You may save money, but negotiating the deal will usually be more difficult. The seller of a for sale by owner (FSBO) has not listed the house with an agent, usually to avoid paying a hefty commission. Some agents will not show you FSBOs, so you may need to find them on your own. Sometimes the sellers have cut the price to get a quick sale, so these can be a real bargain. At other times, the sellers may have set an unrealistically high price, and the home may be no bargain at all.
There are both pros and cons in dealing with FSBOs. The pros are usually a lower price. Wise sellers will often reduce the sales price by a large portion of the amount that would otherwise go to paying the agent's commission, and this can save you money. For example, if the listing rate is 6 percent and the house sells for $150,000, that's $9000 in commission. If the sellers reduce the price, say $6000 (keeping the equivalent of $3000 for themselves), that's a hefty savings for the buyer. Besides, savvy buyers can sometimes pressure the seller to reduce the price the equivalent of an entire commission (or more) thus getting a true bargain. This is usually the case only in a slow market.
The difficulty in buying a FSBO is that you must deal directly with the sellers without the benefit and expertise of an agent. When handling the negotiations, the agent acts as an intermediary, often soothing hurt feelings and at the same time coaxing the price down and getting you better terms. Unless you are a very skilled negotiator, you may find this difficult to do in a face-to-face situation with sellers.
Further, once you and the sellers have agreed upon the price, there's a lot of important paperwork, including disclosures, you must get from the sellers, and there are inspections you must arrange. The agent is, presumably, up-to-date on all of these and can guide you efficiently through the purchase process.
On the other hand, many sellers are just as knowledgeable as Hawaii agents. The sellers may already have all the paperwork ready to go, can assist with getting inspections and may have an arrangement with a lender to help you get financing!
Sometimes you can buy a FSBO with an agent (thus, getting your cake and eating it too!). Most FSBOs are willing to pay a half commission to any agent who brings them a legitimate buyer. If the listing fees in the area are 5 percent, for example, most FSBOs will pay the agent 2% percent. Since this is the same amount as the agent would get by being the selling broker for another agent's listing, they are usually quite willing to go along. If you're working with an agent, have the agent call the FSBO and see if they'll pay a selling commission (half). If they are willing to do so, then just have the agent handle the deal for you. You could get the benefit of a lower price and the convenience of having a Hawaii professional do the dirty work!
Overall, buying a FSBO is harder to do than working through an agent, but it is not impossible. If it works for you, the rewards may be worth an extra effort.