Drafting a For Sale By Owner contract in California without hiring a real estate agent is tricky but possible. Home sellers in California choose FSBO because it helps save money on the 2%-3% listing agent’s commission.
To ensure a successful FSBO home sale in California, you must be mindful of getting the listing paperwork right. Here’s a detailed guide on how to draw up an FSBO contract in California.
What does For Sale By Owner Contract in California Mean?
An FSBO contract is a legitimate document. It contains information to safeguard your legal rights.
Homes for sell by owner in California 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 California?
When selling a home For Sale By Owner in California, the home seller is tasked with all the listing agent’s responsibilities. FSBO sellers in California should consider getting their homes inspected prior to selling them.
» Selling a House in California: Read more about how to sell a house in California.
Who Writes The For Sale By Owner Contract In California?
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.
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 California, a dual agent 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.
2. A Real Estate Attorney
Hiring a real estate attorney can be an option for drafting a California For Sale By Owner 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 between $164 and $422 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 property owners do not go for this option. With a limited-service real estate agent, you will spend more than save as you will handle most of the tasks yourself.
4. The Home Seller
Many property owners are unaware of the starting point for drafting a contract for FSBO California. Many sellers search online for contract templates.
Drafting a California For Sale By Owner contract yourself can be difficult as many states require a realtor to draw up the contract. Title companies and escrow companies provide different FSBO contract California templates.
» Selling a House As Is in California: Read further to know more about selling a house as is in California.
What’s Included in the For Sale By Owner Contract in California?
Selling a house without a realtor in California 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.
» Sell your house in California: 7 things you need to know
|# No||FSBO Contract Inclusions||Description|
|1||Contract Title||Highlights purpose of the FSBO document|
|2||Names of Home Seller & Buyer||Mentions full names of both parties|
|3||Contract Date||Contains the date of execution|
|4||Property Details||Shows FSBO property location, description, etc|
|5||Payment Terms||Explains the terms of payment in full|
|6||Method of Payment||Specifies the mode of payment of both parties|
|7||Contingencies||Timeline and conditions of the event|
|8||Closing Date||Details of the closing date, location, time, and place|
|9||Signature Block||Space at the end to place the names and signatures|
|10||Property Disclosures||Discloses all the material facts|
1. Contract Title
Every document requires a title 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 in California shall mention the date of execution. The contract also specifies further dates by which both owners must proceed with the sale.
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
The For Sale By Owner Contract in California contains the entire amount payable for the real estate property (the amount payable excludes the earnest money deposit). At times, the buyer is expected to make a full payment towards the home’s sale. Otherwise, the buyer may enter into a contract stating the amount for monthly installments for the home’s value.
In essence, a contingency clause allows parties in the FSBO California contract the option to back out of the contract under specific future conditions that must be agreed upon by the buyer and seller. The following are some common contingencies to the California contract For Sale By Owner:
💲 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: The buyer gets your home inspected by a professional home inspector 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 California: 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 California: Read further to know how much is an appraisal in California.
8. Closing Date & Procedures
The home For Sale By Owner California 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 as 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 California: Know How to Sell Your House Fast in California!
9. Signature Block
Leave space at the end of the contract to place the seller’s and buyer’s names and signatures. Make sure to review your state laws to cover all the bases in your FSBO California contract.
10. Property Disclosures
This is also an important part of your California For Sale By Owner Contract. The seller must disclose any issues the property might have that may adversely affect the property’s market value. If you fail to disclose any material defects in your property, chances are that you may face lawsuits in the future. Some states also provide a standardized disclosure form.
» How to Sell Your Own House in California: Read further to know more about how to sell a house by owner in California.
Seller Disclosures in a For Sale By Owner Contract in California
The condition of the property is described in the Real Estate Transfer Disclosure Statement. This statement must be sent by the seller to the buyer prior to the transfer date. California’s law is strict and thorough with its seller disclosure requirements.
Californian home sellers are expected to adopt the specified standard format for the same. Before signing the contract, California homeowners are required to disclose all material information about their property in the disclosure statement.
» Seller’s Mandatory Disclosure Statement California: Understand the seller’s disclosures required in California.
Any of these items must be present for the For Sale By Owner contracts in California to be regarded as legitimate and legally enforceable. A California For Sale By Owner real estate contract must include at least this fundamental information in writing in order to be valid.
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
Frequently Asked Questions
1. Is For Sale By Owner legal in California?
Yes. To sell your house For Sale By Owner in California, be ready to take on all the responsibilities of a real estate agent.
2. What taxes do you pay in California when you sell a house?
California's state transfer tax is $0.55 for every $500 of the property's value. Depending on the location of the property, the county tax may vary.
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