For Sale By Owner: The Initial Documents
For sale by owner (FSBO) is the process in which an owner sells real estate without a real estate agent. It saves the buyer and seller real estate sales fees, such as the real estate agent’s commission. However, without an agent, the process can be intimidating, as the seller is generally responsible for providing the various required legal documents.
The buyer and seller must first come to an agreement on the terms of the sale. Once the negotiations are complete, the following initial documents are executed:
1. Purchase Agreement
The purchase agreement is the most important document of the transaction, as it is a legally binding agreement signed by the buyer and seller. The document includes all of the terms of the sale, including identity of parties, purchase price, date of closing and possession, included fixtures, prorations for taxes, terms of inspections, and conditions that may allow the parties to terminate the agreement. Common conditions include a failed home inspection, or the buyer being unable to obtain financing.
2. Property Disclosure
The seller must disclose to the buyer, in good faith, all known conditions materially affecting the property. Such defects may include any flooding, roofing repairs, plumbing, mold, asbestos, pest infestation, and/or other potentially problematic conditions. If the seller fails to disclose defects, or is dishonest in the disclosure, he or she may be held liable for damages.
3. Lead-Based Paint Disclosure
If the home was built before 1978, the federal government requires that the seller disclose any lead-base paint hazards. This form includes a statement that the seller has complied with the lead paint notification requirements. The seller must also provide the buyer with a specific EPA-approved pamphlet about lead paint. Both the seller and buyer must sign and date this document. Thereafter, the buyer has 10 days to conduct a paint inspection or risk assessment for lead-based paint.
Prior to closing, the buyer should get a title opinion completed by his or her attorney. A title opinion ensures that the seller has clear title of the property being sold, free of liens, mortgages, or other unforeseen issues.
The seller’s attorney, who likely drafted the initial documents above, will then provide the seller with a deed. At closing, the seller signs the deed, as it transfers ownership of the property from the seller to the buyer. The seller will also sign other documents, including a Groundwater Hazard Statement and Declaration of Value.
If you chose to sell your own home, it is essential to have an attorney involved to ensure the documents are properly prepared and other procedural matters, like recording specific documents, are done correctly. This post is only intended to be informative and is not a substitute for legal advice.