For Sale By Owner Information
Information for Buyers Not Represented by a Realtor
While selling your home or buying a home without having a California licensed real estate agent’s assistance increases the buyer’s or seller’s risks, many people represent themselves in real estate transactions without an agent. Most of these transactions are concluded satisfactorily, but many turn into financial disasters for the buyer, seller, or both. While exercising caution is always important, buying a foreclosure or REO property requires additional consideration. Also, buying a condominium requires additional consideration. Most importantly, buyers and sellers should be fully aware of the legal significance of “As Is” real estate contracts.
Determining the Value and Asking Price of Real Estate
Many people use various website sources to determine what they will ask for their house or land before offering it for sale only to be disappointed later when they find out that the information they relied upon was not based upon up-to-date, accurate information. This can lead to a costly error. If you are intending to sell “For Sale By Owner”, you should definitely consider the value of obtaining an appraisal by a California licensed appraiser or Comparative Market Analysis (CMA) by a licensed real estate agent. Sites such as Zillow and Realtor.com are not relied upon by professionals.
“As Is” Real Estate Contracts
An “As Is” clause in a real estate purchase and sale contract does not insulate the transferor or seller from the duty to disclose defects or the requirements of California Civil Code 1102 et seq. “As Is” language serves to give notice of patent defects and means that the buyer accepts the property condition which it is reasonably observable by him or her. Also, “As Is” language in a real estate sales contract does not protect a seller from liability for fraud or misrepresentation.
In California, sellers of residential real estate have a legal duty to disclose any facts materially affecting the value or desirability of the property that are known or accessible only to the seller and not known to or within reach of the diligent attention and observation of the buyer. (California Civil Code Section 1102 et seq.) Notwithstanding, sellers are not liable for latent defects in property of which he or she did not know about and had no reason to believe existed.
Transferors of residential real estate must provide purchasers with a Real Estate Transfer Disclosure Statement (“transfer disclosure statement”). Any attempt to waive this requirement is void as against public policy. This requirement applies to a sale, exchange, installment land sale contract, lease with option to purchase, any other option to purchase, or ground lease coupled with improvements. Delivery of the transfer disclosure statement must be by personal delivery or by mail to the prospective transferee.
The transfer disclosure statement form includes the transferor’s disclosure of information regarding all of the following:
- The physical condition of the property;
- The existence of hazardous materials or dangerous conditions;
- Encumbrances on the property, including any encroachments;
- Easements or other matters which may affect the other party’s interest in the property; and
- Lawsuits against the seller threatening to affect or affecting the property.
Transferors of residential property must also disclose to potential buyers, if applicable, that the property is in a natural hazard area, that the property is subject to a lien created under the Mello-Roos Community Facilities Act, or is subject to an assessment lien collected in installments to secure bonds issued pursuant to the Improvement Bond Act of 1915. In addition, cities or counties may require that sellers or their agents deliver to purchasers the Local Option Real Estate Transfer Disclosure Statement as set forth in the California Civil Code.
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Full - Service Realtor
- Listing agent uses the Multiple Listing Service exposing the property.
- Seller pays a commission.
- Realtor objectively prequalifies prospects to make certain they are financially capable of performing.
- Realtor and associates are available 24/7/365 to show the property and close the transaction.
- Realtors are generally aware of neighborhood and market sales activity and trends.
- Realtors are trained to minimize the risks associated with showing a property to a stranger.
- Realtors are objective in dealing with real estate transactions which is often necessary to consummate a transaction.
- Realtors are knowledgeable about costs, escrow prorations, and industry standards.
- Realtors have access to a real estate attorney when questions arise about legal matters.
- Realtors often receive referrals from other agents in other cities through various national referral networks.
- Realtors generally receive training on how to handle multiple offers so as to avoid legal problems.
- Realtors generally know which lenders are most likely to approve the buyer's loan application.
- Realtors are trained to know what types of written legal disclosures are required to be provided to buyers.
- Most buyers have confidence that a Realtor will treat them fairly and will honor the National Association Realtor Code of Ethics.
- Peace of mind.
For Sale By Owner
- No MLS. Limited advertising.
- Both the buyer and seller want to save the same commission.
- The seller must prequalify any prospective purchaser.
- The seller must be available to show the property to strangers, negotiate the price and terms of sale, and to get the sale closed.
- Owners are not likely to have access to current market data.
- The seller accepts all security risks.
- Most owners find it difficult or impossible to be objective. This can work to the disadvantage of the seller.
- Most owners have little knowledge of industry standards, customs, practices and costs.
- Owners rarely have a real estate attorney on retainer.
- Owners don't have access to national agent referral networks.
- Most owners do not have experience in dealing with multiple offers.
- Most owners do not follow the mortgage market and don't know which lenders are the most and least competitive.
- Most owners don't know the most recent legal requirements for written disclosures.
- Most inexperienced buyers are fearful of dealing directly with an owner because they are concerned about the owner being more knowledgeable and taking unfair advantage of them.
- Seller has total responsibility.
Five Costly Mistakes FSBO Sellers Make
- Failing to make written disclosures required by law;
- Over-improving the property based upon the neighborhood;
- Hiring a real estate agent based upon friendship instead of solid business factors;
- Overpricing the property; and
- Getting emotionally involved in the sale of the property.
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Basic Contract Provisions and Disclosures