A Brief Introduction About the FSBO Contract
The homeowner hires an agent who puts their house up for sale and completes all the contract requirements on the seller’s behalf. But FSBO (for sale by owner) sellers have no agents to draft the real estate agreement or ensure that the entire procedure is carried legally. If you are an FSBO seller, it is your responsibility to draft an FSBO contract.
The FSBO buying contract form specifies the terms and services, the price of the property, and the obligations of the buyer and seller. Drafting an FSBO agreement is imperative for both parties. This contract protects the legal rights of the seller and buyer. Furthermore, it ensures that both parties involved in a legal agreement fulfill their responsibilities.
Who Takes the FSBO Contract?
A For Sale By Owner contract is signed between the buyer (the aspiring owner of the property) and the seller (the existing homeowner). The agreement is created by the seller, who decides to sell the property without the assistance of an agent. The contract is written by the seller. However, the buyer’s agent may want to check the document and suggest certain amendments.
Purpose of the FSBO Contract
FSBO contract is a mandatory requirement. The main purpose of the agreement is to protect the legal rights of the buyer and seller. Both parties have to abide by the specified conditions once the contract is signed and the deal is settled.
FSBO agreement can also save approximately 6% of the expenses by eliminating the need for a real estate agent. The contract acts as evidence of the deal. It contains all the obligations that each party has to abide by and the consequences the buyer and seller might face, should they violate any term. The contract avoids misunderstandings and future conflicts.
Contents of the FSBO Contract
The contents of the FSBO agreement are as follows:
- Specifics: the contract must specify the legal name and address of each party. In addition to the name and contact details, the contract mentions the marital status of the buyer and seller.
- Real Estate Description: The address of the real estate and its complete legal details should be clearly specified in the description column of the contract. The form also includes any personal belongings (such as appliances or furniture) the seller intends to include in the sale.
- Payment Terms: Under this section, the total price of the property and the payment conditions should be specified. It must include the upfront fee, total purchase price, and the installments (if the payment is processed in installments). Moreover, the property tax details should be mentioned in the form.
- Property Disclosures: Some states make it mandatory for the property owners to disclose all the defects in the contract form. If your property has certain issues, it must be clearly mentioned in the FSBO agreement. Furthermore, the contingencies
- Closing Details: The contract contains the closing information, i.e., the closing date of the deal (on which the buyer will acquire the property). This section specifies the closing cost and the exact date of possession.
[ Also Read: Open Listing Agreement
How to Draft the FSBO Contract?
If you are drafting the FSBO agreement on your own, you need to add all the necessary details to protect your legal rights. Here are some important points you must include in the contract form.
- The name, address, identity proof, and contact details of each party, i.e., the buyer and seller. It is imperative to mention the marital status of each party since it could affect the ownership title of the property.
- You must mention the date on which the contract is written and the title of the contract.
- A paragraph on the real estate, its location, size, contingencies, and a detailed description of the property must be specified.
- Additional details including the purchase price, payment options, closing costs, consequences on the failure of payment, property taxes, and so on.
Negotiation Strategy
Each party must read the contract and agree to all the terms before signing it. Drafting the FSBO agreement and accepting all the conditions is mandatory for buyers and sellers. A deal cannot be settled until both parties sign the document.
Benefits & Drawbacks of the FSBO Contract
Pros :
- Clarifies the Duties: The buyer and seller are supposed to fulfill certain responsibilities as decided by the federal and state laws of their country. The FSBO contract forms clarify the obligations each party has to stick to.
- Avoids Misunderstandings: FSBO agreement ensures that the deal is executed legally, and each party fulfills its duties. In case of any issue or misunderstanding, you always have this contract as evidence to prove yourself.
Cons:
- Expensive: Drafting the FSBO agreement can be quite expensive, especially if you are getting it written by an attorney.
What Happens in Case of Violation?
The moment this contract is signed by both parties, the buyer or seller cannot back out. If the seller or buyer fails to abide by the mentioned conditions, they may need to deal with legal ramifications. Each party has the right to bring the case into court if the conditions in the contract are violated(1).
If the seller decides to terminate the contract, the buyer can claim the earnest money and further compensation (as per the contract terms).
FSBO agreement form must be read and signed by the buyer and seller before you finalize the deal. To ensure that your real estate sale is processed legally, this contract is a must. Check the FSBO contract PDF and draft a proper agreement to protect your legal rights.