Home Selling Advice for For Sale By Owner Sellers

From Janet Wickell, Your Guide to Home Buying / Selling.

Avoiding Common For Sale by Owner Mistakes

For Sale By Owner - FSBO for Short

There are a few more things you should handle before you run your first for sale by owner ad.

Property Disclosures

Does your state law require that you give potential buyers one or more property disclosures when you sell a home? Disclosures typically deal with the condition of the property or facts about its location, such as:

• The age of the home and its components
  
• Whether problems exist with any component
  
• Whether you (or a neighbor) have built something (fence, shed, road, pool) that extends past property boundaries
  
• If the house is in an airport flight path
  
• If the house is in a flood zone
  
• If the house is on earthquake fault
  
• Other issues important to your specific location

Don't assume that disclosures are only necessary for homes listed with real estate agents, because most for sale by owner sellers must furnish them, too. Even if a formal disclosure isn't mandatory, you are probably required by law to tell your buyers about known problems, often referred to as material facts.

Contact the agency that oversees real estate sales in your state and ask which disclosures you are required to make. Many state agencies offer disclosure forms online in PDF format.

Lead Paint Disclosures

If your house was built prior to 1978, federal law requires that you disclose that the home could contain lead based paint and give buyers details about past tests for lead paints. You must also offer buyers the opportunity to do their own lead paint testing. You must also give your buyers a lead paint pamphlet, which is available free online from the EPA.

Fair Housing Laws

Individual sellers aren't subject to as many fair housing guidelines as real estate agents are, but it's smart to follow all fair housing laws, just to make sure you don't encounter legal problems later.

Showing the House

Pre-Qualifying Home Buyers

People who know they cannot buy sometimes think that for sale by owner homes offer a better opportunity, because they're hoping to find a seller who will finance the transaction.

Ask these questions to get a better feel for someone's buying power:

1. Have you been pre-approved by a lender for an amount in this price range?

2. Can you buy a house now, or do you have to sell your current home first?

It's a good idea to require home buyers to submit written proof of pre-approval with any offer. If your buyer can't buy until he sells, you'll have to decide whether or not you want to wait for that to happen. If you do decide to wait, be sure to insert a kick out clause in your contract with the buyer.

Contract Forms

Who will provide the contract forms that will be used for an offer to purchase your house, you or the buyer? You can write a contract yourself on a piece of paper, but it wouldn't offer much protection for either of you. The forms you use should be written specifically for your state's real estae laws and cover all issues that are important for your location.

If you aren't contract savvy, have a real estate attorney review any offer before you sign it. Don't cut corners here, neglecting to get advice from an attorney or other knowledgeable person will cost you money, not save it.

The Buyer's Deposit

The contract should spell out what happens to the buyer's deposit money, called earnest money, if the deal falls through:

• Under what conditions would the buyer get it back? (unable to get financing, too many repair issues, etc.)
  
• Under what conditions would you expect to keep it? (buyer backs out with no cause)

The deposit money is not yours until the house sells or the buyer breaks the contract in such a way that it becomes yours by prior agreement. It must be credited to the buyer's funds on closing day and ideally should be held in someone's trust account until then.

Real estate laws and customs differ in nearly every state in the US, so it's essential that you do some research on a state and local level to be sure you are complying with all laws associated with the sale of your home.

More Reading

• 10 Steps You Must Take Before You Sell Your Home

• Learn How to Measure Residential Square Footage

• Four Reasons Why Good Houses Don't Sell