In today’s economy, saving money wherever possible is the name of the game. Most Americans are constantly looking for ways to reduce expenses and save more money for retirement, family vacations, or additional investments.
One of the best ways to save money when it comes to real estate is buying or selling a property by owner, also known as for sale by owner (FSBO). This selling method bypasses the traditional buying and selling process with the homeowner listing the property without the help of a real estate agent.
But FSBO listings can be tricky for sellers who’ve never navigated the process before. They’ll need to know how to market the property, show it to potential buyers, and most importantly, handle contracts and paperwork.
So, who draws up the contract in a for sale by owner listing? This article will answer that question and provide you with tips when navigating a FSBO sale.
What is a For Sale By Owner Listing?
As we mentioned, FSBO listings are real estate listings that are sold directly by the homeowner without a real estate agent or broker facilitating the sale. It’s the owner’s responsibility to handle all the key aspects of selling the home that real estate agents typically do.
Selling by owner provides several benefits for both the buyer and seller, including:
- No Agent Commission: The most common reason homeowners decide to sell their home directly is to avoid paying hefty real estate commissions to their agent or broker. These fees range from 5 to 6 percent, which means homeowners can potentially save thousands when listing FSBO.
- Customized Marketing: Some homeowners prefer to do their own marketing by creating listings on websites, taking photographs, and designing marketing materials. This gives homeowners the opportunity to customize the marketing for their property and control their own budget.
- Negotiations: Homeowners may do their own negotiating when selling to choose the buyer that they believe is the best fit for their property. They handle offers, counteroffers, and any other negotiations related to the sale.
- Lower Listing Price: Some FSBO sellers list their property at a lower price point knowing they’ll save on realtor commission fees. This strategy can attract more buyers and spark bidding wars that drive up the final sale price.
Challenges of FSBO Listings
Listing the home, marketing it, and saving on real estate agent commissions sounds great, but what are the downsides?
The first challenge for FSBO listings is the possibility of receiving limited exposure to potential buyers. Real estate agents have the ability to list the property on the MLS and have access to a network of other agents. Using a real estate agent to sell the home may generate more interest from potential buyers.
Additionally, real estate agents have marketing expertise that many average homeowners don’t possess. They have marketing skills to create compelling property listings, professional photography, and eye-catching marketing materials.
Real estate agents also handle the paperwork and contracts involved in a real estate sale. This can be crucial for sellers who want an expert to handle the legal aspects of the sale to avoid potential issues or disputes during the transaction.
Who Draws Up Contract in For Sale By Owner?
You’ve decided to proceed with a FSBO listing, but who draws up the contract? In a typical FSBO listing, the seller drafts the contract and takes on many of the responsibilities a real estate agent would normally handle in a traditional sale.
For sellers drafting a FSBO contract, it’s crucial to use standard forms provided by state or local real estate associations as a template. This protects you from legal liability and potential issues after the transaction with common terms and conditions in the contract. However, FSBO sellers may choose to consult an attorney for additional legal protection.
Drafting a FSBO Contract
Sellers who decide to draft a contract themselves should proceed with caution and work with a professional to verify that the contract complies with local laws and regulations. Here’s a basic guide to help you get started with your FSBO contract:
- Identify the Parties in the Sale: The first step is to identify the parties involved in the sale. You’ll need their legal names, addresses and contact information for the contract. For married couples, you’ll need to gather this information for both individuals.
- Describe the Property in Detail: Next is providing a detailed property description that includes its square footage, property boundaries, and any unique features that the buyer should understand before completing the transaction.
- Purchase Price and Terms: The seller must record the agreed-upon purchase price in this part of the contract. It’s important to outline the payment terms and the schedule for payments after the completed sale and transfer of the property.
- Financing: This section indicates the financing method and whether the sale is contingent on the buyer obtaining financing. Details like the mortgage amount, interest rate, and term should be specified here.
- Contingencies: Any contingencies like inspections, appraisals, or financing should be listed in the contract as well as the process if one or more of the contingencies are not met.
- Closing Date: The seller must also work with the buyer to determine a closing date. This is the date that the property officially changes hands from the seller to the buyer and typically ranges from 30 to 90 days after the contract is signed.
- Closing Costs: Who is responsible for paying closing costs? These include title insurance, escrow fees, transfer taxes, and other state or local fees. Some sellers may offer seller financing to entice buyers to make an offer on the property.
- Signatures: The final section of the contract is a space for signatures by all parties involved in the transaction. When required, signatures should be notarized by a local notary to make the contract official.
Pursuing a FSBO listing provides plenty of benefits for homeowners. They’ll save on real estate commission fees and may be able to attract more buyers with a lower sale price. However, sometimes the pros don’t always outweigh the cons of FSBO sales.
It’s important to keep in mind the benefits of a traditional real estate sale and working with a real estate agent. While they charge hefty fees, they’ll often be able to attract more high-quality buyers with their marketing materials and networking skills. Real estate agents are also expert negotiators and work on your behalf to find the right buyer.
If you choose to sell FSBO, understanding who draws up the contract in for sale by owner listings is imperative. Armed with this knowledge, you’ll be on your way to a successful home sale and more money in your pocket.
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