Is the FSBO buyer qualified?
So, you listed your Maryland home for sale by owner on one of the many platforms available and received an offer, now what? You want to make sure that the potential buyer is qualified before entering into a contract. How do you do that? Request that a buyer submits a pre-qualification letter or pre-approval letter (stay posted for a future blog on the differences between the two coming soon) along with the offer. This document will help you determine that the buyer has met with a lender and has a good chance of being approved for a mortgage for the amount that is being offered for the home. There is not much sense in investing energy and resources into a contract from a buyer who will not be able to secure a loan for the purchase.
Who is paying the realtor?
In a traditional sale involving real estate agents, the seller’s agent negotiates a fee with the seller, usually anywhere from 4%-7% of the sales price, that is shared with the buyer’s agent. In a for sale by owner transaction that fee may be avoided if there are no agents involved in the transaction. However, it may be the case that a potential purchaser is represented by an agent, what then? A seller in this scenario should determine in advance whether they will agree to pay the buyer’s agent a commission or will require the buyer to pay the buyer’s agent themselves. A seller may be able to refuse to pay any type of commission to a buyer’s agent if their house is a particularly desirable property or is in an area where there are high demand and low supply. In Maryland, there is no requirement that a seller pays an agent a commission unless agreed to in a contract.
Is the FSBO real estate contract valid?
Even the major service providers in the for sale by owner space advise engaging a real estate attorney when a seller does not have an agent. Why is this? Many states require property disclosures for property condition, radon, lead paint, asbestos, etc. and if the requirements are not fulfilled the buyer may be able to terminate the contract. There is a huge temptation to use a form contract found on the Internet or purchased at a store to save a few dollars but this is a risky proposition. You will already be reducing your expenses by eliminating one or both agents so best to make sure you have taken the steps necessary to ensure that the buyer is obligated to see the purchase through.