How to Write a FSBO Contract

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					How to Write a FSBO Contract
When a homeowner sells his or her house without the assistance of a real
estate agent, he or she must provide a contract for the sale of the home.
This contract is referred to as a For Sale by Owner, or FSBO, contract. A
FSBO contract details the terms and conditions of the sale and describes
the obligations of each of the parties. To write an FSBO contract, follow
the steps below.
This article does not constitute legal advice. Check with your attorney
after drafting and/or before signing any legal document.

<Steps

Sample Contract
Sample Real Estate Sales Contract


Writing a FSBO Contract
1Name the parties to the contract. State the names of the parties to the
contract and designate each party as either ¡°Buyer¡± or ¡°Seller¡±. For
example, ¡°John Doe (¡°Buyer¡±) and Jane Doe (¡°Seller¡±) hereby agree as
follows.¡± Once you have designated the parties as Buyer and Seller in
this manner, you should refer to them as such throughout the remainder of
the contract.<
2Name the contract. Give the contract a short name, such as ¡°Real Estate
Sale Agreement¡± or ¡°Property Sale Contract¡± which you can use to refer
to it throughout the rest of the document. You may wish to do this in the
same sentence where you name the parties, for example, ¡°John Doe
(¡°Buyer¡±) and Jane Doe (¡°Seller¡±) hereby enter into this For Sale by
Owner Contract (¡°Agreement¡±) this 3rd day of June, 2001.¡±
3Describe the real estate. When describing real estate in a contract, you
should provide the common address, or street address, and the full legal
description. The legal description is needed because street addresses are
subject to change, and legal descriptions provide a way of describing
property in a more permanent manner. To locate the full legal
description, obtain a copy of the most recently recorded deed or
affidavit of ownership from the county recorder¡¯s office where the
property is located. There may be a small fee for the copy.
4Describe the payment terms. If the terms of payment are as simple as
Buyer will deliver X amount of cash to Seller on X day, and Seller will
deliver to Buyer an executed Deed upon receiving payment, then keep it
simple and describe the payment terms in one sentence. However, payment
in a FSBO contract is generally more complex than exchanging cash for an
executed Deed. Some things you may want to include in your payment terms
are:Full purchase price. Whether your payment terms are one sentence long
or one page long, they should always contain the full purchase price of
the property. The full purchase price is the amount of the accepted
offer, without subtracting any deposits or earnest money paid.
Earnest money and other deposits. When the seller accepts an offer from a
buyer, the buyer will generally make a deposit on the purchase right
away. This deposit is referred to as earnest money, because it is paid so
that the seller knows the buyer is serious about completing the sale. The
amount of earnest money and date to be delivered should be included in
the payment terms.
Trusts. When a buyer makes a deposit on a piece of real estate, it is
generally held in trust until completion of the sale. While in Trust, the
money belongs to both the buyer and the seller. If the deal falls
through, the deposit may be returned to the buyer or given to the seller,
depending on the circumstances surrounding the failed transaction. If
earnest money or other deposits will be held in Trust, the name and
location of the financial institution, trust company, or title company
who will hold the trust should be included in your contract.
Property taxes. Because the purchase of a property does not generally
coincide with the County¡¯s property tax schedule, taxes are usually
prorated between the buyer and seller as of the date of closing. This
means the tax is divided between them based on the number of weeks during
the taxing period that each owned the property.

5Describe any easements or restrictions on the property. An easement is
another¡¯s right in a portion of the property. For example, a person may
have an easement, which allows him to drive his cattle across a part of
another¡¯s property. A common restriction, which may be found on property
is one placed by a homeowner¡¯s association, which may require the owner
maintain the property in a specific manner or even limit the number of
pets the homeowner may have.
6Describe any property that will be included in the sale. Light fixtures,
drapery, cabinetry, and anything fixed to the property in some manner are
generally included in the sale of the property. To ensure that there is
no confusion over what is included in the sale, however, include a
complete description of the property that will be left with the home.
7Describe any contingencies. A contingency in a contract is a condition
or event, which must occur before the contract becomes binding on the
parties. A couple common contingencies in real estate contracts
include:Passing a home inspection. When purchasing property, a buyer
should be afforded the opportunity to have the property inspected for
various defects. When writing a home inspection contingency, be specific
about who will pay for the inspection and what defects will affect the
contract and how they will do so. For example, ¡®Buyer shall pay for a
home inspection to be conducted before closing. Renegotiation of this
agreement shall occur only if said home inspection reveals a major
defect, which will cost more than $500, individually, to repair. Buyer
shall be responsible for all repairs, which are not major repairs and do
not cost more than $500, individually.¡¯
Obtaining financing. If the sale is contingent upon the buyer being able
to take out a mortgage on the property, describe the contingency, and
provide the amount of the mortgage, the name of the mortgage company, and
the method of payment.

8Provide all required disclosures. Federal and state law may require that
you disclosure certain information to potential buyers. Check your
state¡¯s statutes or with a real estate attorney or real estate agent in
order to determine what disclosures you are required to provide. Required
disclosures commonly include:Defects that may affect the property¡¯s
value or desirability. A homeowner is not generally required to go
looking for defects, but only to provide information on those, which he
or she is already aware. Examples of information that may need to be
disclosed include basement flooding, leaky pipes, roofs in need of
repair, and zoning changes.
Lead-based paint hazards. If the property was built before 1978, federal
law requires you to disclose all known lead-based paint hazards in the
house, provide specific warning language in the contract, and give a copy
of a pamphlet on lead-based paint prepared by the Environmental
Protection Agency (¡°EPA¡±).

9Determine if your state requires any specific language in home sale
contracts. The laws governing real estate contracts vary from state to
state, and many states require specific language or information be
included in any sales contract. Check your state¡¯s statutes or with a
real estate attorney or licensed real estate agent to determine what
information, if any, you are required to include in your contract.
10Describe what will happen if either party defaults on the contract.
Home sale contracts generally provide that if a party defaults on the
contract, the other party may seek relief through the Court or receive
any earnest money paid as damages, and terminate the contract. You may
wish to consult with an attorney concerning the language of this default
clause in order to ensure that you are adequately protected.
11Provide closing information. Closing is a final meeting where the deal
is closed. The buyer pays the seller and the seller delivers an executed
deed to the buyer. Because closing is contingent upon inspections,
financing, and/or other events, a real estate sale contract should
provide a period in which the events must take place, and the deal
closed. FSBO contracts generally provide that closing shall occur within
sixty days of signing the contract. You should also specify who is
responsible to pay for deed preparation, title insurance, and other
closing costs.
12Create a signature block. Your signature block should include a line
for each party to sign, plenty of room for signatures, the parties¡¯
printed names, and a place for a notary to notarize the signatures.<

Sample
Here is a sample FSBO Contract you can copy and use.
Sample FSBO Contract

Warnings
When providing the legal description of the property, do not use your
County Recorder or Assessor¡¯s shorthand version of the description. Be
sure the legal description you use is the full and complete description,
as provided on the last recorded deed or affidavit of ownership.
You should consult with an attorney before signing anything, which may
affect your legal rights and/or obligations.

<Sources and Citations
http://www.robertslegalfirm.com/refsbo.html
http://www.realestateabc.com/insights/deposit.htm
http://legal-dictionary.thefreedictionary.com/Easement
http://www.audrie.com/real_estate_sales_contract.htm
http://www.nolo.com/legal-encyclopedia/required-disclosures-selling-real-
estate-30027.html

				
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