Most FSBO home sellers are not used to reading legal documents, let alone filling one out. Since the offer and acceptance agreement and the ultimate purchase contract determine all of your rights and responsibilities, you will want to be knowledgeable about every provision.
In this article we go through the main provisions of a contract for sale of your home:
Names of buyer and seller. Make sure your information is accurate, complete, and spelled correctly.
- Legal description of the property. Make sure the description contains all necessary information and the information is correct.
- Down payment or deposit information. This is called “earnest money” and is paid to show the buyer is making a serious offer. It may be forfeited if the buyer doesn’t go through.
- Purchase price. Both parties will negotiate the amount until the final offer is accepted. Until then, you have only offers and counter-offers.
- Closing date. This is only a proposed date for when the deed will transfer to the buyer.
- Move in date. This is the date the buyer may move in to the property and the seller must vacate the premises.
- Personal property included in the sale. This is the list of items that are included with the sale even though not considered “real estate.” Appliances are the biggest example.
- Contract Expiration Date. How long the contract is valid. This is the date by which all contingencies must be resolved.
- Disclosure of defects. Your lawyer will tell you if you are required by law to disclose any known defects about the property.
- Lead paint disclosure. Houses built before 1978 are required to include a lead-based paint disclosure form.
- Contingencies. These items make any offer and acceptance left hanging until the contingency is resolved. As a seller, you will want to minimize the number of contingencies the buyer receives. That’s because you don’t have a real contract while contingencies are left open. This puts you at risk because the buyer can still back out of the deal. The biggest examples are the buyer having to sell a house and obtain a mortgage. There can also be contingencies on home inspections, attorney review, and completion of agreed-to repairs.
- Inspections. Property inspections are almost always asked for by buyers. It could help to do this very early in the process, to show buyers. Sellers almost always pay cost of repairs.
- Home warranties. Information about any home warranties purchased should be included.
- Title insurance. Title insurance information should also be included in the contract.
- Commission information. The contract will show whether someone will pay an agent’s commission and how much it will be. FSBO sellers often agree to pay a 3% commission to the buyer’s agent.
The most important thing for a FSBO seller is to understand and agree with all the above terms. For example, is the move in date good for your schedule? Is the earnest money deposit enough to make you feel comfortable? Do you really want to have your home sale dependent on all those contingencies that may never happen?