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So, you want to try and sell your house yourself, and save on the real estate sales commission? This process is known as "For Sale By Owner," or FSBO (pronounced "fiz-bow"), and going for it means that you are about to engage on a momentous roll of the dice. Many sellers can successfully conclude the FSBO process without a problem. Many other sellers will wish that they had never attempted it. The purpose of this FSBO page is not to convince you one way or the other, but simply to provide a brief guide to the FSBO process from start to finish. Now for the disclaimers:
This web page is NOT intended to be a comprehensive explanation of everything that can or will be encountered in a FSBO sale. By its very definition, each real estate property is unique and will have its own particular issues to deal with.
All explanations on this page are based on North Carolina law and custom, and certain customs and procedures may vary from county to county within North Carolina.
Nothing in this summary should be applied or used for property sales outside of North Carolina.
For the purpose of this summary, we are assuming that a residential house is being sold, but some of the same basic principles should apply to vacant land, residential rental houses, or other non-commercial real property situated in North Carolina.
No attorney-client relationship exists between our firm and any visitors to this site until a visitor establishes personal contact with a firm attorney AND the firm attorney and the visitor both agree to establish an attorney-client relationship. Although we welcome e-mail from prospective clients, the sending of an e-mail to one of our attorneys does not create an attorney-client relationship
FSBO STEP 1: SETTING THE PRICE
You can try setting a sales price for your property by collecting market analyses from various real estate professionals, but this seems inherently dishonest and unfair to me, unless you tell the real estate professionals up front what you are doing. You can also use the online tax office records to see what the tax office thinks yours and surrounding properties are worth, at least as of the last county revaluation. Another way to establish value is to hire a professional residential appraiser and also consider having a "pre-emptive" house inspection done by a licensed home inspector. You'll see later on in the FSBO process where appraisers and inspectors come back into the picture.
FSBO STEP 2: ADVERTISING
Many FSBO sellers bypass the MLS and online advertising, and simply advertise using traditional direct methods, such as newspaper and magazine advertisements and putting a FSBO sign in the yard
FSBO STEP 3: SHOWING THE PROPERTY AND EVALUATING PROSPECTS
This is probably the most difficult step of the FSBO process. When you employ a real estate professional, they meet with the buyers and show the house to them. Your job is simply to keep the house presentable as directed by your real estate professional, stay out of the way, and make the final decision on any contract which may be presented by your real estate professional. When you go FSBO, everything is up to you. Here is a short list of some potential things to watch for: (a) Browsers - there are a lot of people out there who just want to browse and have no intention of buying your house. Their function is to waste your time; (b) Nut Cases and Criminals - there are also predators out there looking for victims; and (c) Those who can't afford to buy your house - Many people, particularly first time homebuyers, want to buy more house than they can afford.
You can cut down on some of these problems by taking some common-sense precautions:
FSBO STEP 4: REQUIRED DISCLOSURES
In completing this form, keep in mind that any "Yes" answers mean you are aware or a problem, and requires a detailed explanation, using extra sheets if necessary. Any "No" answer means that you are not aware of any problem. Any "No Representation" answer means that you're not certifying anything, yes or no, and is similar to an "as-is" statement in a contract. While a "no representation" answer is safest for a seller, to a buyer it may be like waving the proverbial red flag.
The second disclosure, also required by North Carolina General Statutes 47E, is the:
The third disclosure depends on the age of the house. If the house was built before 1978, the seller is also required to give the buyer a Lead Paint Disclosure Fact Sheet/Pamphlet and a Lead Paint Disclosure form. The fact sheet/pamphlet and the disclosure form can be downloaded from the Federal government's web site
Once the seller and the buyer have agreed on the terms of sale, everything that was negotiated must be put into writing and signed by both seller and buyer. Verbal or "handshake" contracts for the sale of real estate are not enforceable in North Carolina, and no mortgage lender will make a loan to a buyer without a written contract.
