There are generally two ways to go about selling a home: using a licensed realtor or “for sale, by owner.” Many home-sellers choose to use the expertise of a realtor to list their property for sale, prepare the property for the market, negotiate a deal, and bring the deal to closing. An experienced and knowledgeable realtor can offer valuable insight and professional support and advice throughout the sales process. Of course the representation of a realtor comes at a cost, which is generally a commission on the sales price of the property.
In order to avoid a realtor’s commission, some sellers decide to sell their property “for sale, by owner.” By choosing this route, the seller foregoes the support and advice of a realtor and elects to carry out the necessary steps to sell the property on his own behalf.
Once a home-seller has negotiated the general terms of the sale with a prospective buyer, there are two steps to bring a sale to completion: Execution of a real estate purchase agreement and bringing the deal to closing.
In order to sell and purchase the home, the seller and purchaser usually begin by executing a purchase and sale agreement. The agreement sets out the terms of the deal. What is the purchase price? Who pays the real estate taxes due on the property? What happens if one of the parties breaches the contract? These and other issues should be addressed in the agreement so that the intentions of the parties are clearly expressed and understood. The agreement may also contain certain contingencies that must be fulfilled before the parties are obligated to proceed with closing, which might include the buyer’s examination of title, the buyer’s inspection of the property, and the buyer’s procurement of financing for the purchase. Finally, the law may require certain disclosures at the time of the execution of the purchase agreement, such as a residential disclosure form or a lead paint disclosure.
Once the agreement is signed, the parties begin to work toward closing. In between signing the agreement and closing, the parties will take whatever actions necessary to fulfill any contingencies under the agreement, such as title work, inspection, security of financing, and so on. Assuming that all of the contingencies can be fulfilled to the satisfaction of the parties, the deal will go to closing. Closing is usually administered by a closing agent, who may be a bank representative, a lawyer, or a title professional. At closing, the purchase price is paid to the seller, and the seller delivers a deed to the buyer. Any expenses arising from the transaction are also paid, such as attorneys’ fees, real estate taxes, title insurance premiums and costs, and recording costs. Other documents are also reviewed and executed by the parties, including a note and mortgage if the buyer is financing the purchase, a closing statement showing the purchase price and the allocation of expenses paid, and tax-related documents. At the conclusion of closing, the buyer owns the property and seller accepts payment of the purchase price.
It is important for someone considering the sale of his home “for sale, by owner” to realize that while a realtor’s commission on a sale can be avoided, the seller should consider seeking professional advice and representation in negotiating and drafting the purchase and sale agreement and preparing and reviewing closing documents.