Mr. Teitle very graciously agreed to write a very informative article to help Home Sellers with an overview of what they can expect, and what they need to anticipate. Please note that this article does not eliminate the need for an attorney, and does not provide guarantees implied or express. This is Part II of this helpful post. For Part I please click
In my experience, the biggest concern most sellers have is how to handle the actual discussion and negotiations concerning terms of the contract. Real estate law provides that agreements affecting real estate which are not signed and in writing are not binding and effective. In other words, it is legally acceptable and quite normal for parties to verbally discuss the terms of an offer prior to putting them in a formal written contract called an Offer to Purchase (“Offer”) or Purchase Agreement (“Agreement”), which are interchangeable terms. These discussions happen in most deals, and in some cases can also include email exchanges or text messages. Please remember you should retain any electronic communications with the other party in case of need for reference as to what was discussed. Always be aware, however, that once a final written agreement is signed by both parties, the law provides that all previous conversations, emails or texts do not matter, and both buyer and seller are legally bound by the specific terms of the final document they signed.
To be prepared for these conversations and communications, know the issues you need to see reflected in the Offer or Agreement. In any residential purchase, the most common and important terms include the price, amount of earnest money, closing date, and contingencies such as financing, appraisal, inspection and other issues (such as a contingency of selling buyer’s home) or concessions (such as seller contribution to closing costs and prepaid items, specific allowance or home warranty). A contingency is defined as something which must occur for closing to happen. If a contingency included in writing is not satisfied, it generally results in the agreement being terminated and the buyer’s earnest money being refunded. Finally, if buyer wants to purchase some of your personal property, such as appliances or patio furniture, you are free to include such items in the price of the home or agree upon another price. Either way this should be done with a separate Bill of Sale, which your attorney can provide.
As a FSBO seller you certainly have the option ask for a buyer to present any offer in writing, which sometimes helps determine how serious that buyer is about your transaction. If you do so, be sure to suggest that the buyer contacts a real estate attorney as opposed to a realtor (which will introduce a commission into the picture, usually paid by you). However, you should also be mindful of the possibility that the buyer will not have an attorney, or may not want to go through the trouble of contacting an attorney. In this case, don’t worry. You can tell the buyer that once you come to verbal agreement on the terms of the deal, you can have your attorney draft an Offer or Agreement, and it can be presented from seller to buyer. In such cases your attorney cannot represent both parties, and buyer would simply act without legal representation.
As far as a seller is concerned, a binding contract does not exist until there is a signed document. You can expect any sophisticated buyer to press you for a response to a written offer within 24-48 hours, to decrease the risk that another buyer will step in with a better offer. If a buyer puts a deadline to accept in writing, the offer legally expires at that time. Sometimes ongoing counteroffers or responses cause a deadline for acceptance to be missed, in which case the original offer stands officially null and void unless revived by the parties. The term “counteroffer” under contract law means to make a different offer, and it also constitutes a rejection of the most recent offer or counteroffer which has been made to you. As seller, this means if the buyer makes a counteroffer to your original offer and you respond with another counter, the buyer can choose to reject your counter and walk away. In other words, once you reject an offer by making a counter to it, you have no right to go back and accept the last offer made to you, as the other party may choose to withdraw it. This becomes important in multiple offer situations. Your real estate attorney can advise you on the most effective way to approach these scenarios, and how to handle more than one interested party.
Once you have a fully signed offer or agreement (remember, this is after all buyers have signed and initialed your disclosure forms and received the pamphlets), immediately get a copy to the buyer, as the lender cannot in most cases begin processing buyer’s loan application until they have received it. The most common reason for closings being delayed is lenders not having authority to actually fund the loan, due to insufficient or untimely information. As a seller, feel free to check in with buyer as you move toward closing, to ask if everything is going fine with the loan process. Also ask when the appraisal will be ordered, and when you will get notice of its completion and whether the property appraised as required. Ultimately, if the buyer is not prepared to proceed to closing on the contractually agreed date, the agreement usually allows seller the option to walk away from the deal without consequence.
Within a short time after the Offer or Agreement is signed, the buyer will arrange for home inspections by contacting a licensed home inspector and/or radon inspector. Lenders also typically require a wood-destroying pest inspection. As a seller, you will need to make the property available for those inspections. Once the report is received, buyer must give notice to seller of any deficiencies. Failure to give notice properly or timely can mean the buyer waiving the right to address such deficiencies. In many agreements, if buyer raises deficiencies and seller declines to remedy them according to buyer’s demands, the deal is generally null and void until and unless a new agreement is reached, and buyer’s earnest money is refunded. If the parties agree on certain deficiencies being resolved, often an addendum to the original agreement is prepared and signed to clarify exactly what seller is obligated to do.
Selling a home is a serious endeavor, but the FSBO process is actually very manageable with the right information and the guidance of an experienced real estate attorney who routinely handles these matters. Competent advice about your questions, explanation of legal concepts and knowledge of typical practices in your community can help you get where you want to be. Your attorney will also take care of transfer documents and closing, ensuring a successful end to the transaction. Now that you know what to do, start planning for your FSBO sale today, and good luck with your listing!
Justin A. Teitle
Attorney at Law
Teitle Law Offices, P.C.
This article is not intended as legal advice, and cannot be relied upon in that manner. In order to get representation specific to your needs, contact a licensed real estate attorney for more information.
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