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19 min read Jan 11, 2023

How to Create a For Sale by Owner Contract (2023 Updates)

For Sale By Owner Contract

Selling a house without a listing agent can save you up to 6% in agent commissions – That’s thousands of dollars! But while the savings are important, it is also just as critical to ensure your For Sale By Owner contract and paperwork is legally sound.

FSBO home sellers have consistently identified “paperwork” as one of the biggest challenges while selling their homes without an agent. Contracts can be tricky and they are legally binding. You want to make sure there are no errors in your real estate purchase and sale agreement. Not when an asset worth several hundred thousand dollars is at stake!

Key Takeaways

  • For Sale by Owner contract is an agreement between a FSBO seller and buyer for the transfer of property.
  • A well-written FSBO contract is legally enforceable as long as all parties involved consent at contract signing.
  • A home seller, buyer agent, real estate attorney, or a limited-service listing agent can draft this contract.
  • The paperwork required may vary from one state to another. It is best to check your local regulations before drafting the contract.
  • Some of the best FSBO websites will connect you with a state licensed broker for help with contracts.

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. 

Many sellers go down this path because they want to save money on agent commissions. The average real estate agent commission is around 2.5% to 3% and sellers have to pay for both the listing agent and buyer agent. This can amount to 5% to 6% of the total sale price.

For example, if you sell a house for $500,000, you may end up paying $25,000 to $30,000 in real estate agent commission alone.

This is one of the primary reasons why homeowners choose FSBO and use a Flat Fee MLS service to sell their homes.

Selling by owner makes sense in the current slowing real estate housing market. Around 77% of FSBO homes sell in 2 weeks!

» How to Sell a House by Owner: Check out our step-by-step guide on how to sell a house without an agent.

What is a For Sale By Owner Contract?

FSBO sellers need to prepare a contract for the transaction and that’s called For Sale By Owner Contract.

When you sell a house, you need to prepare a sales contract. When both buyer and seller sign this agreement, the property officially changes hands.

Real estate agents can help you with this process. The agent creates the real estate contract and ensures all terms are outlined carefully.

But what if you want to sell without an agent? In that case, you need to write a contract yourself and this is called the For Sale By Owner contract. Yes, it is possible and legally valid, so it is important to be careful while drafting it.

» Selling a House: Check the 7 steps to selling a house in America.

Who Draws Up Contract in For Sale By Owner?

There are a few options available to you when it comes to drafting real estate contracts. Let’s look at who draws up contract in for sale by owner if you can’t write them:

  • Buyer’s Agent – If there is a buyer’s agent involved, more likely than not, they will be submitting the offer to purchase contract to you, the seller. If the buyer’s agent doesn’t automatically do it, you can ask them to draft a sales contract. While not usually necessary, you can also ask them to represent you, and if they agree, they become a ‘dual agent’ as they work for both the buyer and seller.
  • Home Seller – A home seller can create an FSBO contract at home, on a piece of paper, and still ensure it is legally binding. However, it can be a little challenging and confusing. This option may not be available in some states as they require a real estate agent or an attorney to draft contracts.
  • Real Estate AttorneyReal estate attorneys 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. An attorney is usually more affordable than a full-service real estate agent. They charge around $150 to $300 per hour.
  • Limited-Service Listing Agent – A limited-service agent, as the name suggests, offers a limited service at an affordable price. They will handle things like the FSBO sales contract while you do the bulk of the work. You could also engage a low fee realtor to get professional services at an affordable rate.

If you plan to draft the FSBO contract yourself, consider looking at a real estate contract template online just to get an idea of what to do.

💡 Did You Know: With Houzeo’s Platinum plan, a state licensed real estate broker will assist you with your FSBO contract!

What is Included in Real Estate Contract For Sale by Owner?

Understanding the For Sale By Owner real estate contract structure can help you create a strong FSBO contract. Every agreement should typically include the following:

1. Contract Title

The contract title specifies the purpose of the agreement. It doesn’t need to be fancy, just straightforward and clear. You may use ‘Real Estate Sales Contract’ as the title as it conveys the purpose of the document clearly.

2. Names of Home Seller and Buyer

The document should include the full legal names of the buyer and seller. It is best to use the names used in official identification documents like driver’s licenses, social security, or passport. 

