The end goal of any For Sale By Owner transaction is for the Buyer and Seller to sign a Real Estate Contract.
But what makes a good contract? And what’s the best way to create that contract when a real estate agent isn’t involved?
Let’s look at what makes a well-written agreement, then review some options to create an FSBO document package.
Keys to a Strong Real Estate Contract
When a Seller is paying several thousands of dollars to a real estate agent, the legal document package required for the home sale is part of the agent’s responsibility.
But when a Seller goes the For Sale By Owner route, the creation and execution of a real estate contract usually becomes the Seller’s responsibility.
So what elements should a Seller look for to ensure a real estate contract is best-suited for a specific transaction?
First, all of the Contracts, Disclosures, Deeds and filing documents should be specific to the state in which the transaction is being done. Every state in the USA has its own real estate legal requirements, especially in the disclosure language. Many counties within a state also will have specific filing requirements. So any document provider that offers only generic real estate contracts — run.
Also, the contract language should vary based on the type of financing used by the Buyer to pay the Seller. If a mortgage loan or cash sale is the method of payment, the contracts will read much differently vs. a seller-financed sale like a Land Contract or a lease-to-own contract.
The real estate contract should also spell out exactly what inspections, insurance, title and escrow services will be used. The document should clearly indicate which party is responsible for paying for these services, too. Family-member to family-member transactions might skip using some of these closing services, but a transaction between two people who are unknown to each other usually should include them.
Finally, getting the documents from an established, legitimate source is critical. Using incorrect or out-of-date documents could invalidate a transaction or cost the parties thousands.
The documents don’t have to be expensive to be valid and complete. But free? Any website that offers free real estate documents without some method of receiving payment should be avoided. The language within real estate documents changes frequently, especially on the state and local level. So any professional entity that maintains a complete, up-to-date library of these documents won’t give them away for free. ‘Free’ should be viewed with a skeptical eye.
Options for Creating an FSBO Real Estate Contract
Creating a real estate contract for a For Sale By Owner transaction is usually done in one of two ways: using do-it-yourself (DIY) legal forms; or through a legal document preparation service.
(A third option is to find a lawyer to write a custom real estate contract, but this option is the most expensive one. Plus it’s often over-kill if a home sale is a typical, straight-forward transaction.)
Do-it-yourself forms are suitable for a person that has an understanding of business and legal basics. The reading of FSBO overviews and specific form instructions is required; don’t expect to just jump in and start filling out documents (at least, not if you want them to be done correctly). A bit of time and patience will be required to complete all the forms needed.
You will also need an understanding of how computers and computer files work. If you can’t download a document file, unzip it, open it in a specific program, complete it using the instructions provided, print it out, then follow the steps for filing — well, then DIY isn’t for you.
If you are less than 100% certain you will understand and be able to complete every part of the DIY process described above, it would be wise to look to a real estate legal document preparation service. Through ‘Doc Prep’, a professional helps the Buyer and Seller create the needed documents. Details about the transaction are requested and provided either online, in a questionnaire, or over the phone. Using that collected information, the professional preparer will customize the legal documents on your behalf using only the information you provide. Once finished, the documents are sent back to the Buyer and Seller for signature and filing. A set of step-by-step instructions is usually provided with this finished document package.
Real Estate Contract Providers
On the DIY side, there are a handful of great sources for affordable do-it-yourself real estate contracts: Standard Legal, U.S. Legal Forms and Find Legal Forms all have a complete library of real estate legal documents. Review each one, compare, then choose the provider that feels best to you.
There are individual local providers of document preparation services that can be found, but there is only one major national company providing ‘real estate doc prep’: RealtyPact. They offer complete document packages for FSBO Home Sale, Land Contract, Seller-Financed Mortgage, and Lease-to-Own contracts.