FSBO: More than just the clown from Modern Family
Ok, so technically Cam’s clown name is “Fizbo”, but it sounds the same.
FSBO is an acronym of “For Sale By Owner”. In these transactions, the seller has not retained the services of a professional real estate agent to assist with the sale of their home. The seller is gathering the information, taking photos, and marketing the property on their own. FSBO sellers hope to save the commission fees when they sell without a realtor.
If you are buying or selling in a private or FSBO transaction, our Cornwall real estate lawyers strongly recommend having a lawyer draft the agreement, or at least look over the agreement before you sign it.
Some problems we find in FSBO agreements:
- Paying deposits directly to sellers. This is a HUGE no. If you give a few thousand dollar deposit directly to the seller, you have many issues. Firstly, the seller is not bound to hold it in trust or return it if the deal goes sour. Secondly, the buyer will need title insurance and the title insurer asks where the deposit was paid. If the deposit was paid directly, the file is flagged for potential fraud. It will take some time and maybe additional legal fees to prove this is not a fraudulent transaction.
- Improper or no listing of chattels or fixtures. A chattel (like a lawnmower) is presumed to be excluded unless it is listed in the agreement, while a fixture (a built in item, like light fixtures or dishwashers) are presumed to be included unless specifically excluded. If you don’t include or exclude these items, there will be issues on closing day. This is particularly an issue with things that are often rented, like hot water tanks.
- No or improper buyer conditions. Most offers are conditional upon certain things that the buyer needs to satisfy before they can firm up the deal – like financing, obtaining insurance, etc. If you enter into an unconditional deal and you can’t get financing, you are going to have some legal problems.
- No seller conditions. If the buyer has conditions, sometimes the seller wants to also have conditions, like being able to continue to accept offers and the buyer will have a short period of time to waive their conditions or abandon the offer, so the seller can accept a new offer. Without this provision, sellers can lose out on better offers.
- Incorrect legal description, lot dimensions, etc. The seller needs to be able to sell what was described in the agreement. Even if it is an innocent typo, you could run into legal problems if what you “sold” isn’t what you own.
- Not listing at an appropriate price. Homes don’t go for the list price very often. So trying to gauge the list price for your home is going to be difficult. You may not get the highest value. Buyers may also pay too much and run into financing problems if the list price does not match the appraisal.
While FSBO deals have a legitimate place in the real estate market, just be sure you know the risks. Get legal advice early in the process.
Do you need advice about a FSBO deal? Call or text us at 613-933-7720 today to get started, or fill out an intake here.