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VA Loans & For Sale By Owner (FSBO) Homes

Not all buyers will have a real estate agent to market their home. Purchasing a For Sale By Owner (FSBO) property can be an attractive option for many VA home buyers.


A home that’s labeled For Sale By Owner (FSBO) is exactly that – a property available for purchase that’s marketed by the homeowner rather than a real estate agent.

For VA homebuyers, it’s essential to understand the potential challenges and advantages that can come with a FSBO approach.

Potential FSBO Advantages

Buying a FSBO property might also present advantages.

One is the potential ability to land a great deal.

FSBOs typically have a lower median sales price than homes sold by real estate agents. Every property and housing market is different, but the general thinking is FSBO sellers aren’t “pricing in” the real estate agent commission. On a $200,000 home, a 6 percent commission could add $12,000 to the asking price.

But remember that part of the draw for many FSBO sellers is maximizing their bottom line. There’s no guarantee the seller is going to cut you a deal.

Another advantage is that some buyers and sellers find it easier to work directly with one another rather than using an intermediary agent. But be cautious. “Going it alone” isn’t a smart choice for every buyer and seller. A home purchase is likely to be a buyer’s biggest financial investment.

Potential FSBO Challenges

Good listing agents help give homeowners an objective viewpoint. Agents help sellers understand how local market trends, available inventory and a home’s features should affect pricing. That expertise allows owners to price homes appropriately and attract the right buyer.

But in a FSBO sale, sellers don’t have the advantage of an outsider’s opinion. That lack of objectivity can easily hurt the odds of a successful sale. Sellers might refuse to let go of emotional attachments, especially when it comes to pricing. Properties could be priced too high and languish on the market for months. Buyers can lose patience with inflexible sellers and head elsewhere.

Real estate sales aren’t simply about open houses and advertising. They’re legal and fiscal transactions.

FSBO sellers may not be aware of the proper legal requirements of selling a home. Or they may not know how to best address typical real estate transaction challenges, such as seller disclosures, inspection issues, appraisal problems and title insurance glitches.

There’s also the issue of commission. The typical real estate transaction involves two real estate agents: the listing (or seller’s) agent and the buyer’s agent. In most cases, when a property sells, the seller pays a commission that’s split between the two agents. The percentage can vary based on a host of factors, but a common estimate is 5 to 6 percent of the purchase price.

Things can look different in a FSBO transaction. In fact, one of the most common reasons homeowners go the FSBO route is to minimize what they pay in agent commissions. VA buyers and their agents may want to see something in writing from the seller regarding commission payments before formalizing a purchase offer.

Generally, prospective homebuyers will sign a buyer-broker agreement with their real estate agent that covers FSBO transactions. In some cases, these could obligate the buyer to pay their agent’s commission if the seller refuses. But VA loans offer an important safeguard here: The VA prohibits borrowers from paying real estate agent fees.

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Tips for Pursuing a FSBO

Are you thinking about bypassing the traditional market? Ready to find your fantasy FSBO?

Here’s a look at three tips to consider:

1. Hire a Buyer’s Agent

Just because the seller isn’t represented by a real estate agent doesn’t mean the buyer can’t be. It’s nearly always in a buyer’s best interest to hire a real estate agent before purchasing.

If you’re using a VA loan, remember that the seller must pay your agent’s commission. Make sure your seller and your agent are fully aware of this fact before signing a purchase contract.

2. Get a CMA Before Making an Offer

Whether buying a FSBO or an agent-listed property, all buyers should obtain a Competitive Market Analysis (CMA) before making an offer.

A CMA is a short report about the value of other homes in the area, and it’s an excellent tool for determining a property’s fair price. If the FSBO list price is way above the CMA value, you may be able to bargain the owner down. Your buyer’s agent should conduct a CMA before you make an offer.

3. Don’t Skip the Inspection!

If you decide to make an offer, don’t forget to add an inspection contingency to your contract.

This little loophole gives buyers an “out” and allows you to renegotiate with the seller if the inspector discovers problems with the property. The buyer is typically responsible for ordering and paying for an inspection.

According to the Department of Housing and Urban Development, the cost of a professional inspection typically ranges from $300 to $500.

Think of it this way: A home is likely to be the single largest purchase of your life. Why not get as much information about that purchase as possible?

Don’t let the challenges involved with a FSBO sale limit your options. You shouldn’t run from that gorgeous Victorian down the street with a “FSBO” sign in the front yard. Simply prepare yourself for what’s ahead with a thorough understanding of the FSBO process.

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