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11 min read Jan 18, 2023

How to Create a For Sale By Owner Contract in Alabama?

For Sale By Owner Contract Alabama

Selling a house by owner is tricky and requires a lot of patience and extensive paperwork. Home sellers in Alabama choose FSBO because it helps save money on the listing agent’s commissions.

To ensure a successful FSBO home sale in Alabama, you must be mindful of getting the listing paperwork right. Here’s a detailed guide on how to draw up an Alabama For Sale by Owner contract.

What Does For Sale By Owner Contract Mean?

An FSBO contract is a real estate contract signed by all home buyers and the home seller involved in an FSBO home sale. It contains information, terms & condition, and contingencies to safeguard your legal rights.

Home sellers in Alabama choose a sell-by-owner arrangement to avoid hiring a real estate agent and save on the 6% real estate commission.

How to Sell a House By Owner in Alabama?

When selling a home For Sale By Owner in Alabama, the home seller is tasked with all the listing agent’s responsibilities. FSBO sellers in Alabama consider getting their homes inspected prior to selling them.

Alabama home prices surged 19.7% between 2021 and 2022. 77% of FSBO homes are selling in less than 2 weeks. Selling FSBO in Alabama is more popular and high-tech than ever.

» Selling a House in Alabama: Read more about how to sell a house in Alabama.

Who Writes the For Sale By Owner Alabama Contract?

In a conventional house sale, the seller’s realtor or agent would prepare the papers and assist with the negotiations. If you’re selling your property alone, you might be curious about the procedure.

Once you start receiving buyer’s offers, offer negotiations begin, and the contract is drawn up. Usually, a real estate attorney does it.

1. The Buyer’s Agent

You can also choose the buyer’s agent to act as your agent. A transactional agent does the task for you. They are also known as “Dual Agents.” In this scenario, the realtor will act as a third-party person and will not negotiate for either of the parties.

If you choose to do so, the cost of drawing up the paperwork will be added when closing the sale. There might be a chance that the agent’s commission would land on your plate, so make sure you ask to split the cost in the initial stage itself. However, few states prohibit the Dual Agent concept.

2. A Real Estate Attorney

Hiring a real estate attorney can be an option for drafting a For Sale By Owner Alabama contract. Having an attorney by your side can be helpful. They would provide professional guidance and ensure that the contract is legally binding for both parties.

A real estate attorney charges around $256 an hour.

» Real Estate Attorney: Learn the role of a real estate attorney in a home sale

3. A Limited-Service Listing Agent

A limited-service real estate agent is cheaper than a traditional agent. They provide limited services at lower costs, but most of the property owners do not go in for this option. With a limited-service real estate agent, you will spend more than saving as you will handle most of the tasks yourself.

4. The Home Seller

Many property owners are unaware of the starting point for drafting an FSBO contract in Alabama. Many sellers search online for contract templates.

Drafting an Alabama real estate contract For Sale By Owner yourself can be difficult as many states require a realtor to draw up the contract. Title companies and escrow companies provide different Alabama FSBO contract templates.

» Selling a House As Is in AlabamaRead further to know more about selling a house as is in Alabama.

What’s Included in Your Home For Sale by Owner Contract In Alabama?

Selling a house without a realtor in Alabama means looking into all the details yourself. This means that from listing your home on MLS till the closing date, drawing up the contract is a part of it. Most home sellers aren’t familiar with this document and its inclusions.

# NoFSBO Contract InclusionsDescription
1Contract TitleHighlights the purpose of the FSBO document
2Names of Home Seller & BuyerMentions full names of both parties
3Contract DateContains the date of execution
4Property DetailsShows FSBO property location, description, etc
5Payment TermsExplains the terms of payment in full
6Method of PaymentSpecifies the mode of payment of both parties
7ContingenciesTimeline and conditions of the event
8Closing DateDetails of the closing date, location, time, and place
9Signature BlockSpace at the end to place the names and signatures
10Property DisclosuresDiscloses all the material facts

1. Contract Title

Every document requires a title given to it explaining what the document intends to deliver. You can simply name it “Real Estate Contract.”

2. Names of Home Seller & Buyer

Add the full names of the parties to the contract. Later, you can refer to them as buyer and seller in the contract.

3. Contract Date

The FSBO contract shall mention the date of execution. The contract also specifies further dates by which both owners must proceed with the sale. In some FSBO contracts, there are fines for missing deadlines.

4. Property Address & Description

This is the most crucial part of drafting the contract. You need to be specific with the details of your property. Mentioning the entire property address is very important, and its legal description should be added. Now, you must start specifying the appliances you wish to carry with you or plan to leave them as is. Be as specific as possible. Do consider the below points.

  • Appliances include a refrigerator, washer, dryer, toaster, etc.
  • Home Decor includes decorative items such as wall art, figurines, table accents, etc.
  • Furniture includes closet doors, shelves, sofa sets, etc.
  • Any kind of yard or garden fixtures.

