For Sale By Owner - Closings!
House after house after house and then, finally, you’ve found your dream home. The location is perfect, the price is affordable, and there’s room to grow as a family. But wait, it’s For Sale By Owner. Fear not!
For Sale By Owner closings are not the nightmare HGTV might have you believe.
There’s a lot of myths about properties that are For Sale by Owner (FSBO) -- they aren’t serious sellers; they’re not flexible on price; they’re hiding something by not hiring a real estate agent. Luckily that’s all they are -- myths! While some owners are just checking out the market, more FSBO’s are 100% serious about selling. According to the National Association of Realtors, FSBOs tend to be less expensive than those homes sold by a realtor and are more willing to negotiate on price (and more likely to be bad at it). FSBOs aren’t hiding anything either; they’re bound by the same laws as real estate agents and have to provide buyers with federal- and state-mandated disclosures.
With your fears put to bed, there’s only one thing left to do -- close. You’re just a contract and a home inspection away from holding the keys to your brand new home!
Purchase Contract prior to Closing
Though you can write up your own purchase contract if you wish, a real estate lawyer can also handle it for a few hundred dollars, give or take. It’s usually a good idea to go with the professional as they know exactly what to include and it takes a huge amount of stress off your shoulders.
Whether you or a lawyer draws up the purchase contract, there’s a few things that you should be sure to include.
- Offer less than the list price -- if you start high you can’t lower later.
- Ensure that you can back out of the deal if there’s issues the seller won’t fix, the CC&Rs are unsatisfactory, or your loan is rejected by including contingencies like:
- Loan approval
- Home inspection
- Clear title from seller
- Approval of seller’s disclosures
- Pest inspection
- Give your earnest money deposit to a reputable title or escrow company like Titlequest instead of the seller.
- Negotiate who’s paying for what including transfer taxes, escrow, title fees, etc
- If taxes are paid in arrears, get prorations and the seller will credit you
- Specify when you retain possession of the property and keys. This may be the same day of closing or the day after.
Make sure to hire a reputable home inspector! Many closings don’t work out because a bad or shady inspector was hired. You can double-check his reputability by asking for credentials and whether or not the inspector belongs to an association.
If your (reputable) inspector does find serious problems with the property, you have a few options:
- Ask to lower the sales price.
- Get the seller to credit you money to hire your own contractor.
- Have the seller fix it themselves.(Note: the seller is not bound to hire a good contractor or do the best job.)
It may seem like an unnecessary extra cost, but buying title insurance is very important when it comes to smooth closings! People make mistakes occasionally and title insurance protects from human error and property defects. The cost to fix clouds on title, or disputed easements, can be ridiculous compared to the minimal, one-time cost of title insurance.
You have several different options when selecting a title insurance policy.The top three choices are Owner’s, Lender’s and Extended Coverage. These policies don’t have to be renewed and there are no secondary costs. Title policies are the best piece of mind a homeowner can buy.
Going through a title company to buy this insurance is your best bet for getting a clear title. Title clearing services are vital -- if your title isn’t clear, it could mean someone else has a claim to your property. A professional title search by a trustworthy, reputable company can assure you that your house will belong to you and ONLY you.
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