Sell by Owner Contract: Who Draws up the Contract
The American dream has always been to own a cute house with a white picket fence, and for many people, that dream still rings true. Owning a home can be a gratifying experience, but the time and effort required to buy and sell one can be daunting. It can also be an expensive process, so it's common to look for ways to cut costs.
Many people choose to implement a sell-by-owner contract to save money on the process. By choosing to not hire a real estate agent, you could save up to 6% of your home's value by not paying their commission.
This process, typically referred to as "for sale by owner," can be tempting but also risky and complicated. Not hiring a professional means that you have to do much of the work yourself, and once a buyer is interested, the contractual process can become dicey.
When you choose to sell by owner contract, what exactly does that mean? Who draws up the contract in a for sale by owner deal?
For Sale by Owner
An owner-to-owner house sale contract can be a simple deal in some cases, but in many cases, it becomes complicated and unpleasant. It's important to understand the details of the process and when you should reconsider selling your house yourself.
Experts recommend selling your house without an agent only in a seller's market. This means that the market value of your house is more likely to be met or exceeded in the sale because buyers are more desperate to buy a house than sellers are to sell them.
You will want to avoid selling your house without representation if you feel that it will be hard to negotiate a fair deal for your house. If there aren't a lot of buyers interested, you might not be getting offers that meet your needs. Having an agent can help in achieving better offers.
An agent also acts as your representation so that you do not have to directly deal with the buyers and their agents. This can be less stress and time spent on your end. It also ensures that a professional is handling unpleasant or complicated problems.
Technically, you can sell a lot of things with just a handshake. Not everything requires a formal process and contract. This might be your attitude with your house, but it shouldn't be. Here's why:
Your House is a Huge Asset
Selling your house isn't as simple as exchanging some money for a title. There are many different parts to your home to consider in a sale. You are selling land, the structures that are on it, and often some of the furnishings and appliances.
These deals amount to huge amounts of cash and are full of contingencies. The buyers don't always want to buy your house "as is" and often will ask for repairs, upgrades, and inclusions of furniture and appliances. An owner-to-owner house sale contract will have to include all of these details and more.
Most people are not knowledgeable enough about contracts, specifically real estate contracts, to know how to properly create and negotiate them. It requires schooling and experience, so professionals are often the best bet in selling a home properly.
A contract is essential because it is a legally binding document, so it's important to know what you're getting yourself into before you commit to it! Such a huge asset as a house is not the time for experimentation.
The Art of Purchase Contracts
Because home sales are so complicated, they require purchase contracts. A purchase contract is a legally binding written agreement that outlines the details of the sale between the two parties.
These contracts include comprehensive legal descriptions of all the terms of the agreement, including:
- Purchase price
- Down payment
- Agreed payment plan
- Closing date
- The legal description of the property
- Conflict resolution
It is important to cover the above terms comprehensively in a purchase agreement to avoid disputes or to outline how to handle disputes when they arise. The contract should make it clear how the financial end will be handled as well as what the seller needs to do to meet the requirements for sale.
You also need land contracts in special circumstances. The seller may choose to provide financing so that the buyer does not need to find a mortgage somewhere else. These contracts include loan amounts, interest rates, and the penalties for falling behind on payments or taxes.
Without the specific education and experience dealing with these contracts, you might make mistakes or leave out important details, leaving yourself open to legal disputes or losing money from the sale.
Who Writes the Contract in a For Sale by Owner?
In a traditional sale of a home, the seller's real estate agent or attorney would draw up the paperwork and help negotiate the deal. If you're on your own, you might be wondering what the process is for your home sale.
If not you or your sales agent, then who writes draws up the contract in a for sale by owner deal? If a buyer comes with an offer, you'll need someone to create the outlines of the deal and make it legally binding.
Write Your Own Sell-by-Owner Contract?
Your first instinct might be to search online about how to write up a contract yourself. It could be done, but there's a lot of hurdles in your way. One of the biggest hurdles is that many states require that you have an attorney draw up a contract for it to be legally binding.
It's also likely that buyers would be unwilling to buy your home unless a professional drew up the contract and facilitated the sale. They might be wary of entering an agreement with someone without legal advice. There's also the uncertainty of how the terms would hold up in case of a legal dispute.
Drawing up a contract by yourself is extremely time-consuming and difficult. You would have to lose days of your time researching, learning, and drafting. In the end, it's probably not worth it.
In the case that your buyer has a real estate agent, you can choose to ask for that agent to act on your behalf as well. This option is called using a "transactional agent" or "dual agent."
If the agent chooses to do this, they will not represent either party. Instead, they would act as a neutral third party that draws up the contract without negotiating for either side.
If you are using a buyer's agent as a dual agent, there is the issue of cost for drawing up the paperwork. This cost is usually included in an agent's commission once the sale is completed, but you shouldn't let the buyer absorb all the cost. In the case of a dual agent, you should agree to share the cost.
Certain states, however, do not allow dual agents.
Real Estate Attorneys
Sellers can also choose to seek out an attorney to represent them and draw up the contract. This means that they are only forfeiting the services of a real estate agent before the offer is accepted.
This could save you money by not paying the commission of the agent, but you will still have to pay for an attorney by the hour. Attorneys generally are paid between $150 and $300 an hour. Some come with fixed-price packages.
If you go this route, you can at least be sure that you will have a professional on your side that can provide legal advice. You can also be sure that the contract they draw up will be legally binding and have your interests in mind.
Is There Another Option?
It's possible to save some money when choosing to sell your house yourself, but it might not be worth it when considering other costs. By now, you must be thinking, isn't there another way?
Yes, of course, there is another way to sell your home without needing an agent, attorney, or hours to teach yourself. Online services like iBuyer.com can cut out the need for a real estate agent without losing your peace of mind.
You want to make sure that the sale of your home is done properly and is legally full-proof. You also want to make sure that you are getting the right value for your home. There are so many benefits to using a home sale online service, such as:
- Free estimates on your home
- A report of your home's market value
- Instant matches with buyers who want your house "as is"
- Flexible closing dates
- No staging, cleaning, or open houses required
- No repairs or upgrades to do
You can also get full cash for your home, meaning you don't have to deal with financial contingencies with potential buyers who are waiting on mortgages and loans.
Even better, you can get transparency with upfront costs that allow you to decide if you're willing to spend the money to sell right from the beginning.
Sell Your Home the Best Way
Are you ready to make the big move? You don't need to hesitate any longer due to commission costs and grueling months left on the market. Don't waste your time with a sell-by-owner contract.
iBuyer.com can sell your home with the peace of mind that comes with professional legal services and matching you with the right buyers affordably. Get started today with our free home value estimator!