Since 1977, the standard form for entering into a North Carolina real estate contract has been North Carolina Bar Association Form No. 2 (also known as North Carolina Association of Realtors Standard Form No. 2). The form is entitled "Offer to Purchase and Contract," and it becomes a fully binding contract once it has been signed by both the buyer and the seller. The contract form is copyrighted as a joint effort between North Carolina's lawyers and real estate professionals, and is therefore not available for Internet download. A FSBO seller may be able to secure blank copies of the form from a North Carolina lawyer or realtor, but our recommendation is that a FSBO seller establish a relationship with a North Carolina real estate attorney. The attorney can meet with the FSBO seller to go over the contract process, with it being fully understood that the attorney will draft up the final version of the contract.
The drafting of a contract must not be taken lightly, since many thousands of dollars will be at stake. Many times the buyer and seller will have verbally negotiated the terms of the sale without considering all of the possible issues, and ask an attorney to put these terms into a formal contract. The better practice is for sellers to have met with an attorney first, then buyer and seller carry out their negotiations using a checklist of issues to agree upon, and then have the attorney formalize the agreement into a written and signed contract.
Here is a sample checklist of issues that need to be addressed when drafting up a North Carolina real estate residential sales contract:
Names: Correct names of buyers and sellers
Once the Contract has been fully agreed upon and written up, it needs to be reproduced in at least four (4) counterparts - one each for the buyer, seller, buyer's lender, and the person holding the earnest money deposit. The buyer then is required to use his best faith effort to meet all of the conditions, such as financing and inspections. The mortgage loan process can take anywhere from one week to six weeks, depending on the property and the borrower, and it is possible that the buyer will not be able to qualify for the mortgage loan needed to close. Things that affect qualification are (but are not limited to) the actual credit report of the borrower, the value that an appraiser selected by the lender assigns to the property, and the available cash that a buyer has on hand to make up the difference between the purchase price and the loan amount.
During the due diligence period, the buyer will need to get all financing, inspections, and other closing details worked out, and the buyer and seller will need to resolve all issues arising from this due diligence. At some point between the contract signing and the closing date, the mortgage qualification process will be completed. If the buyer qualifies for the mortgage loan, a closing date will be set between buyer, lender and buyer’s closing attorney.
Closings in North Carolina are generally held at the office of a licensed attorney selected by the buyer and approved by the lender. See our Closing Services page for more information on this. In a FSBO sale, the seller and the buyer will appear at the office of the closing attorney on the closing date and sign all of the closing documents. The seller will be responsible for providing a warranty deed to the buyer and paying for North Carolina excise stamps and any other expenses which seller has agreed by contract to pay. Also, in order to close, the seller will need to be able to deliver to buyer "marketable title," which means that a title search done by the closing attorney reveals that seller can deliver clear title to the buyer with "acceptable encumbrances" (such as restrictive covenants, general easements, etc.). If the title search shows that the seller has an uncancelled mortgage, judgment, unpaid tax or other "unacceptable encumbrances" on the property, then the closing attorney will make arrangements with the seller, through closing, to pay off, satisfy or otherwise remove unacceptable encumbrances. Certain acceptable encumbrances, like taxes for the current year which are not yet payable, or mandatory assessments for a homeowners association, will be prorated between buyer and seller at closing, so that seller has paid seller's share of the encumbrance, and buyer then assumes the encumbrance from the seller. All of these payoffs and adjustments will be reflected on a document known as the HUD-1 Settlement Statement. The HUD-1 will itemize all of the buyer's and seller's expenses and credits, and come down to the net funds required by buyer and the net funds payable to seller when closing is complete. Both the buyer and the seller sign off and agree to the HUD-1.
Once all of the documents are signed, then the closing attorney collects the closing funds from the buyer. The funds must be in the form of a bank wire, certified funds, cash, or other “cash-equivalent” funds as required by the North Carolina Good Funds Settlement Act. Once the closing attorney is satisfied that he has the correct amount and type of closing funds, and that all documents have been properly signed and notarized, the closing attorney will proceed to update title and record the documents at the county Register of Deeds (in the county where the property is situated). The closing attorney will not distribute the net sales proceeds to the seller until all of this is done. The FSBO seller will need to be sure to ask the closing attorney when seller can reasonably expect to receive seller's net proceeds check.
We have now taken a brief and simplistic walk down the FSBO yellow-brick road. Your actual mileage may vary, which is to say that FSBO sales can be easy and pain-free or difficult and complex. Good luck!