Buying a house from the owner: a step-by-step guide
Buying straight from an owner can be smooth and friendly, but no listing agent is there to manage the paperwork. These steps protect you, and most of them apply to any home purchase.
Key points
- Get mortgage pre-approval first, and compare Loan Estimates from several lenders.
- Put everything in a written contract with clear contingencies for inspection, financing and appraisal.
- Pay earnest money to a neutral title, escrow or attorney account, not to the seller directly.
- Order your own inspection and a title search, even if you pay cash.
How buying from an owner is different
With a for-sale-by-owner home, the seller has no listing agent. You may talk with the owner directly about price, repairs and dates. You can still hire your own buyer's agent or a real estate attorney to help you, and many buyers do. Agree in writing who pays that person.
Step by step
- Set your budget and get pre-approved. A pre-approval letter shows the owner you are serious. The CFPB suggests you request Loan Estimates from several lenders so you can compare them (CFPB). A HUD-approved housing counselor can help first-time buyers for free or at low cost.
- Research the home and its price. Look up recent sales of similar homes nearby; our pricing guide shows the method.
- Ask for the disclosures. Ask for your state's seller disclosure form. For homes built before 1978, the seller must give you the EPA lead pamphlet, disclose known lead-based paint and offer a 10-day period for a lead inspection, which you can waive or change in writing (EPA).
- Make a written offer. Use your state's standard purchase agreement or have an attorney prepare one. Include the price, the earnest money, contingencies, what stays with the home and the closing date.
- Pay earnest money to a neutral party. Earnest money shows you are serious. If you follow the contract and your contingencies, it stays protected; if you back out for a reason the contract does not allow, you could lose it (Virginia Housing). Ask the title company or attorney to hold it in escrow.
- Get a home inspection. Book it as soon as the contract is signed. See the inspection while in escrow.
- Let the lender appraise the home. If the value comes in low, your contract terms decide your options.
- Check the title. A title company searches public records for liens, unpaid taxes or ownership problems. Ask about owner's title insurance.
- Review your Closing Disclosure. Your lender must give it to you three business days before closing. Compare it with your Loan Estimate and ask about every change (CFPB).
- Final walk-through and closing. Check the home just before closing. Confirm any wiring instructions by phone with the closing company, using a number you already know.
The CFPB's mortgage closing checklist is a good printout for the last weeks.
Questions to ask the owner
- Why are you selling, and how soon do you need to move?
- How old are the roof, the heating and cooling system and the water heater?
- Have you had any leaks, flooding, pest problems or insurance claims?
- What work was done with permits, and can I see the receipts?
- What are the average utility bills, property taxes and any HOA dues?
- Which appliances and fixtures stay with the home?
Buying with cash
Cash buyers skip the lender's appraisal and loan papers, but they should not skip the safety steps. Still order an inspection and a title search, use a written contract and close through a title company, escrow agent or attorney.
Warning signs
- Pressure to skip the inspection or sign today.
- A request to send your deposit to a personal account.
- No disclosure form, or answers that change.
- Someone other than the owner on the title, with no clear reason.
Your fair housing rights
The Fair Housing Act protects buyers from discrimination because of race, color, religion, sex, national origin, familial status or disability (Department of Justice). These rights apply when you buy from an owner, too.
Sources
- CFPB: Buying a house
- CFPB: Loan Estimate explainer
- CFPB: Closing Disclosure explainer
- CFPB: Mortgage closing checklist (PDF)
- CFPB: Find a HUD-approved housing counselor
- EPA: Real estate disclosures about potential lead hazards
- Virginia Housing (state housing finance authority): What is an earnest money deposit?
- U.S. Department of Justice: The Fair Housing Act
This page continues a topic from the earlier Learning Center at this web address. We wrote it from scratch with current rules and sources.
How we write: we check every legal and money statement against the official sources above. Read our process or report a mistake.