If you’re going the FSBO route, understand what costs you’ll owe at closing
Whether you’re planning to buy or sell a home as For Sale By Owner (FSBO), it’s important to understand exactly what you’ll have to pay at closing. FSBO listings have several benefits, including avoiding paying listing agent fees and commissions, but these benefits come at a price. Before moving forward with a FSBO sale, here’s what you need to know about who foots the bill when it comes to the closing costs on a FSBO home.
Closing costs are one of the many expenses associated with buying and selling a home. While many of these costs vary by state (and some even vary by township or municipality), you can expect to see the following fees on your final closing statement:
Appraisal fee
Attorney fees
Title insurance
Credit report charges
Upfront payments for insurance or taxes
Origination fees
Underwriting costs
Real estate agent commission
Determining which party pays closing costs works the same as any other home sale. The buyer typically pays the majority of closing costs, but the seller is responsible for some fees, too. Keep in mind that many of the fees are negotiable, especially during a FSBO sale, so you should work out an arrangement beforehand. However, there are a few FSBO specific figures you’ll need to negotiate.
One of the major perks of selling a home FSBO is that the seller won’t have to pay a listing agent’s commission. However, the seller may still have to cover the buyer’s agent commission fee. If you’re still using an agent as a buyer, you’ll want to spell out who will be paying the real estate commission fee in your offer letter.
It doesn’t matter whether you’re the buyer or the seller; you can still calculate your estimated closing costs ahead of time so that you’re not surprised when you get to the signing table. A good rule of thumb is to assume that the buyer will need to pay about 3% and 6% of the purchase price, and the seller will likely pay up to 10% of the purchase price.
Seller concessions, also known as a seller’s assist, is when the seller offers to cover some of the buyer's closing costs. Since a seller is technically spending less when they go the FSBO route, asking them to pitch in and offset some of your closing costs may sound agreeable. Buyers can also request a closing cost credit, which is when the seller uses a portion of the sale profits to cover some of the buyer’s closing costs. Keep in mind that these negotiations will be tougher in a seller’s market with more offer competition.
It’s no secret that real estate transactions require a lot of paperwork, but usually buyers and sellers can count on their real estate agent to keep it organized. But that’s not the case with a FSBO sale.
You’ll need to do a lot of the legwork of submitting closing paperwork accurately and on time. If you and the seller have made agreements about closing costs or seller’s concessions, it’s your responsibility to ensure those are outlined in your legal documents. If your closing documents don’t reflect your agreements, it could cause a delay in closing.
