Quick Mortgage Tips – For Sale By Owner Properties Tougher to Finance

With real estate commissions often as high as 6% of the sales price of a property, some adventurous, or ahem, frugal homeowners, decide to go it alone when it comes to selling their home.

While this type of listing, referred to as a “for sale by owner,” is not necessarily the easiest, nor quickest way to sell a home, it is cost-efficient. That’s pretty much the only reason for doing it.

However, the difficulty of selling and showing your home on your own comes with another often overlooked hurdle that may hinder the selling process.

A lot of banks and mortgage lenders place restrictions on “for sale by owner” properties that wouldn’t necessarily apply to real estate agent-listed properties.

For example, if you, the homeowner find a buyer through your FSBO listing, the bank or lender the buyer chooses may not allow 100% financing, or may require an exception to get the deal done at a lower loan-to-value.

And even if the borrower qualifies in every category, the sole reason for a denial could simply be because the property is a FSBO.

This can make the lending process difficult, and may even sour a deal if enough goes wrong to exacerbate the buyer.

That being said, there are plenty of banks and lenders willing to finance FSBO properties, but with today’s hardening market, it’s just another potential roadblock to getting a mortgage.

Tip: Consider using a mortgage broker to help you find a mortgage lender willing to finance a FSBO with no restrictions.


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