HomeSaleDIY: Buyer & Seller FSBO Info

 

We've collected and summarized some of the inquiries from our members and listed them below. If you also have a question and can't see to find a solution, feel free to post your question in our Q & A Board.

 

WHAT ARE SOME THINGS A SELLER SHOULD LOOK OUT FOR WHEN DEALING WITH THE SALE OF A HOUSE?

The seller should consider the following:

(1) Whether or not to use a broker, and if so, the broker's commission.
(2) What things (fixtures, equipment, built in furniture and the like) will be included in the sale?
(3) Is there anything that I should do in advance to "dress up" the property, from needed repairs to a new coat of paint?
(4) What is the asking price of the house?
(5) What price are you willing to accept?
(6) Are there any defects that you must by law disclose to the buyer?
(7) Do you have any debts or liens that may affect the sale of your home?

 

WHAT ARE SOME THINGS A BUYER SHOULD LOOK OUT FOR WHEN DEALING WITH THE PURCHASE OF A HOUSE?

The buyer should consider the following:

(1) Exactly what property is included in the sale? Lighting fixtures, drapes or blinds, refrigerators, stoves, washing machines and dryers are often problem areas.
(2) Is the neighborhood quiet, friendly? Are the homes well kept?
(3) Are there any development plans that will affect the property?
(4) The inspection report - are there any substantial problems with the house?
(5) Real estate taxes - what are the current property taxes, and what impact will your purchase have on the taxes?

 

IF A BUYER MAKES AN OFFER ON A HOUSE, IS SHE/HE BOUND TO IT? IF A SELLER ACCEPTS AN OFFER, CAN SHE/HE CHANGE HIS/HER MIND?

A buyer can withdraw an offer anytime up until the offer is accepted by the seller. After that, (if using an agent) the seller may owe the commission to the broker, and may well turn around and sue the buyer for breach of contract to recover the cost of that commission.

If the seller changes his/her mind after accepting an offer, especially if the terms of the listing agreement have been met, she/he (if using an agent) usually still owes the broker a commission. This depends largely on the wording of the listing agreement; it might be wise to state that the commission will be paid upon completion of the sale of the property.

 

WHAT HAPPENS AFTER A BUYER AND SELLER AGREE ON A PRICE?

It is common for the buyer and seller to complete a "binder". This is either an outline of the proposed sales contract between the buyer and seller or the contract itself. It includes:

(1) the property address
(2) the names of the parties involved (the buyer and seller)
(3) the purchase price, and proposed financing
(4) what will happen if the buyer can't get a mortgage, or if inspection reveals serious problems with the house

It is most often accompanied by a deposit from the buyer - the amount can vary from as low as 1% to as much as 10%, generally depending upon the location. It is mostly used as a show of good faith between parties. Depending on the wording of the binder, it may or may not give either party the right to sue for breach of contract, or create a forfeiture of deposit.

 

WHAT ARE SOME OF THE THINGS THE BUYER SHOULD BE SURE TO PUT IN THE CONTRACT?

The contract should also include a standard clause that enables the buyer to have an inspection made of the property. It should allow the buyer to terminate the deal and receive a full refund of the deposit if she/he

(1) is unable, despite good faith efforts, to obtain financing within an agreed upon time at prevailing interest rates
(2) discovers any serious mechanical problems or environmental hazards with the house
(3) discovers any other serious problems that could not have been discovered before signing the contract.

 

WHAT ARE SOME OF THE THINGS THE SELLER SHOULD BE SURE TO PUT IN THE CONTRACT?

The seller will want to be sure that the contract specifies that

(1) She/He (the seller) is entitled to damages (usually the deposit) if the buyer does not fulfill his or her end of the contract - the amount can vary from as low as 1% to as much as 10%, generally depending upon the location
(2) all statements made about the property by the seller are accurate
(3) any of the buyer's contingencies - like inspections or financing - will be taken care of in a reasonable amount of time

 

IF THE INSPECTION IS NOT SATISFACTORY, CAN THE BUYER BACK OUT OF THE DEAL?

In addition to everything else, the contract should include an "inspection contingency clause"; that is, what happens if the buyer's inspection does reveal problems with the property. Small problems, like leaky faucets, loose light fixtures or doors that don't close properly can probably be fixed easily by the seller. More substantial problems, like a defective furnace, a waterlogged basement, or non-compliance with building codes, that can be structural, need more substantial repairs. Although, depending on the terms of the contract, the buyer can often break the deal without forfeiting his/her deposit, there may be a statement in the contract that says that the seller will either fix the problems, or give the buyer a discount on the price of the house in lieu of repairs. If the house is situated on a hillside, and is about to slide off the side of a cliff, the buyer will most likely want to cancel the contract.

