For Sale By Owner – What to do when you get an offer on your Home Part 1
Are deciding whether to sell your home by owner? This post is for you if you are scared about what to do when you get an offer. There are two scenarios that could play out in a FSBO home: 1.) a buyer comes to you without a realtor (YEAH!) and 2.) a buyer comes to you with a realtor.
Buyers Without Realtors
Pros: If a buyer comes to you without a realtor, that is great for you because you don’t have to pay the buyer’s realtor. You save an average of 3%, that’s $12,000 on a $400,000 house.
Cons: If they buyer has no realtor they might need help with making an offer if they haven’t done it before.
Most states have standardized contracts for making an offer on a house. Don’t be scared by the length of these contract, the language is mostly standard and there are not a blanks that have to be completed. They can be completed in under an hour (and by a realtor in about 5 minutes). In Texas you can download the standard form right from the Texas Real Estate Commission. Check to see if your state has something similar.
Buyers With Realtors
Pros: For these buyers, the good news is they bring the completed offer to you.
Cons: The bad news is you will most likely have to pay their realtor an average of 3%. You have to make a decision when you put your house on the market if you are willing to do this.
The advantage of working with realtors is that they get most serious buyers. If you don’t work with realtors, you are limiting who will come look at your house. To give you an example, we showed our house eleven times to buyers with realtors. I had three open houses with about sixteen people total. The offer came from the buyer with a realtor.
Most Important Parts of the Contract
While the purchase contracts can be lengthy, there are really a few items that change and need to be reviewed more closely.
This is the most obvious, but the buyer will need to fill out not just the price but how much will be in cash and how much will be from a mortgage. For example, if the price is $400,000, the buyer might be putting $40,000 in cash and $360,000 from a home mortgage. These are blanks on most of the form. The more cash the buyer has the better.
2.) Earnest Money
This money is deposited by the buyer and held by the title company until closing. It is put toward the purchase. It’s a way for the buyer to have some skin in the game between the offer date and closing. The amount is typically between 1% and 2% of the purchase price.
3.) Title Company
You will need to select a title company to work with. If you have ever bought and sold a house before, chances are you will see the same names come up over and over. You can go back to a title company you have used before. If you type it “Title Insurance Dallas” and the list that comes up includes all of the big companies that do most of the work.
4.) Option Fee
This is the amount that the buyer gives directly to you. This is basically a fee for letting them get inside your house to inspect it. If they back out of the sale after an inspection of your home, you get to keep this.
5.) Closing Date
The buyer will need enough time to obtain the funds to close. If they are getting a mortgage, this will be 30-60 days depending on the time of year.
If the offer is contingent on anything it is less attractive. The most common contingency is that the buyer has to sell their home. As a seller, you can mark through the contingency when you counter. If the market in your area is strong you should not accept a contingent offer if you have other options.
Most of the language in the purchase contract is standard and is the same for every house sold in your state. The title company that you work with will make sure that all of the paperwork necessary to complete the sale is done.