For example, if the buyer is Jason Edward Thomas and the seller is Patricia Clark on their driver’s licenses, both of these names should be used as is in the FSBO purchase agreement.

3. Contract Date

Your FSBO agreement must mention important dates like the date of execution, closing, transfer of payment, etc. Some of the dates mentioned include:

  • Deadline to pay earnest money, also known as the Alternative Earnest Money deadline.
  • Deadline to Record Title Deed, providing documents like plats, covenents, declarations, and more.
  • Association Documents deadline, which means you need to file all your association documents by a specific date.
  • All Seller Disclosure documents must also be handed by a specific date.
  • Sellers must complete a new loan application within a specific deadline as well.
  • New ILC or New Survey is also handled by the title company and must be completed within a specified deadline.
  • Home Appraisal deadlines include appraisal timeline, appraisal objection deadline, and appraisal resolution deadline as well.
  • Homeowners can object to an inspection report, which happen within the deadline mentioned on the FSBO contract.
  • Closing Date is usually mentioned on the contract. All closing activities and payments must be complete before this date.
  • Possession date and possession time must be clearly mentioned in the contract.

These are some of the deadlines and dates mentioned in the FSBO sales contract. In some contracts, these deadlines are enforced and there’s a penalty if parties pass the deadline without taking action.

4. Property Details

All of the property details should be added to the contract of sale without any errors or omissions. This is the most important aspect of your contract as it identifies the property on sale. Even a single misplaced letter can be disastrous as you might end up facing a title challenge down the line.

For example, if you write ‘320, Elliot Drive’ for a property named ‘320, Elliott Drive,’ you might end up attempting to sell a property that isn’t yours just because there’s an additional ‘T’ missing.

Make sure the property address is correct, as mentioned in the title deed. Double-check the house numbers, names, street names, and other details carefully, before finalizing the document. The legal description of a property will include:

  • Accurate Location
  • Shape and Size of the Lot
  • Boundaries of the Lot
  • Government Survey or Land Survey
  • Townships

The best way to find an accurate legal description of a property is to look at its recent deeds in the public record, including county records, court records, and title deed records.

5. Payment Terms

Payment terms of all real estate transactions need to be very clear in for sale by owner contracts. Explicitly highlight all of the price expectations, who pays closing costs, and related expenses. The payment terms in the contract usually include:

  • The Price of the Property
  • Length of Payment Period
  • Downpayment
  • Earnest Money Deposit
  • Mortgage Plan
  • Property Taxes
  • HOA Dues and Fees

The buyer and seller must agree to the payment terms and be completely transparent about them. In most cases, a real estate transaction won’t go through before the buyer can provide some sort of proof of payment.

6. Method of Payment

Does the buyer have cash offers? Do they have a mortgage? What kind of mortgage? All of these details need to be disclosed in the FSBO contracts, before you can proceed with the transaction. In most real estate transactions, the money is paid to the seller in full. The mortgage lender will provide the agreed-upon amount and the buyer’s downpayment will make up the rest. 

In some cases, the seller and buyer may come up with an agreement to pay in monthly installments. The method of payment should be clearly mentioned in the contract.

7. Contingencies

Once the buyer and seller sign the For Sale By Owner home contract, they are bound to its terms. If any party backs out of the agreement, they may have to deal with a lawsuit. That’s why it is important to include some contingencies in your contract.

Contingencies allow parties to safely back out of the agreement, especially if certain important conditions aren’t met. The common contingencies in an FSBO contract include:

Financing Contingency

The financial contingency comes into play if the buyer isn’t able to secure a loan by the date specified in the purchase agreement. This contingency gives sellers the right to back out of the agreement without repercussions, ensuring they don’t have to wait until the buyer can secure finances.

If the buyer fails to secure a loan, they need to inform the seller within the stipulated time as well. Failure to do so can result in legal consequences.

Inspection Contingency

Most buyers will get a home inspection done before they commit to a purchase. If the home inspector reports any serious problems, the buyer may request repairs, reduce the offered purchase price, or back out of the deal.

This usually applies to new issues discovered during the inspection and not old issues already discussed in negotiations. It may not apply if you are selling a house as is.

