A Quick Guide to Selling a Home by Owner
An attorney can save you time and money in the process.
Selling your own home, or For Sale By Owner (FSBO), can be a way to save you the money that would otherwise be paid out on commissions to your realtor. Selling your home, however, is more than just hanging a sign out front and then waiting for prospective buyers to line up outside your door, and it is definitely not a task you will want to take on alone.
Before you decide this is the best route for you, be sure you are ready for the work that has to be done to get the best price for your home.
This is also a good time to contact a real estate lawyer to assist you now and before you decide on a buyer. You can still do most of the work needed to prepare your home for sale, but there are important legal and contractual obligations for which legal counsel is essential before you start receiving offers—and certainly before you sign anything of legal significance.Your home should be in pristine condition before you post an ad. Go through the house and see what needs to be painted, what carpets need to be fixed or replaced, and if the walls or stairs have cracks. Few houses are perfect, so expect some defects.
If they are material, you will either have to repair or disclose them. It is not your responsibility to conduct a home inspection since the buyer will do so at their cost. Also, you are legally obligated to disclose only what you know about, and you are not required to conduct an inspection to uncover defects of which you had no previous knowledge.
If you fail to make a material disclosure that you knew about, however, you could be liable for thousands of dollars in costs and legal fees.
The law requires a seller to disclose known defects in the home, including:
- Defects in the roof, plumbing, HVAC, or foundation
- If infested by termites or rodents
- Whether the home is in a floodplain
- If there are fuel storage or LP tanks
- If the home is contaminated by toxic substances
You can provide this information in a real estate condition report that lists many of the known material defects in the home. Your attorney can discuss with you just what constitutes a condition or defect that would result in a significant negative impact on the property value or on the health or safety of the occupants.
When buyers and agents come to visit, the home should look like royalty is coming to visit. As a do-it-yourselfer, you should learn more about “staging” your house to help ensure you will receive top dollar offers. While aspects such as location, price, and structure are essential to selling your house, you should never underestimate the impact of a buyer’s emotional reaction to a house on a sale. Some FSBO sellers even go so far as to hire a professional “stager” to do the preparation for them. In the same line of thought, it is important to make sure you have quality pictures or hire someone to take pictures, as most buyers look for houses online before deciding whether to schedule a showing.Of course, you want the highest price, but it should not be unreasonable. Realtors determine a listing price for a home based on comparables or what other similar homes in close proximity to yours have sold for in the past six months.
You can look at various websites like Zillow or Realtor.com to see a reasonable price range for you home. You can also review the tax assessment for your home through the County tax assessor’s website. If your house has additional amenities like a pool or large yard, you can factor that in when determining the price. On the other hand, if there are large repairs required, you may need to reduce your sales price to account for these repairs.
You might also want to ask a realtor to visit your home and see what they think they could get you for a top offer. This will let you know if the price you are thinking of asking is within a reasonable ballpark.
When you have a price, you can list the house on the MLS website for maximum exposure, though you will either need a realtor to do it for you or pay a fee through a FSBO website. You can also use Craigslist, which many people use to search for homes. You should also consider putting a For Sale by Owner sign on your property or simply use the sign as your sole marketing tool. An excellent way to get lots of buyers at once is to hold an open house on a Saturday and Sunday. You or someone will need to be present during the hours you wish to show the house.
Have color brochures with photographs of the interior and exterior of the house, a list of its amenities, description of the neighborhood, and the price. You may want to include a date as to when all offers should be submitted.
If you are willing to do individual visits, you or someone will have to be present during the visit and be able to answer questions about the home.If the buyer is represented by a realtor, then they are typically pre-qualified by a lender. When the offers come in, you may consider counter-offers, though you may have to include some things to get the higher price. You should always be clear what is—and what is not—included in the sale.
In any case, do not sign anything until your attorney reviews all offers and explains any contingencies or other issues to you. The most common contingency is financing. Once all contingencies are removed, the sale can go through.
Before you decide to accept an offer, have your attorney review the documents to circumvent potential issues that could lead to future litigation. Some sellers make the mistake of thinking that they should work with an attorney once they have an accepted offer. However, the time to consult with an attorney is before you accept an offer, as an accepted offer is a binding agreement that will determine your rights and responsibilities for the entire transaction. After the offer is accepted, there are still several steps before closing can be completed. This is often where sellers find they need the assistance of an experienced attorney most, especially if issues arise.
First, contingencies need to be satisfied. For example, if a home inspection discloses defects, you may need to renegotiate with the buyer to either fix the defects or reduce the sales price accordingly.
A title company will also need to be engaged to provide title insurance. If any issues arise in regards to the title commitment, those will need to be addressed. For example, a title commitment may disclosure easements, liens, deed restrictions, or other matters of record against a property. What needs to be done to address issues varies on a case-by-case basis.
Closing documents and statements will also need to be prepared and reviewed. Often, the title company will prepare these documents, and your attorney will review and provide explanations and corrections if needed.Selling For Sale By Owner can certainly be a rewarding process, both in terms of making sure you receive top dollar for your house, and also in terms of reducing your costs. Through the process, however, you will want to have an experienced attorney at your side to help guide you through the process and make sure you avoid costly mistakes. While it is tempting to try to do it all yourself, doing so can have expensive consequences immediately, or down the road. Engaging an attorney early in the process can help ensure everything will go smoothly and avoid sleepless nights when issues—big or small—inevitably come up during the process.