If you’re a homeowner choosing to sell without using a realtor, properly using a for sale by owner contract can be a burden. After all, you have bigger concerns such as: finding the right buyer and right asking price. Staging your home. Marketing. It’s a process that can take weeks, if not months.
Both federal and state laws require certain disclosures about any property to be revealed to potential buyers; and neither FSBO (For Sale By Owner) homes nor Utah State Law are exempt.
Typically, a fore sale by owner (FSBO) contract will include necessary facts about the home condition as well as legal ownership of the property. But there are other legal items which you may have never considered to be part of your property. Should the contract include the home’s original appliances? Lighting fixtures? What stays and what goes—and what is legally your possession?
Utah state law actually does provide some flexibility in terms of auxiliary items which you can claim as personal property. But claiming them in all likelihood may wind up costing you a sale.
Before we look into the specific of what is contained in a Real Estate Purchase Contract, let’s look at how you should draft one.
Who Draws Up A Contract In A For Sale By Owner Purchase?
The simplest way to think of a purchase contract is as a written agreement between a buyer and seller defining the terms of a property sale. And one of the reasons why many homeowners choose to use a realtor to sell their home is to avoid the trouble of drafting an agreement among other things.
Still, others choose to leave the responsibility in the hands of the buyer’s attorney or agent—in the case of the latter, what is sometimes known as a transactional or dual agent. Dual agents can legally represent both parties during the transaction process (as unlikely as that might sound, both buyers and sellers can sometimes find a neutral mediator helpful in detailing the technicalities of the purchase.) And while some states prohibit disclosed dual agency, Utah is not one of them.
Keep in mind that should you conduct your transaction through a buyer’s agent, it will likely cost you the same commission fee you were hoping to save by avoiding a realtor in the first place. One simple alternative is to draft an FSBO contract yourself. The state of Utah has even provided a template for transactions you may wish to follow here.
Earnest money is a down payment made by the buyer as a token of good faith that they’re absolutely serious about the transaction. And this is one area in which you have an advantage on the sale when it comes to drafting your own contract: you can essentially name your own price.
However, most real estate specialists recommend not being too excessive when listing earnest money in a contract. “The average cost of earnest money is between 1 and 5 percent of the value of the home,” says Rob Berry, a Provo real estate attorney. “More commonly, it’s around 2. But in a seller’s market, we’ve seen 5—all the way up to 7 percent. Sometimes, you can negotiate for a fixed price. It all depends on the market and the buyer.”
What To Include In A For Sale By Owner Contract
At the very least, an FSBO contract should consist of the following:
- Your asking price for the home
- The requested down payment of earnest money
- Any furnishings or items you wish to include with the purchase
- Certificates of occupancy
- A legal description of the property
- Property tax provisions
- Property title deeds
- Loan documents—including first mortgage and, where applicable, second mortgage and any home equity lines of credit
- The closing date of the sale
- A date and certification of the most recent inspection
- A deadline for the buyer
- Any miscellaneous provisions
- Any contingency clauses and fees should the buyer fail to find financing
However, as Berry notes, these items can sometimes play a role in the buyer’s ability to negotiate. “The final contract in any real estate purchase is not binding until the approval of financing as well as appraisal, property title insurance, disclosure statements and walk through inspections. And what we hear a lot is that homeowners wait until the last minute to provide documentation and approval—sometimes to the point where they’ve literally gone and tanked the deal.”
“Also, keep in mind that’s it’s not that easy to find a buyer who’ll accept a contract as is at first glance. And things such as contingency clauses and earnest money are the most common haggling points outside of the price. Even in a seller’s market it’s not necessarily as much of an issue as they might think.”
Is That All There Is?
Commonly listed items you should also include in a contract may also consist of:
- Home warranty deeds and receipts
- Utility easements
- Zoning restrictions
- Proof of homeowner’s insurance
- Plans and permits
- Floor plans, blueprints and surveys
- Utility bills
An Easier Solution?
The process of drafting and approving an FSBO contract takes negotiation skills, savvy real estate contract knowledge, and a bunch of time—all things homeowners are not always in easy possession of. One alternative many Utah residents have found helpful has been contacting home buying agencies like us. Not only is approval automatically guaranteed regardless of the condition of your home, we can frequently contact necessary insurance and financial entities on your behalf—often in a matter of days.
Ultimately, there’s no doubt that selling your home on your own can frequently be the wisest decision you can make. In times of needing to stop the foreclosure process in the midst of an FSBO sell can be stressful as well. But there’s also no doubt that knowing what to prepare for also means more than sticking a “For Sale” sign in your front yard. And it’s not just paperwork. It’s the market, as well. A qualified buyer may not be guaranteed, and negotiating with them can frequently prove less than satisfactory. Knowing there are options, on the other hand, to truely sell your house fast for cash in “as is condition” can at least provide you with some form of certainty.