If you are selling a home without a realtor, you may need a For Sale By owner Contract. However, many FSBO sellers are not aware of this term itself.
Usually, the real estate agent is responsible for writing the purchase agreement. But in case you forego using an agent, you can create your own sales contract.
Contracts can be tricky and they are legally binding. Your purchase and sale agreement should be free of errors. Especially when hundreds of thousands of dollars are at stake!
- #FSBO Home Sales: Home sales by FSBOs accounted for 10% of all sales.
- FSBO Contract Meaning: For Sale by Owner contract is an agreement of sale between an FSBO seller and buyer for the transfer of property.
- Legally Enforceable: FSBO contracts are legally enforceable provided all parties consent to signing the contract.
- Statewise Legal Paperwork: The paperwork varies statewide. It is best to check your local regulations before drafting the contract.
- Who Draws Up Contract in For Sale By Owner: A home seller, buyer agent, real estate attorney, or limited-service listing agent can draft this contract.
What is a For Sale By Owner Contract?
An FSBO contract is a legally binding document used to buy and sell a house. Usually, a real estate agent creates the contract and ensures all terms are outlined carefully.
FSBO Contract includes contract title, contract date, home buyer, and home seller’s name.
👉Listing on MLS by owner in Illinois: Get all the information related to listing on MLS by owner in Illinois.
What is For Sale By Owner?
FSBO or For Sale By Owner is the process of selling a property without the assistance of a listing agent.
Often sellers take this route to save on agent commissions and may use a Flat Fee MLS service. With Illinois Flat Fee MLS companies, home sellers can save thousands by not paying the 6% real estate agent commission.
Who Draws Up FSBO Contract in Illinois?
The seller’s agent is responsible for drafting the FSBO contract. However, you can hire an attorney or buyer agent.
There are a few other options available if you can’t write them:
- Hire a Real Estate Attorney – They have the knowledge and ability to draft a real estate contract. In some states, you may need to hire one to ensure the transaction is legally binding. They charge approximately $150 to $300 per hour.
- Hire a Limited-Service Listing Agent – A limited-service agent offers fewer realty services at an affordable price. They will only handle things like the FSBO sales contract while you do most of the sales yourself.
- Ask your Buyer’s Agent – If the home seller doesn’t have an agent, the buyer’s agent can step in to help. This case where the buyer’s agent is also working as a transactional agent is often denoted as a ‘dual agent’.
If you plan to draft the FSBO contract yourself, consider looking at the real estate FSBO contract template online.
What’s Included in Your Home For Sale by Owner Contract In Illinois?
To draw an FSBO contract, you need to include the following information:
- Title of the Contract: The Title of the contract defines the purpose of the document. You may use a “Real Estate Sale Contract” or something similar.
- Name of Home Seller and Buyer: The document should include the legal names of both the buyer and the seller.
- Date of the Contract: When you sign or close the sale, this date is important in case of any future dispute.
- Property Details: House number, property name, and street name, the agreement should be inlined to the tax records, especially the location, shape, size, and boundaries of the lot.
- Payment Terms: Payment terms are critical for any real estate transactions. Explicitly highlight all of the price expectations, who pays closing costs, and related expenses.
- Method of Payment: The For Sale By Owner contract defines the buyer’s method of payment. Is the buyer offering a cash offer? or are they applying for the mortgage? The method of payment should be discussed and agreed upon.
- Contingency Clauses: Contingencies are contractual rights allowing parties to back out of the agreement safely, without any penalty. Common contingencies in an FSBO contract include:
- Financing Contingency: This gives buyers time to secure financing and the option of getting their earnest money back.
- Inspection Contingency: The buyer has the right to back out of the deal if the home inspector reports any serious problems.
- Home Sale Contingency: If the buyer is unable to sell their current home within the specified timeframe, they can withdraw their offer.
- Appraisal Contingency: The buyer can back out if the home’s appraisal value is less than the purchase price.
- Closing Procedures: Your FSBO contract should include details about the closing procedure such as the closing date, time, and location. In the event of any change in information, the contract must be amended and both parties must sign it.
- Signature Block: You have to leave some space at the bottom of each page for all parties i.e., the buyer, seller, and witness to sign the contract. In some states, initials are required on certain sections of the contract. Check your state requirements and ensure they are met.
- Property Disclosures: Legal disclosures are an essential part of your purchase agreement. It is the seller’s responsibility to disclose all information required by law.
Here’s a sample handwritten FSBO Purchase Agreement:
Is For Sale By Owner Real Estate Contract Enforceable?
Yes, they are enforceable if both parties agree and sign the document. However, a contract for FSBO will only carry legal weight if you take steps to ensure it.
- Legal Purpose: Your proposed contract should be something that is admissible in court. You can hire a lawyer who can review your contract for legal validity to ensure everything holds up in court.
- Competence: Both the signing parties should be able to understand the terms of the contract. Neither party can be a minor, under the influence of alcohol or drugs, and mentally ill.
- Consideration: There has to be a reasonable exchange of value between the parties.
- Agreement: The FSBO contract should contain an offer from the buyer and an acceptance from the seller.
- Bona Fides: Bona fides (in good faith) means that both parties should agree to the terms of the created binding agreement.
- Mutual Consent: The contract is only valid if it is signed with informed consent. If one party threatens or coerces the other, the contract is invalid.
What if You Are Unable to Write an FSBO Contract?
Well, Don’t Worry!
There are many other alternatives to drafting your For Sale by Owner contract.
- Dual Agent: A dual agent is an individual who acts as both buyer’s agent and a seller’s agent in a real estate transaction. They may offer free service or charge a small amount for it.
- Attorney: Hiring a real estate attorney is also a great way to ensure all of your paperwork is in order. They can review your contract template and make the necessary changes if needed.
- Flat Fee MLS – Houzeo: Alternatively, you can use a Flat-Fee MLS service like Houzeo and list without a realtor. There’s already a template available for the real Estate For Sale By Owner contracts that you can start using within minutes.
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An FSBO contract is legally enforceable and valid only after the consenting parties sign them. The details including contract title and party names must be up-to-date.
If necessary, get the contract reviewed by a lawyer. Keep in mind that “handshake transactions” without any of this is invalid.
Checkout the Best For Sale By Owner Websites
We have reviewed & ranked the best For Sale By Owner websites in Illinois, both paid and free, for you.
What is Houzeo?
An overview of what the platform is all about
» NEED MORE CLARITY? Read these exclusive Houzeo reviews and learn why it is one of the best FSBO sites in America.
Frequently Asked Questions
1. Who draws up the contract in FSBO Illinois?
The seller draws up the For Sale By Owner contract in Illinois.
2. How long does a seller have to back out of a FSBO contract in Illinois?
Illinois law does not give sellers a statutory right to cancel a contract for any kind of reason. A seller may only cancel a contract under a very restricted set of circumstances, so be careful to seek legal advice from a professional.
3. How does a for sale by owner contract work?
A FSBO contract works when all parties involved sign the document. You need to make sure that all details about the property and transaction is included in the contract for it to be legally valid.
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