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-- Posted: May 12, 2000

Dorothy Rosen -- The Dollar Diva Ask the Dollar Diva

We want to buy a For Sale By Owner

Dear Dollar Diva,
My husband and I have been working with a real estate agent to find a home. He's worked very hard for us, but so far he hasn't shown us anything that we like in our price range. We finally found the home of our dreams, only it's a for-sale-by owner. Can we still buy this home even though we have a real estate agent? Who pays the real estate agent's commission? Do real estate agents look down on this?


The Diva understands your predicament, but it's not as bad as it feels. Real estate people make a nice commission when they match up a buyer and seller -- the reason it's so nice is because it has to make up for all of the time they spend on unmatched buyers and sellers.

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Can we buy the home without a real estate agent? Yes you can. It 's called buying a FSBO (pronounced Fizzbo), which stands for For Sale By Owner, and it's done all the time by people who were formerly working with real estate agents. It's the bane of the agent's existence, but he's used to it. Generally, there's no such thing as an oral agreement when it comes to real estate transactions, so if you didn't sign anything obligating you to the agent, there's no obligation.

Who pays the real estate agent's commission?

The seller pays the commission. He lists his home with a real estate sales agent. The agent who gets the contract is called the listing agent. The homeowner signs a contract and agrees to pay a commission, usually around six percent, when the house is sold. Of course, the seller knows that when he sets a price on the home.

The agent who lists the house and the agent who finds the buyer usually split it in half. Sometimes it's the same agent, more often it's not. The agent then splits his share of the commission with the firm he works for. If he's a big producer he gets to keep a higher percentage of his share than if he's the new guy on the block. The buyer doesn't have to worry about all this.

Do real estate agents look down on this?

Don't worry about the real estate agent looking down on this. He's not your friend, he's a broker who wants to make a deal. He looks upon you as a potential buyer, and his goal is to match you up with a seller. Working hard at it isn't good enough; he has to find a house that will work for you. Since you found the house for yourself, he didn't make a match. It's all part of the game, and if your real estate agent can't accept this graciously, he's in the wrong business.

Buying a FSBO

When you buy a FSBO, you have to do a little more work than when you use a real estate agent. Two things are very important:

  • Have a real estate attorney look at your sales contract before you sign it. You want to make sure the seller pays his fair share of any problems that are found during the inspection. If there are any contingencies, make sure you include them, such as having the sale dependent upon getting a mortgage, selling your present home, or the results of the inspection you're going to have done on the property.

  • Have the property inspected. You want to make sure it doesn't have any structural, electrical, mechanical or plumbing problems, termites or anything else that's going to cost you a bundle after you move in. Be sure to remind the inspector to check for environmental hazards, such as asbestos and radon. And follow the inspector around when he's checking the place out; you'll find out a lot about your new home that way. Sometimes sellers say it's not necessary to have an inspection because their house has nothing wrong with it. Don't believe it.

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