 

WITH ALL THESE SIGNED AGREEMENTS, IS IT IMPORTANT TO HAVE A LAWYER?

Although many people buy and sell houses each year on their own, it is a good idea to have an attorney represent your interests when you are buying or selling a house. An attorney who has experience in real estate can help you to draw up a contract that can be sure all contingencies have been considered. (If using an agent) The real estate agent will be trying to get the deal done to receive his/her commission, so it is good to have someone who specifically represents you, whether you are the buyer or the seller.

 

WHAT HAPPENS AT THE "CLOSING"?

The closing is the meeting between the buyer and the seller, at which time all remaining documents relating to the sale are signed. The deed to the house is transferred from the seller to the buyer. Title insurance is paid, the mortgage papers are signed by the buyer, and possible transfer taxes are paid to the state. In addition, the buyer will pay the seller for any miscellaneous expenses, such as appliances or furniture that had been previously agreed upon, the remaining oil in the oil tank, or any real estate taxes that the seller had prepaid.

 

WHAT ARE "TITLE INSURANCE" AND "MORTGAGE INSURANCE", AND ARE THEY NECESSARY?

Owner's title insurance will cover you if a problem regarding legal ownership arises that was not discovered during the title search (for example, if an earlier deed was forged, or that side yard you thought you were buying belonged to someone else). The title insurance will pay attorney fees, as well as all other costs in defending the title. Although title problems are infrequent, they could result in the loss of the house, so it can be wise to protect yourself. The bank, or lender, will likely also insist on title insurance to protect its investment - at your expense.

Mortgage insurance protects the lender (usually a bank) against the risk of nonpayment by the buyer. The only reason to buy this insurance is if your lender insists upon it; there is no benefit to anyone except the lender.

 

WHAT IF THERE ARE PROBLEMS FOUND WITH THE HOUSE AFTER THE CLOSING?

This really depends upon the type of problem you find. If you find that the seller has walked off with some fixtures, which should have been included with the house, you might be able to sue to get them back, but this is a problem that might be better found in a walk through inspection just before the closing. Any major problem that the seller should have disclosed before the sale would probably justify a lawsuit, while a problem like termites, which should have been discovered in inspection, will likely leave you no recourse but to solve it yourself. A problem such as noisy neighbors is your problem; it is best to spend time in the neighborhood before making an offer or signing the contract. Don't wait until the closing to see if there will be a problem.

 

HOW DO I FIND OUT ABOUT ANY EXISTING HAZARDOUS MATERIALS ON PROPERTY I AM THINKING OF BUYING?

You should conduct an investigation, including a check with the local health department and your state environmental agency for any specifics they may have. For individual homes, you could hire a certified specialist to look for asbestos, radon, lead-based paint, and other hazards. Obtaining an environmental audit prior to purchase would also help shield you from any subsequent liability in the event there is later a release of hazardous material.

 

WE RECENTLY PURCHASED A HOME CONTINGENT ON A HOME INSPECTION. THE HOME INSPECTION REVEALED STRUCTURAL WATER DAMAGE TO THE FLOOR JOISTS, BASEMENT DAMPNESS, AND SMALL LEAKS IN THE ROOF. WE WANT TO TERMINATE THE AGREEMENT, BUT THE SELLER IS WILLING TO MAKE THE REPAIRS. FURTHERMORE, THE SELLER NEVER DISCLOSED THE EXISTENCE OF THESE PROBLEMS. HOW CAN WE BREAK THIS DEAL?

You have an out if the sales contract was contingent not only upon completion of the home inspection but your full approval of the results of the home inspection. That means that there must be a home inspection completed and you must approve of the condition of the home based on the home inspector findings. If the contract was written with only the contingency of getting a home inspection, then once this task was completed, you are obligated to buy the home no matter what the results are. If the contract was written such that, if the home inspection uncovers defects and the seller agrees to and fixes the listed defects, the buyer is obligated to buy, then you are liable. An argument can be made however, that a certain condition such as the damp basement cannot be fixed or fixed properly which may give you the right to cancel the contract. You should consult with legal counsel experienced in real estate seller disclosure matters for his/her opinion after review of the contract documents. If only the Seller had a real estate agent and you did not, there is a question of dual agency and possibly a violation of the real estate agent duty and standard of care to you not as a client but as the customer/buyer. In this instance, there appears to be improper disclosure on the part of the seller for misrepresentation and/or non-disclosure of material facts and standard of care liability on the part of the seller real estate agent. The seller should have disclosed the condition and history of the roof regardless of it being fixed. You could raise the issue of " what else was a problem that the Seller fixed and decided not to disclose?" The home inspection is a general visual nondestructive inspection so if there were other defects that were fixed by the seller the home inspector may not have seen it.