For Sale By Owner – Learn The Basics Before You List Your Own Home
Every day hundreds of homeowners are selling a home without an agent. Although utilizing the services of a professional real estate agent is the easiest way to sell a home, there are systems available to those homeowners who feel they can manage the transaction on their own.
The process of selling “for sale by owner” (FSBO) requires the homeowner to be educated in how to market their home, who to market it to, and understand how to manage the paperwork involved in a real estate transaction.
There are companies who specialize in providing FSBOs with the tools necessary for selling a home. These companies either charge a percentage of the sale, or a flat fee for services. Such services may include signage, contracts, flyers, flyer boxes, and a link to the home on the company’s website. These services usually do not include information on how to market the home for sale to attract as many buyers as possible.
Whether using FSBO services from a company or not, there are several steps that must be taken in order to sell a home and meet all legal, and taxable, requirements. Here is a short list of what you need to obtain and understand before handling the sale of your own home:
- Legal and binding contract forms
- Federally mandated disclosures forms
- Proper disclosure of defects
- Tax ramifications, including but not limited to IRS capital gains requirements
- Real estate tax information, distribution, and responsibility
- Deed restrictions and liens
Some states will have standardized forms available for homeowners who attempt to sell on their own, and there are packets of forms available at many office supply stores. If using the latter, it is a good idea to contact an attorney to review the forms to ensure they are legally binding, protect the seller, and meet all local, state and federal guidelines. In addition, there are some federally mandated forms such as the Lead Based Paint Disclosure form that, if not included in a real estate transaction, can result in penalties for the seller.
One of the risks for FSBOs is litigation brought forth by angry buyers after the close of the transaction due to failure to properly disclose any known, and unknown, defects in the property. That is why it’s imperative to have a home inspection on the property prior to putting it on the market. Although most buyers will have their own home inspection conducted, some will not, further opening up potential law suits in the future after the close of sale.
FSBOs should always investigate the tax consequences of selling their home, whether on your own or with a real estate agent. Consult a tax professional for advice on capital gains laws that may end up resulting in additional taxes due at the end of the year, on any unpaid local taxes, and the responsibility for the current year’s real estate taxes.
Attempting to sell a home “for sale by owner” is possible, but many critical issues must be researched in order to guarantee a successful, legal sale. By contacting the right professionals, understanding the law, and being proactive about taxable consequences, selling a home without an agent can be achieved with success. However, understanding all the risks and liabilities of selling a home as a FSBO, makes even more sense to consider hiring a professional to do the job they are trained to do.
Overall, the commission you’ll pay a real estate agent is a small price to pay for the peace of mind you’ll have by not having to worry with all of the aforementioned risks and liabilities.