Traditionally, when a homeowner decides to sell their house, they hire a real estate agent to handle the sale. For sale by owner (FSBO) is when the homeowner chooses to sell the house on their own without hiring a real estate agent to facilitate the sale.
A buyer may choose to do a For Sale by Owner aka FSBO transaction and still be represented by a buyer’s agent; however they may choose to enter the transaction without an agent as well. For Sale By Owner transactions are becoming more and more common, especially with peak moving season upon us as summer approaches. Whether you are looking to sell a home or buy a home, here is what to expect from the FSBO process.
Deciding to Sell: For Sale By Owner
Homeowners may choose to do For Sale By Owner for several reasons. One of the most common reason is that the homeowner wishes to avoid the commission payment to the real estate agent, which could be in excess of 6% of the final selling price. In such a case, it is important for the homeowner to understand that they will be responsible for all the tasks normally assumed by the agent, such as researching comparable homes and prices, determining a sale price, marketing and showing the property, dealing with purchase contracts and negotiating with buyers. For individuals that have previous experience buying and selling homes, these tasks may not be overburdensome. However, an inexperienced homeowner can quickly find themselves in way over their head.
The second most common reason that a homeowner may choose to do a FSBO transaction is that they already have an interested buyer. In this case, the FSBO process is much easier on the seller. They avoid having to market and show the house, which can be a very time-consuming process.
After deciding to proceed with as a FSBO transaction, it is important that the homeowner do some leg work to determine a couple things: What kind of timeframe do you require to sell your house? Do you need to make alternate living arrangements? Are you purchasing another home? Urgency often plays a role in determining many of these variables, so it is best to get a head start on them.
Finding a Buyer
As previously mentioned, it is common for For Sale By Owner transactions to occur when a homeowner already has an interested buyer. In such case the homeowner avoids having to market and show the house to find a buyer, and the process to sell the house is a lot quicker; however, this is not always the case. A homeowner may decide on a FSBO transaction without already having an interested buyer and decide to take on the challenge of marketing and listing the house
When the time comes time to list your house on the market, it is best to step back and look at the house as if you were a buyer. Homes that sell the quickest are the ones that are priced correctly and have minimal issues to deal with, a turnkey purchase. To achieve this, it is imperative to keep the house clean and free of clutter so that when potential buyers walk through, they are seeing the house and are not being distracted by the contents. To ensure the house is in the best shape, it may be necessary to make small cosmetic repairs (i.e. painting, replacing worn/missing parts, etc.). If time and finances allow, it may be best to make some needed updates (i.e. appliances, fixtures, etc.).
Offer to Purchase
Once a buyer is interested, they will submit to the homeowner an Offer to Purchase on the buyer’s terms. The buyer may make the offer contingent on a satisfactory home inspection or property appraisal. It is also very common for a buyer to make an offer contingent on the buyer obtaining certain financing terms or closing on the sale of their own property. If the homeowner agrees to the terms of the offer and accepts by signing, a legally binding contract is formed. Therefore, it is important that both the homeowner and buyer fully understand the terms of the offer prior to accepting.
After the offer is accepted, the buyer then begins a period known as due diligence. To aid the buyer in this process, Wisconsin law (§ 709.02) requires that the seller disclose to the buyer the actual condition of the property by submitting a Real Estate Condition Report to the buyer within ten (10) days of accepting the offer. With this information, the buyer does an investigation of the various aspects of the house. Typically, the buyer will coordinate a home inspection, an appraisal (if applicable) and any other required testing (i.e. radon testing, pest inspection, etc.), and do a title search to ensure that there are no defects in the title that would affect ownership of the property (such as outstanding mortgages, liens, easements, claims of adverse possession, etc.).
It is not uncommon for items of concern to be revealed during due diligence. Sometimes the home inspection turns up defects or other issues with the home (i.e. necessary roof repairs, structural damage, mold, etc.). The seller typically has a right to cure these issues. If the offer is contingent on a home inspection and a defect is revealed that the homeowner does not agree to remedy prior to closing, the buyers may have the option not to go through with the purchase. However, if the offer is not subject to an inspection (or sold as-is), the buyer does not have such right.
It is also not uncommon for certain defects to arise during the title search, such as foreclosure proceedings, a prior satisfied mortgage that was never released from the lender, possible claims of adverse possession, or mechanics liens. Most often, these items can be resolved, however, it is not uncommon for such issues to cause a delay in closing.
Once the buyer has had the home inspected and appraised and the buyer is satisfied with the condition of the title, the closing occurs. At the closing, the buyer will pay the purchase price (less any deposit amounts) and the seller will sign a deed conveying the real estate property to the buyer. If the buyer is financing the purchase of the house, the buyer will also execute the loan documents (promissory note and mortgage) at the closing. The deed is recorded with the register of deeds in the county that the property is located to evidence ownership. The buyer is now the legal owner of the property.
Should I have an attorney help with my FSBO?
The purchase of a home may be the largest transaction that occurs in one’s life. For this reason alone, it is important to, at a minimum, involve an experienced attorney to review any contracts before signing; this goes for both buyers and sellers.
If you are a seller and you are presented with an Offer to Purchase, you should have an attorney review the offer to ensure you are fully aware of the offer terms, contingencies and your obligations.
If you are a buyer looking to purchase a home, it is important to have an experienced attorney prepare the offer to ensure that the if reflects your proposed terms appropriately and accurately. Obtaining legal advice does not have to be expensive. Rather, it can save you a lot of time, money and hassle in the future should an issue with the contract arise.
Whether you are a buyer or seller, contact our office today at
920-499-5700 and let one of our experienced attorneys assist you with your For Sale By Owner transaction.