For Sale by Owner Laws

“For Sale by Owner” (FSBO) means that a person is selling their own house or property without the aid of a real estate broker or sales agent. Selling a property on your own can save a good deal of money because you won’t have to pay a realtor the usually charged fee. Real estate agent fees to the seller are typically 5-6% of the home’s purchase price, so working on your own can save you thousands of dollars.

On the other hand, if you wish to sell your property on your own, you have to devote a lot of time and energy to learning the local laws regarding the purchase and sale of residences. Thus, it is important that you carefully consider the benefits and disadvantages of selling your home without an agent or broker.

What Are the Pros and Cons of For Sale by Owner?

There are many advantages to selling your own home, such as:

• Control of the entire process: You will control all of the decisions regarding the key issues, such as setting the price, doing advertising and marketing, selecting buyers, and setting the terms of the sales and the conditions of the sale
• Savings in time: You won’t have to spend time meeting with realtors until you find one you like, and you won’t have to spend time meeting with your real estate agent during the sales period
• More freedom: In some listing agreements with realtors, you must pay a fee if you decide to take your home off the market. This is to compensate the realtor for the time they already put in. If you sell it yourself, you can take it off the market anytime you feel it is the right thing to do.
  • Why would you take it off the market? Perhaps you found a crack in the foundation or some other defect in the house that needs to be repaired. You can take it off the market while you make the repairs. This can matter. When a house has been listed for sale for a long period, buyers become wary, thinking there must be something wrong with it if it hasn’t been sold yet
• Cost savings: As mentioned above, it can be cheaper in the long run. You will save thousands of dollars in real estate commissions. Note, however, that this has to be weighed against the possibility that a real estate agent might be able to get a better price for your home than you can

On the other hand, the FSBO process also has its disadvantages, such as:

• No advice: You will not have the benefit of advice from an experienced local real estate agent regarding matters such as pricing, advertising, and home inspections
• Less exposure to the market: Most real estate companies work with listing services that expose the property to other agents and buyers. If you are selling the house yourself, you may get less exposure because you may be unable to work through a popular listing service. (Of course, now some websites specifically collect FSBO owners; you can take advantage of those.)
• More work: You will have to do everything yourself, including locating contractors for repairs, decorating and staging the home, hiring an appraisal expert, verifying that the legal description of the property is correct, and much more. You will have to take time to show the house to potential purchasers and host open houses
• Learning curve: You will have to learn what the real estate sales laws for your state
• Contract drafting: You must draft or review the sales contract and other contracts with those you will hire (e.g., an appraiser). These contracts are dense and sometimes hard to understand

Disclosure Laws

One of the complicated areas of real estate sales is the required disclosures a seller must make to a prospective buyer. In most places, you can’t sell a property “as is.” Most states require disclosures about known and “latent defects,” meaning problems in the property that the buyer could not be expected to discover by a reasonably thorough inspection before the sale. An example would be roof or foundation problems that only reveal themselves when it rains.

In some states, certain stigmas may have to be disclosed. For example, if the property has a history of suicides, murders, or paranormal activity, a disclosure may have to be made. However, the information must not be disclosed if the potential buyer does not request it.

There are also federal laws that require various types of disclosures. For example, the federal Department of Housing and Urban Development (HUD) enforces the lead paint disclosure law. This requires sellers of residential real estate to disclose to a buyer any information they are aware of regarding lead-based paint or lead-based paint hazards on the property. A seller must also disclose information about any lead paint hazard, such as the location of any lead-based paint.

Cities and counties may have disclosure laws that apply to residential real estate sales. Some counties require disclosure of the location of airports in the county because airports can create unpleasant and unwanted noise pollution.

Real estate agents and brokers are required by law to stay abreast of local, state, and federal laws regarding disclosures. An owner thinking of selling without an agent or broker needs to inform themselves of applicable disclosure requirements.

Sales Strategies

Another disadvantage to FSBO is that most home sellers have little knowledge of sales strategies that might be useful in different markets.

Some sales take place in a “buyer’s market.” A buyer’s market is when housing prices are trending downward. This happens when there are more houses on the market than potential buyers. A buyer’s market may dictate certain sales strategies to attract attention to the house in the face of a highly competitive market.

On the other hand, a seller’s market is a market in which prices are trending up. This happens when there are a lot of buyers but not enough houses for sale. An owner might anticipate receiving multiple offers for a house after it has been on the market for only a few days or hours. This situation will dictate the use of specific strategies to get the maximum price for the house.

An experienced real estate agent will have experience with different kinds of markets. If you are thinking about FSBO, consider that you might have to invest a lot of time and effort to gain the knowledge that a real estate agent already possesses.

Most people consider their house their most valuable asset, and getting the best possible price is important. You need to honestly assess whether you think you can do as well as a professional real estate agent or broker could do.

Do I Need a Lawyer for “For Sale by Owner” Issues?

Having an attorney is essential with FSBO sales. In regular home sales, the real estate agent knows as much law as is needed to stay compliant with the laws concerning selling houses. If you are not working with an agent, you need a lawyer for legal advice regarding selling your house, making or reviewing a sales contract, and closing the house.

Also, if a dispute arises with a buyer at any point in the transaction, an experienced real estate lawyer can help represent your interests. If a lawsuit or arbitration arises, your lawyer can protect your rights.