Home Sale Contingency

Many buyers sell their old homes and use that money to purchase a new one instead of getting a new mortgage. If the buyer isn’t able to sell their old home within a specified time, they can back out of the agreement without any consequences. All they need to do is inform the seller they weren’t able to sell their old property.

Selling a home isn’t an easy process because it can be unpredictable. The home sale contingency protects the buyer and sets a specific time limit to the agreement.

Appraisal Contingency

Mortgage lenders will request a home appraisal before they approve a loan. An appraisal contingency protects a buyer if the property has a lower-than-expected appraised value. A full home appraisal process determines the value of a property, which can have an impact on the home sale process.

The appraisal contingency also helps a seller if the property is appraised and is more valuable than the buyer’s offer price. They can renegotiate the price if necessary.

8. Closing Dates

Closing dates need to be mentioned on the FSBO house contract. That’s the deadline buyers and sellers set to close the deal and complete the property handover. Everything must be resolved before the closing date.

Leave some room for unexpected events while determining the closing date.

9. Signature Block

Every house sale contract requires official signatures to be valid, since without signs, they will not hold up in court. You need to leave enough room at the bottom of every page of your FSBO offer contract for the signatures. Buyers, sellers, and witnesses need to sign the document with their official signatures for it to be legally binding.

10. Property Disclosures

No property is perfect but sellers need to be transparent regarding all known flaws. Seller disclosure is an important part of real estate transactions. These disclosures should be included in your home for sale by owner contract.

Most states require sellers to disclose all issues and have a standard disclosure form (in checklist format) available. If you don’t provide accurate information, you may face legal action later.

» Seller’s Disclosure: What home sellers need to disclose to finish the deal.

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.

1.  Legal Purpose

All real estate contracts must have a sound legal purpose and should be something that can be admissible in court. If the contract goes against the legal purpose, it won’t be valid. For example, if you attempt to sell a property you don’t own, you will be violating the law.

Sometimes, the issue can be as simple as you trying to sell a house but there is an issue with the lot’s boundaries. Getting your paperwork reviewed by a real estate attorney can help you avoid these problems.

2. Competence

Competence is a very important factor in legal transactions. Both parties should be of sound mind and able to make informed decisions. They can’t sign when they’re under the influence of mind-altering substances or if they’re being coerced into signing.

If the party can’t be considered competent, the FSBO real estate sales contract won’t be valid. Competency also depends on age and state of mental health. An elderly individual dealing with dementia may not be considered competent. Similarly, a child or teenager isn’t considered competent in legal terms either.

3. Consideration

There should be an equal exchange of value between the buyer and seller. In a real estate transaction, the buyer pays money that’s equal to the value of the home and the seller is offering their home in exchange.

If there’s no reasonable exchange of value between the two parties, the contract may come under legal scrutiny.

4. Agreement

Both parties must come to an agreement with each other. The buyer will offer a purchase price and the seller will offer a house with all disclosures and in its current state. The real estate contracts for sale by owner are only valid if the offer is accepted on both sides.

5. Bona Fides

Bona fides ensures both parties have read through all the terms mentioned in the sale by owner contract and understand them. They agree to the same terms with no hidden or undisclosed clauses in good faith.

6. Mutual Consent

The contract is only valid if it is signed with mutual, informed consent. If one party deceives the other, the contract isn’t considered valid. If one party threatens or coerces the other, the contract is invalid.

The house sale by owner contract is only legally binding and enforceable if it meets the conditions mentioned above.

What if You Are Unable to Write a FSBO Contract?

Does all of this sound a bit complicated? Well, you’re not alone! Legalese is never easy, especially if you aren’t an attorney. Fortunately, you can avoid learning how to write an FSBO contract by exploring alternatives. You just need to pick who draws up contract in for sale by owner.

1. Dual Agent

A dual agent is the buyer’s agent who agrees to draft a real estate purchase agreement for you. Sellers will need to pay the buyer agent’s commission in any case so there’s no reason why you can’t take advantage of this. The agent may offer the service for free or charge a small amount for it.

Usually, this amount is lower than a full listing agent’s commission.

You could also hire discount real estate brokers to save some money.

2. Attorney

Hiring a real estate attorney is also a great way to ensure all of your paperwork is in order. They can look at your For Sale By Owner contract template and make the necessary changes if needed.

