller for a copy of the purchase contract he wishes to use. Get a state-approved purchase contract from an office supply store if the seller doesn't have a preference.

Write your offer based on your research and what you've learned from the seller during the times you've been at the house. Present the paperwork in person, opening the conversation in a positive manner. Explain your reasoning behind the price you're offering, and give the seller documentation backing up your numbers. Include your mortgage pre-approval letter and proof of funds if you're paying cash. Explain the contingency dates and leave the closing date open until you've discussed the seller's plans for moving.

Submit a deposit check and make it out to the escrow company the seller wishes to use, never to the owner personally. Be prepared with the name of your own escrow company if the seller is undecided on this point. Agree to increase the deposit once all the contingencies have been met and settled, if asked.

Negotiate a counter offer from strength, referring to the comps you've provided if you're far away from agreeing on a price. Negotiate items within the house to compensate for an increase in the purchase price. Increase the purchase price only to a point where you and the seller are comfortable. Walk away if the negotiations become difficult, as this is an indication of how the rest of the buying process will play out. Sign the purchase contract and initial each page, and have the seller do the same, making the contract binding.

Ask for the name of the seller’s attorney handling his side of the transaction, if he has one. Employ your own real estate lawyer to verify your end of the deal and to be sure all the paperwork is being processed correctly. Let the attorneys work the finer points of the transaction to keep you separate from the seller and any emotional involvement he may have in his home.

Pay attention to the contingency dates you include in your contract, especially if it’s for financing, and meet those deadlines to avoid losing your deposit. Book a home inspection immediately. In California, all contingencies must be fulfilled within 17 days of an executed contract; other states have varied contingency periods. Agree, in writing, to extensions of the contingencies if necessary.