“For Sale By Owner” Transactions

Introduction

More and more homeowners are discovering the advantages of selling their homes by themselves. The rewards can be worthwhile, so long as professional assistance is used to help avoid costly and time-consuming mistakes along the way. This pamphlet contains tips to help you successfully sell your home without the assistance of a real estate broker.

Using A Lawyer

A lawyer can assist you at each step in the process of selling your home. A lawyer can prepare and review the purchase agreement, insure that all legally required notices are given to the purchaser, make the closing arrangements, and either review or prepare the final closing papers to protect your interests. A lawyer can represent you in the sale of your home at a substantial savings over the other methods of sale.

Determine Sales Price

Determining the proper sale price for your home is a primary consideration. A home that is priced too high may sit on the market stagnant and unsold. A home that is priced too low is sold for money out of your pocket. As a starting point, you should review the State Equalized Value ( SEV ) of your property contained on your most recent tax statement. This figure should be doubled to obtain a ballpark sales figure. Educate yourself as to the sales prices of other houses in your neighborhood and community. Request one or more local real estate salespeople to perform a market analysis of your property for you. Advise the salesperson up front that you are intending to sell the home "for sale by owner" before you request his service. You may also choose to have a certified appraisal performed. The cost of the appraisal may be more than offset by the peace of mind you have that you are receiving a fair market price for the home. An appraisal can also be an excellent negotiating tool with prospective purchasers who may want to haggle or underbid the purchase price.

Marketing Your Home

There are many ways to successfully market your home. Do not overlook the obvious methods of simply telling your friends, family and co-workers that your home is for sale. A well-placed sign is also a necessity. You should also consider running a small advertisement in a local or countywide paper in the weekend editions as this is when most people shop for property. Another method gaining popularity is placing a notice on an Internet bulletin board. When showing your home to prospective purchasers be prudent of meeting people alone at the property, make sure your pets are placed away from visitors for their own safety, and make efforts to see that the home is neat and gives a good impression of having owners who care about it.

There are a number of terms, which you will need to negotiate with prospective purchasers and incorporate into the purchase agreement. What is the purchase price? How much earnest money is being put down? How is the purchaser financing the home? When will the purchasers receive possession? When does the closing need to be held? What personal property items if any are included in the sales price? Are there any contingencies to the sale? Does the purchaser need to sell his present home? Who is responsible for paying the closing costs? There are many other terms that are unique to your transaction, which should also be included.

Purchase Agreement

A contract for the sale of real property in the State of Michigan must be in writing. Verbal agreements are not enforceable. Either the seller of the purchaser can prepare the purchase agreement. However, you should not sign a purchase agreement without having it reviewed first by an attorney. The agreement may be missing important terms that protect your interests. This is especially true of pre-printed forms sold by office supply stores. The importance of the purchase agreement is most evident when a dispute later arises with the purchaser. Protect yourself in the front end of the transaction by having the document prepared or reviewed by an attorney.

"As Is" Clauses

It is important that your purchase agreement contain a term that the home is being sold "as is." However, many sellers are under the mistaken assumption that an "as is" clause always prevents a purchaser from suing the seller after the closing over the condition of the house. This is not true. An "as is" clause serves to apportion to the purchaser the risk of loss of conditions unknown to the parties or newly arising after closing. A purchaser may still file suit against a seller for fraud or misrepresentation. In sum, the fraud may be the failure to disclose a known material fact to the purchaser or making false material representation on which the purchaser relies to his detriment, whether done intentionally or innocently. You should disclose all defects and significant repairs to the purchaser (whether or not you believe that they are important) and allow the purchaser an opportunity to have the home inspected by a professional of his choice.

Disclosure

Seller's Disclosure law: Michigan law requires as of January 8, 1994 , that most sellers of used homes provide the purchaser with a detailed disclosure statement before the seller executes a binding purchase agreement. If the seller fails to provide the disclosure statement, the purchaser has the right to terminate an otherwise binding purchase agreement. If the seller delivers the disclosure statement timely, but a change in the condition of the property occurs any time prior to closing, you must disclose this change to the purchaser and the purchaser has the right to terminate the transaction. The purchaser's right of termination expires when the deed is delivered at closing. Note that law mandates the form of the disclosure. The form is updated from time to time. Your attorney can provide you with the most recent version of the form.

Lead Based Paint Regulation: Federal regulations require owners of more than four residential dwellings as of September 6, 1996 , and owners of one to four units as of December 6, 1996 , to make various lead-based paint disclosures to prospective purchasers and tenants before the sale or lease of housing built before 1978. These regulations provide that before ratification of most contracts for sale or lease of housing built before 1978, sellers and landlords must disclose known lead-based paint hazards and must provide available reports to buyers or renters. Sellers and landlords must give buyers and renters the pamphlet titled Protect Your Family from Lead in Your Home. Homebuyers have the option of receiving a 10-day period to conduct a lead-based paint inspection or risk assessment at their own risk. All sales contracts and leasing agreements must include certain notification and disclosure language.

Closing Costs

Sellers of real estate are responsible to pay various closing costs either by tradition or statute. The parties can always agree in writing to reapportion these costs. Typically, a seller will pay the cost of the title insurance for the purchaser, the state and county transfer tax, and the closing fee to the title insurance company. The state and county transfer tax equals $8.60 per $1,000.00 of the purchase price. The purchaser typically reimburses the seller for a portion of the property taxes paid, the recording costs and all costs associated with the mortgage. There may be other costs charged to either party unique to the transaction as well.

A Smooth Closing

An attorney can assist you in your "for sale by owner" transaction in a number of ways. Prospective purchasers can be made to feel at ease in that you have a professional assisting with the details. The attorney can review the documents in order to protect your interests. The attorney can make the necessary arrangements and coordinate your closing. The attorney is available to answer questions and solve problems that may arise. An experienced real estate attorney will stay current on the ever changing laws in this area and can help insure a smooth closing for you.

Conclusions

Your home is a major asset. Ask your lawyer for assistance in the sale of your home whether you chose to do a "for sale by owner" transaction or not. An attorney can help you avoid many costly mistakes along the way.

Please feel free to contact our offices should you need any assistance with your transaction.