5. Terms for Payment

Because purchasing a home is a big investment, funding and payment shouldn’t be left up to chance. The buyer and seller should be transparent about their financial situation and clearly convey their expectations. Explain the terms of payment in full. You should include the following in your payment terms:

  • Purchase price of the house
  • Earnest money deposit
  • Payment of the remaining amount
  • Property taxes
  • HOA fee and payment rate for the current year

6. Method of Payment

Mention the payment method involved in the transaction. It can either be a cash transaction or financed by a lender. Your contract must contain earnest money amount that the buyer delivers within 3 days of the execution of the Contract. The balance of the purchase price and the buyer closing cost has to be paid at the closing.

7. Contingencies

In essence, a contingency clause allows parties in the FSBO contract the option to back out from the contract under specific future conditions that must be agreed upon by the buyer and seller. There are some common contingencies to the FSBO contract:

💲 Financing Contingency: This contingency clause gives the buyer the right to back out of the contract on failure to obtain financing within the specified time.

However, if the buyer fails to get a mortgage from the lender, he is supposed to inform the seller within that time. Failure to do so will make the buyer liable under the contract to purchase.

🕵️‍♂️ Inspection Contingency: Alabama is a buyer beware state. This means the buyer it is the buyer’s duty to conduct the home inspection within a specified timeline. If the inspector reports any major defects in his report, then the buyer may ask you to repair them, or they might even terminate the contract.

🏡 Home Sale Contingency: A home sale contingency gives the buyer a specified time for selling their previous house to raise funds for the new property. This clause protects the buyer. If their house doesn’t sell for their asked price, the buyer can back out from the contract without breaching the contract terms.

» Best Month to Sell a House in Alabama: Know exactly when is the best time to plan a home sale.

💯 Appraisal Contingency: If the seller’s property is not appraised for the minimum specified amount, this condition safeguards the buyer. The buyer reserves the right to terminate the agreement; on rare occasions; even the earnest money is refunded.

The contingency clause contains a timeline and conditions as to the event of a contract. If the buyer fails to inform the seller about the appraisal report within the given time frame, then the buyer has to buy the property at a price initially agreed upon by both parties.

» Average Cost of Home Appraisal in Alabama: Read further to know how much is an appraisal in Alabama.

8. Closing Date & Procedures

The house for sale by owner contract is completed when it contains all the details of the closing procedure. The details related to the closing date, location, time, and place have to be mentioned. This acts like a deadline for the buyer to keep their finances ready. Changes in the closing details must be made by making amendments to the contract and filing it along with the remaining paperwork.

» Sell House Fast AlabamaKnow How to Sell Your House Fast in Alabama!

9. Signature Block

Leave space at the end of the contract to place the seller and buyer’s names and signatures. Review your state laws to cover all bases in your FSBO contract.

10. Property Disclosures

Though Alabama is a buyer beware state you are not exempted from furnishing the property disclosure statement. The seller must disclose all the known issues in the property that might adversely affect the property’s market value. If you fail to disclose any material defects in your property on the Alabama sellers disclosure form, chances are you may face lawsuits in the future.

» How to Sell Your Own House in Alabama: Read further to know more about how to sell a house by owner in Alabama.

Disclosure Forms in Alabama For Sale By Owner

Alabama real estate laws require home sellers to fill out the Residential Property Condition Disclosure Statement. The disclosure form walks you through various sections, asking you questions about various features of your house.

Disclose all the known problems in your house honestly. Remember, suppression of material defects constitutes fraud and the home seller is liable for punishment. You have to fill out designated sections on smoke detectors, the flooding history of the property, and termite inspections

Apart from the Alabama seller disclosure notice, fill out the federal lead-based paint disclosure if your house was built before 1978.

» Seller’s Mandatory Disclosure Statement Alabama: Understand the seller’s disclosures required in Alabama.

Checkout the Best For Sale By Owner Websites

We have summarized the best FSBO sites for you, these include paid and free websites too.

Reviews: America’s Best FSBO Websites

We’ve reviewed the best paid and free For Sale By Owner Websites in 2023

Final Word

All the items listed above must be present in the Alabama FSBO real estate contract. This ensures your For Sale By Owner contract is regarded as legitimate and legally enforceable.

Other details, such as information about the property’s condition and occasional contingency conditions based on financing or appraisal, or inspection, are typically included in most contracts. “Handshake transactions” or agreements without any of this information are not enforceable or legally binding.

Frequently Asked Questions

1. Can a seller back out of a contract in Alabama?

Yes, a home seller can back out of a contract in Alabama if the buyer fails to meet the transaction contingencies. This includes financing, the sale of a house owned by a buyer, insurance, inspection, etc.

2. Does Alabama have a standard real estate contract?

Yes, Alabama has a standard real estate contract. It is issued by the Birmingham Association of REALTORS® and it outlines the terms of real estate transactions in Alabama.

3. Do you need a lawyer to close on a house in Alabama?

Yes, you need an attorney to close on a house in Alabama. Apart from drafting contracts and paperwork, a real estate attorney is the closing agent in Alabama.

4. Can a buyer back out of a real estate contract in Alabama?

Yes, a home buyer can backout of a real estate contract in Alabama. This usually happens when the seller contingencies such as inspection or appraisal are not met.

Also Read


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