Attorney fees are typically between $150 to $300, which is lower than a full-time agent’s commission as well.

3. Flat Fee MLS – Houzeo

Or you could make things easier and cheaper by choosing a Flat-Fee MLS service like Houzeo. There’s a real estate For Sale By Owner contract template already available. With just a small upgrade, you can have a full contract within an hour.

    🎯 Houzeo Helps You Create Your FSBO Contract Effortlessly


    Houzeo is the best alternative for you to complete the FSBO paperwork, from listing on the MLS, to seller disclosures, and closing.

      💲 List your property with Houzeo’s Freemium Plan

      💲 Purchase the “Contract to Close Upgrade Package”. A Licensed broker will review your paperwork to make sure it is appropriate.

      In addition, you should also have the settlement agent review the paperwork so you cover all bases. Houzeo takes FSBO to the next level with its innovative technology.

    » More: Start your FREE listing NOW!

State-Wise For Sale By Owner Paperwork

StateFSBO Paperwork
NationwideLead-based paint disclosure | 1099-S tax form
AlabamaAlabama For Sale By Owner Contract | Alabama Seller Disclosure
AlaskaAlaska For Sale By Owner Contract | Purchase Agreement | Alaska Seller Disclosure | Exemption
ArizonaArizona For Sale By Owner Contract | Purchase Agreement | Arizona Seller Disclosure
ArkansasArkansas For Sale By Owner Contract | Purchase Agreement | Seller Disclosure
CaliforniaCalifornia For Sale By Owner Contract | California Seller Disclosure | California Real Estate Transfer Disclosure Statement
ColoradoColorado For Sale By Owner Contract | Purchase Agreement | Colorado Seller Disclosure
ConnecticutConnecticut For Sale By Owner Contract | Purchase Agreement | Seller Disclosures
DelawareDelaware For Sale By Owner Contract | Purchase Agreement | Seller Disclosures
District of ColumbiaDC For Sale By Owner Contract | Purchase Agreement | Seller Disclosures
FloridaFlorida For Sale By Owner Contract | Purchase Agreement | Florida Seller Disclosure
GeorgiaGeorgia For Sale By Owner Contract | Purchase Agreement
HawaiiHawaii For Sale By Owner Contract | Purchase Agreement | Seller Disclosures
IdahoIdaho For Sale By Owner Contract | Purchase Agreement | Idaho Seller Disclosure
IllinoisIllinois For Sale By Owner Contract | Purchase Agreement | Illinois Seller Disclosures | Radon Hazard Disclosure | Radon Testing Guidelines
IndianaIndiana For Sale By Owner Contract | Purchase Agreement | Indiana Seller Disclosure
IowaIowa For Sale By Owner Contract | Purchase Agreement | Seller Disclosures | Radon Fact Sheet
KansasKansas For Sale By Owner Contract | Purchase Agreement | Seller Disclosures
KentuckyKentucky For Sale By Owner Contract | Purchase Agreement | Kentucky Seller Disclosure
LouisianaLouisiana For Sale By Owner Contract | Purchase Agreement | Seller Disclosures
MaineMaine For Sale By Owner Contract | Purchase Agreement | Maine Seller Disclosure
MarylandMaryland For Sale By Owner Contract | Purchase Agreement | Seller Disclosures
MassachuesettsMassachusetts For Sale By Owner Contract | Purchase Agreement | Massachusetts Seller Disclosure | Septic tank Disclosure
MichiganMichigan For Sale By Owner Contract | Purchase Agreement | Michigan Seller Disclosures
MinnesotaMinnesota For Sale By Owner Contract | Purchase Agreement | Minnesota Seller Disclosure
MississippiMississippi For Sale By Owner Contract | Purchase Agreement | Seller Disclosures
MissouriMissouri For Sale By Owner Contract | Purchase Agreement | Missouri Seller Disclosure
MontanaMontana For Sale By Owner Contract | Purchase Agreement | Montana Seller Disclosure
NebraskaNebraska For Sale By Owner Contract | Purchase Agreement | Seller Disclosures
NevadaNevada For Sale By Owner Contract | Purchase Agreement | Seller Disclosures
New HampshireNew Hampshire For Sale By Owner Contract | Purchase Agreement | Seller Disclosures
New JerseyNew Jersey For Sale By Owner Contract | Purchase Agreement | New Jersey Seller Disclosure
New MexicoNew Mexico For Sale By Owner Contract | Purchase Agreement | Seller Disclosures
New YorkNew York State For Sale By Owner Contract | Purchase Agreement | Seller Disclosures
North CarolinaNorth Carolina For Sale By Owner Contract | Purchase Agreement | North Carolina Seller Disclosure
North DakotaNorth Dakota For Sale By Owner Contract | Purchase Agreement | North Dakota Seller Disclosure
OhioOhio For Sale By Owner Contract | Purchase Agreement | Seller Disclosures
OklahomaOklahoma For Sale By Owner Contract | Seller Disclosures | Seller Disclosure Exemption | Seller Disclosure (No known defects)
OregonOregon For Sale By Owner Contract | Purchase Agreement | Seller Disclosures
PennsylvaniaPennsylvania For Sale By Owner Contract | Purchase Agreement | Pennsylvania Seller Disclosures
Rhode IslandRhode island For Sale By Owner Contract | Purchase Agreement | Seller Disclosures
South CarolinaSouth Carolina For Sale By Owner Contract | Purchase Agreement | South Carolina Seller Disclosure
South DakotaSouth Dakota For Sale By Owner Contract | Purchase Agreement | Seller Disclosures
TennesseeTennessee For Sale By Owner Contract | Purchase Agreement | Tennessee Seller Disclosure
TexasTexas For Sale By Owner Contract | Texas Seller Disclosure
UtahUtah For Sale By Owner Contract | Purchase Agreement | Seller Disclosures
VermontVermont For Sale By Owner Contract | Purchase Agreement | Seller Disclosures
VirginiaVirginia For Sale By Owner Contract | Purchase Agreement | Virginia Seller Disclosure
WashingtonWashington For Sale By Owner Contract | Purchase Agreement | Washington Seller Disclosure
West VirginiaWest Virginia For Sale By Owner Contract | Purchase Agreement | Seller Disclosures
WisconsinWisconsin For Sale By Owner Contract | Purchase Agreement | Wisconsin Seller Disclosure
WyomingWyoming For Sale By Owner Contract | Purchase Agreement | Wyoming Seller Disclosure

