Selling your home For Sale By Owner (FSBO) can be a rewarding experience for those “Do It Yourselfers” out there, and of course can help the sellers save thousands or even tens of thousands in real estate commissions. But navigating contract negotiations and the closing process requires careful attention.
Here are the most important things you need to know to make the For Sale by Owner journey as smooth as possible.
1. Know Your Property’s Value
Before diving into negotiations, get a clear understanding of your home’s market value. Consider getting a professional appraisal which might cost a few hundred dollars or use online resources like Zillow and Realtor.com to help with comparing recent sales of similar properties in your area. This knowledge will empower you to set a true market price and to stand firm during negotiations.
2. Prepare Your Paperwork
Have all your documents ready from the get-go. This includes the deed, property survey, homeowners or condo association rules, warranties on appliances, and any permits for renovations. Organized paperwork makes you look professional and helps avoid delays with contract negotiations. It can also help you to get a higher price if a buyer and their agent see value in your documentation.
3. Draft a Solid Sales Contract
A well-crafted sales contract is crucial. If a buyer has an agent their agent may draft the contract for both parties. But keep in mind that you should always have an attorney review that contract if you’re unrepresented by an experienced realtor that you trust.
If the buyer doesn’t have an agent then an attorney can step in and assist both parties in drafting the contract.
The contract should cover:
- Price and payment terms: Clearly state the agreed sale price and how the buyer will pay (e.g., cash, mortgage).
- Contingencies: Contracts often include conditions like home inspections, financing approval, appraisal contingency, and the buyer’s sale of their current home. These contingencies can give the buyer a way to back out of the deal, depending on the wording. Be very careful what you sign!
- Closing date: Set a realistic date for closing that gives both all parties enough time to prepare and to close. Lien searches often take at least two weeks to come back and if there is an Association it might take up to 30 days to get an Association approval of the buyer as well as an estoppel letter laying out what, if any, amounts are due and owing to the Association.
- Personal property: Specify what personal items are included in the sale, such as appliances, fixtures, or furniture.
4. Negotiate Smartly
Negotiation is a balancing act. Be open to offers, but also know your bottom line. Common negotiation points include:
- Price adjustments: Be prepared for buyers to offer less than your asking price. Buyers will also often ask for price adjustments after they inspect the property if they are still in their inspection period where they can cancel. They often leverage this ability to cancel the deal to get price reductions.
- Repairs and improvements: Buyers might request repairs or improvements as a condition of the sale, especially during the inspection period.
- Buyer credits: Sometimes buyers will ask for credits towards their closing costs instead of a price reduction, especially if they are getting financing and are on a tight budget. This often helps them get their full loan amount while putting less down towards the closing.
5. Stay Compliant with Legal Requirements
Ensure your sale complies with local, state, and federal laws. This might involve:
- Disclosure laws: Be honest about any issues with the property. Failure to disclose can lead to legal trouble.
- Contract specifics: Ensure your contract meets all legal requirements and includes necessary disclosures including the presence of lead paint, property defects, or whether FIRPTA or a 1031 Exchange are involved.
- Tax implications: Understand the tax consequences of your sale, including capital gains tax. Consult with an attorney who may be able to assist you in reducing those capital gains for investment properties using a 1031 Exchange.
6. Plan for the Closing Process
Closing is the final step, and preparation is key. You’ll need to:
Hire an Attorney: Although you may think you’re “going it alone” as a FSBO owner you don’t have to do it without assistance. An attorney will handle the title search, ensure there are no liens, and prepare closing documents. It’s typically better to utilize an attorney as opposed to a title company as an attorney will be able to provide you with legal advice, draft complex documents, and assist you with issues in the deal that a title company may not be able to help you with.
Prepare for the final walk-through: The buyer will likely want to do a final walk-through to ensure the property is in the agreed condition.
Transfer utilities and services: Arrange to transfer or cancel utilities, internet, and other services.
7. Be Ready for Hiccups
Even with the best preparation, things can go awry. Common issues include financing falling through, last-minute repair requests, or delays in closing. Stay calm and flexible, and seek legal advice if you haven’t already hired an attorney to assist you.
Final Thoughts
Selling your home FSBO can save you money on commissions and give you more control over the process. By staying informed and organized, you can navigate contract negotiations and closing with confidence. If you ever feel overwhelmed, don’t hesitate to reach out for professional help. The law firm of Kelley Grant & Tanis, P.A. is here to assist you every step of the way.
If you need personalized advice or assistance with your FSBO sale, contact us today! Our experienced team is ready to help you achieve a successful and stress-free home sale. Call us at 1-877-871-8300.