Once you’ve done all your homework and set the correct asking price, had a few open houses and advertised in all the right places you are now ready to receive your first offer on your for sale by owner property. Someone has looked at the house, decided that they want to buy it and have made you an offer. Now what?
Well you can either reject, accept or make a counter offer. It is always good to make a counter offer unless someone is offering you your full asking price. To not make a counter offer lets the buyer think they offered too much and it may cause you to accept a lot less than the buyer is actually willing to pay.
First, never accept any offer that isn’t in writing. And make sure that your counteroffer is in writing also. Once you agree to an offer it is time to write the sales contract up. Be sure and cover all of these items with the buyer before writing your sales contract. You do not want the deal on your for sale by owner house to fall through now. The following items need to be in your sales contract.
1. Agree on the sales price . – If your buyer is using an agent be careful that you don’t forget any commission you will owe them before you accept an offer. If the buyer is really anxious you may be able to talk them into paying their own agent’s fee. If there are no agents obviously there will be no commissions to worry about.
2.Get An Earnest Money Deposit – Usually 1% of the sale price, this deposit is given to a third party like your title company to apply to the buyers fees. If the buyer backs out, they agree to forfeit their deposit to you. Make sure you get this and the buyer signs the sale agreement with the agreement to forfeit the deposit. Have them initial that paragraph to be safe.
3. Down Payment Amount . – A 10 percent down payment is traditionally used to offset the amount that the buyer’s lender is willing to loan them to purchase the property. This should be noted in the sales agreement that the buyer must come up with this by closing. If you can afford it you may offer to hold a second mortgage to cover any amount the buyer can’t come up with.
4. Contingencies – You may agree to sell your home only if certain conditions are met such as the buyer’s inspection being done first that confirms there is no pest infestation, or the buyers must sell their house first. I strongly suggest that you do not agree to the second one unless you can get a very large earnest deposit. I once held a $55,000 house for 3 months for a $5000 deposit. The deal closed but if it hadn’t I’d still be $5000 richer.
5. Agree What Property Stays – Appliances generally stay with the house, if there is anything unusual that you will be keeping, like the stove, or that you will be leaving, like your pool table, spell it out in your sales contract.
6. Set A Closing Date – Spell out on which date you will be settling and handing over possession of your home. Also place time limits on any contingencies that could go on forever. As the seller you can always be lenient later if you like.
Use a contract provided by your lawyer, rather than one you made up or purchased from somewhere else unless you’ve done this before and really know what you’re doing. This is the biggest item you will sell in your lifetime and you do not want to make your buyer uneasy at the last second because you whipped out a contract written in crayon. A for sale by owner contract is just as binding as any other and it should look professional.
Allow the buyer some time to show his lawyer the contract before signing it and make sure that if your state requires any disclosures that they are presented with the sales contract. This is not the time to forget to cross your Ts and dot your Is. Once the buyer has signed the contract remember that your house is effectively sold at that point and you can no longer accept any other offers unless the buyer has backed out of the deal or can not meet his obligation to obtain a mortgage.
Don’t cancel any of your listings as deals do fall through but you should stop actively trying to find buyers and holding open houses. Once the buyers have provided you with their earnest money be sure and get to your tile company quick so they may place it in escrow. The money still belongs to the buyer until the sale is completed or they officially back out of the deal.
Scott Olewiler gives out free For Sale By Owner tips that might save you thousands by avoiding costly FSBO mistakes. Visit today: Sell My House
