What is a For Sale By Owner Transaction?
A For Sale By Owner Transaction or “FSBO” as they often referred to, is when a Seller sells their home without the benefit of a realtor. The Seller will advertise the deal themselves and negotiate the terms of the deal directly with the Buyer.
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What are the Pros and Cons of a FSBO?
The “Pro” to the Seller is that that the Seller does not pay a realtors commission. The “Con” is that all of the work normally done by the realtor now must be done by the Seller. For example, the home must be shown by the Seller and the deal must be negotiated directly between the parties. Also, the Seller must provide access for all inspections of the Property, must be available at the walk through inspection and must take complete responsibility for obtaining all municipal certificates. Often a realtor will perform all or some of these functions in a non-FSBO transaction. From the Buyers perspective it simply means that the Buyer is dealing directly with the Seller during the negotiation process and the scheduling of all inspections is done directly with the Seller.
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Is a realtor ever involved in a FSBO?
Sometimes, a realtor will show a home that is a FSBO to one of their clients and a deal is struck. In that case, it is advisable that the Seller negotiate with that realtor before the home is shown, so that the realtor’s commission is negotiated up front.
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Who Prepares the Contract in a FSBO?
It is custom and practice, not law, that the Seller’s Attorney prepares the Contract. We advise Sellers to contact us as soon as the home is placed on the market. Once a Buyer is chosen and the deal made, the Seller should then complete the form entitled “Contract Information Sheet” and fax the completed form our office so that we can prepare the Contract. You can get a copy of the Contract Information Sheet by clicking here. It is important that we are given the name of the other attorney so that we can immediately contact that attorney to discuss the transaction. If you are the Buyer, you should give us the name of the Seller’s attorney so that we can follow up and obtain a copy of the Contract.
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What is the role of the attorney in a FSBO?
The attorney prepares and negotiates the Contract after the basic terms of the deal have been established. The attorney also makes sure that the contract gets executed and follows up with respect to collecting and tracking the deposits. However, the attorney does not check the credit or the assets of the Buyer. The attorneys then negotiate inspection items and proceed with the legal work as in any other transaction.
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How does the Contract get executed in a FSBO?
There is no one way of doing that, and there are lots of right ways. Often the Contracts are circulated through the attorneys to the parties, and eventually the Buyer and Seller each receive a fully executed Contract. Less often, the parties themselves have a sit-down, and sign the Contract all together and then give the signed contracts to the attorneys.
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Does the Attorney Review Period apply in a FSBO deal?
That is a very good question. Since the Contracts are prepared by attorneys in the first instance there is theoretically, in a FSBO deal, no need to have an attorney review period. However, many FSBO contracts do contain specific language that calls for an attorney review period. To protect yourself, you should never sign a Contract in a FSBO deal, until your attorney has reviewed it. This is one important instance of how a FSBO deal differs from a non-FSBO transaction.
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The Pitfalls of a FSBO.
Sellers often forget or don’t know to obtain a smoke/carbon monoxide detector certificate prior to closing. Since there is no realtor, there is no one to remind the Seller to obtain this certificate. You cannot close without the Certificate, plain and simple. There is no way around it. So if you are the Seller, please make sure that you obtain the Certificate and if you are the Buyer please make sure that you follow up with the Seller to make sure that the Seller has obtained the certificate. Our Firm will of course follow up with the other attorney. The same goes for the Certificate required pursuant to the Private Well Act.
Every once in awhile FSBO deals fall apart due to the appraisal. If the home is sold for above its value, and it does not “appraise out” a Buyer may not be able to get a mortgage. This is more likely to happen in a FSBO deal, than in a non-FSBO deal.
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Who is at the Walk-through and Closing?
Usually, the Buyers and Sellers are at the walk-through inspection together. The attorneys do not attend the walk-through inspection. The Buyers must attend the closing, but often the Sellers pre-sign the closing documents and only their attorney attends the closing.
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