For Sale By Owner Legal Issues

Selling and buying homes requires legal paperwork. Writing contracts to sell your home is tricky business and you do need a lawyer to help you. Find one by asking for recommendations from family or friends or by looking for one in the phone book. Ask for a consultation before deciding.

What to Know About Your Lawyer

Ask questions. Often you can have a free consultation before deciding on a lawyer. Be sure that they can accept evening and weekend calls. Find out the costs. Ask if you’ll be charged hourly or a flat fee, if you must pay for phone calls, have a limit of visits and if you will be charged if the deal does not go through. Although using a lawyer costs some money, it is well worth the peace of mind.

You would be well advised to use a real estate specialist rather than a general lawyer. Not only are they more familiar with current real estate law, but they are accustomed to the demands of closing deals. They will understand the that real estate contracts need to be handled quickly – often within 24 hours, and will be more likely to accept weekend or evening calls. This is important as you don’t know when an offer will be made.

How Your Lawyer Can Help

Your lawyer can also help you fill out the contracts and understand the language used. Having certain areas pre-filled means you won’t make mistakes in the anxious moments that a prospect is willing to make their offer. It will also prevent you from creating loopholes for the prospect if they get buyers remorse (unfortunately, not all that uncommon).

Proper names and addresses are crucial. If these are filled out beforehand you won’t have to deal with complications because you misspelled something or put down incorrect information.

Your lawyer will require you to make four copies of each document, one for you, one for them, one for the buyer and one for their lawyer. Counter-offers and addendums will also need to be dated, signed and copies made for each party.

Your lawyer can advise you of other paperwork – surveys, insurance papers, etc. – that need to be included.

Lawyers can also provide escrow accounts. This means that the buyer will not be handing their $3000 deposit check to you, they will be placing it in trust of your lawyer. Their money will be returned if the offer doesn’t work out, or else applied to the purchase of the home.

Your lawyer will also work with the buyer’s lawyer in exchanging the relevant documents. The title transfers and new mortgages will be handled by the lawyers. They will check with the Land Titles Office to make sure everything is correct. A new title will be drawn up and the mortgage information changed.

The lawyers will collect the money from the buyers and pass them the keys on possession day.

A note of caution: if the buyers do not have their own lawyer, do not recommend yours. It is in everyone’s best interest to retain their own legal counsel

Having a lawyer to discuss the details of selling and the legal requirements will help ensure the least hassle when selling your own home. This is an area where an ounce of prevention is certainly better than a pound of cure.

About the Contract

One of the first things you must do before signing an offer is add the following:

“This offer is accepted subject to lawyer’s approval as to form and content by (state date and time).”

Usually give no more than 24 hours unless it’s a weekend and you anticipate a delay. If you don’t put this in the offer you could be in for a messy situation.

Subjects

Here’s where you need to pay attention.

Often times a buyer will want to add a subject to the offer. Assuming that you’ve already remembered to add the subject about having the offer approved by your lawyer (and they can state the same) here are some other types of subjects you may be requested to add.

‘Subject to Financing’

Clearly, if the owner isn’t coming with cash, they will need to have their financing approved. This is for everyone’s benefit. You do not want to have signed a deal to sell your home to someone with no money, and they should not be legally responsible for buying a home with no financing.

You cannot know for certain if the information your buyers have given you is correct. They may say their credit is good but until a bank agrees, you have no basis.

‘Subject to Inspector’s Report’

Your buyers may wish to have a third party investigate the house for structural problems or other unknown flaws. Some banks will also require a termite inspection before approving a mortgage.

‘Subject to Sale of Purchaser’s Home’ and ‘Subject to Parent’s Approval’

We will discuss the steps you should take to protect yourself from this one, but having these subjects are very risky.

Often (as stated before) parent’s will have a much different viewpoint than their children and you should probably hold off on writing the contract until all decision makers have viewed the property.

Subject to the sale of the buyer’s home is also a problem since you have no control on how long that will take.

The Escape Clause

There are plenty of other subjects that could be included, with these ones being the most common. However, you are not tied to that offer if you remember to add an escape clause.

The escape clause should go something like this: ‘The vendor holds the right to continue showing the property at (address here). If another offer is received, the purchaser will be notified and given 24 hours to waive the condition or the original agreement may be considered null and void’.

This is a very important detail. You are now free to continue showing your home to prospects and accept new offers. If an offer is made that does not have other subjects attached to it, you may accept the offer with your own ‘subject to original purchasers canceling contract’. You can then notify the first buyers and give them the required 24 hours to remove or satisfy their subjects before canceling the original contract and issuing the refund of the deposit.

How Long Should the Subjects Stand?

Your original subject should state the minimum 24 or 48 hours for both lawyers to be contacted and approve the contract. However, if you are subjecting the sale to financing, or an anticipated promotion, or another temporary setback, make sure to give as little time as necessary. Seven to ten days would be acceptable in most cases if the bank needs to make a property appraisal, only two or three if the subject is an inspection report.

If you give too much time there is the chance that the buyers will find another home or give in to buyer’s remorse and not complete the deal. Not only will this have wasted your time but is sure to break your spirit in your next attempt to sell. Keep things moving as quickly as possible.

Obviously other subjects (such as the sale of the buyer’s home) will not have a time frame, but you’ve protected yourself with the escape clause so you will not have to pass on a better offer if it comes through the door.

If you are waiting on a sale with subjects, do not take on new offers that have extensive subjects themselves. Perhaps it would be better to take the name and number of the prospects and tell them that you will alert them to any developments.

Finishing up

So, you’ve found a buyer, you’ve got your deposit – here’s a few thoughts to keep in mind:

If the possession date is close to the end of your mortgage term, try to coincide it to avoid paying penalties on an early payout.

Make certain that the buyer is clear on what stays with the house and what goes with you. Anything fixed (including light fixtures, drapery rods and doorknobs) is part of the home. If you don’t want to sell them then you should consider changing the fixtures BEFORE showing your home. Otherwise you will have legal problems in making the switch.

If you are including blinds, appliances or other unfixed items, list them individually on the contract. These are called chattels. Put everything in writing.

Be aware that there are some laws about writing contracts that you may inadvertently break. Some places don’t allow contracts to be signed on Sundays. You should also avoid celebrating with any alcohol before the papers are signed.

Minor as these may seem, making these mistakes can provide a loophole for your buyers. If they suddenly get cold feet they may use this as a way out. The law will not support contracts signed because of undue pressure or while intoxicated. Find out from your lawyer if there is anything else you should be aware of.

That’s it. You’ve done your homework and sold a home. Not too difficult was it? Now start looking for a new place if you haven’t already got one - there’s no going back!

Article Resource: For Sale by Owner