If you can’t find free resources, there are paid options like USLegal. Many legal forms, such as tax records, property surveys, and deeds, are usually found through local or state government offices, such as your tax assessor’s office or the department of revenue.

» FSBO Paperwork: Understand the paperwork required for Selling a House Without a Realtor

Interesting Facts about For Sale By Owner Contract

Phew! That was a bit of an info dump! But when it comes to a For Sale By Owner contract, the more you know, the better! Legal documents can be tricky and mistakes can lead to problems down the line. 

Nevertheless, an FSBO contract isn’t as complicated as it appears. Once you understand what is included in it, you can even write it out on a sheet of paper at home and make it legally sound.

Here’s a sample handwritten FSBO Purchase Agreement:

For Sale By Owner Contract

Conclusion

For sale by owner contracts are legally enforceable and valid after the consenting parties sign them. You need to make sure that details like contract title, party names, property descriptions, and other important elements are up-to-date. If necessary, get the contract reviewed by a lawyer.

Checkout the Best For Sale By Owner Websites

We have reviewed & ranked the best For Sale By Owner websites, both paid and free, for you.

Reviews: America’s Best FSBO Websites

We’ve reviewed the best paid and free For Sale By Owner Websites in 2022

Frequently Asked Questions

1. How Do I Make a FSBO Contract Template?

Making a real estate sales agreement is very straightforward if you understand what’s included in it. Make sure you add all important information like legal property description, buyer and seller names, purchase price, payment terms, and relevant details to create a valid legal document.

2. Who draws up contract in for sale by owner?

In most cases, it is the seller that writes the FSBO contract but the buyer agent or a real estate attorney can write it too.

3. At what point is for sale by owner house contract binding?

The contract becomes legally binding when both parties agree to the terms and sign it with mutual informed consent.

4. Is it difficult to create for sale buy owner contracts?

Creating a free for sale by owner contract form can be challenging, especially if you have no experience with it. However, things are easier if you choose a platform like Houzeo. With a small upgrade, you can get a contract ready in under 60 minutes.

5. 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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