Tuesday, July 8, 2014
It's a good idea for by-owner sellers to assemble this team of pros early on, considering their services may be required at different stages in the five-step FSBO timeline: deciding to sell, preparing a home to sell, marketing, negotiating and closing.
Consider Calling in an Appraiser
In a FSBO seller's initial step, he or she will determine the listing price of their home. Although a by-owner seller who conducts a careful survey of neighboring property values and recent sales of similar homes often can arrive at a good listing price, it's still a good idea to consider hiring an appraiser to offer a professional assessment.
A professional's keen eye could prove to be critical further down the line, because almost one-third of all deals fall through at the last minute, not because a buyer balks at the price, but because the buyer's lender is unwilling to offer a mortgage for that much after the bank's own appraiser weighs in at this near-final stage.
This situation can be avoided by starting off with a realistic listing price.
Hiring an Attorney is Crucial
The most important thing a seller or buyer can do is to hire a good real estate attorney — because as things start moving and paperwork and closing procedures loom on the horizon, many people understandably feel nervous.
According to Eddie Tyner, general manager of ForSaleByOwner.com, most of the anxiety first-time buyers and sellers experience around closing arises because they aren't sure what's coming down the pipeline. "If you have a good attorney on your side, their job is to answer your questions, review the contract and protect your interests," he says.
The attorney in a FSBO transaction has the same responsibilities as when real estate agents are involved, explains Lisa Raimondi, an attorney with Raimondi Law Group Ltd. in Orland Park, Illinois. When representing by-owner sellers, that includes contract review, negotiation of inspection items, ordering and clearing the title and attending the closing, Raimondi says.
"However, in a FSBO transaction, the attorneys will also be called upon to draft the initial offer instead of just reviewing it after it has been accepted by the parties," she adds. "The attorneys are also there to answer all of the questions that sometimes would be answered by (an agent)."
According to Raimondi, one of the most important roles of the attorney in any real estate transaction is to ensure that the parties get to the closing table and are provided with exactly what they had negotiated.
Attorneys' duties differ slightly depending upon whether their client is a FSBO seller or buyer.
"When representing a FSBO seller, your main concerns after getting through contract drafting and review are going to be with drafting and gathering all of the necessary paperwork that the seller is required to provide the day of the closing," Raimondi says. This includes ordering and clearing any title concerns; drafting the deed; and compiling the affidavit of title, bill of sale, surveys and other municipal requirements.
It's slightly different when an attorney represents a buyer. "After reviewing the contract and any related (materials) such as condominium or association documents and dealing with any inspection items, the attorney's main concern becomes making sure the loan process is going smoothly, watching for contingency dates and then attending the closing and going through all of the closing documents with the buyer," Raimondi says.
A FSBO seller or buyer's legal counsel can bring other resources to the table, as well. According to Raimondi, attorneys will typically have had significant dealings with title companies, lenders and inspectors they can recommend. "Typically, the appraisers are hired by the banks, and the parties have little say in who is used unless there is a dispute with the appraisal."
Finding a Mortgage
Just as online services have empowered FSBO sellers and buyers, so has the Web put FSBO buyers in the driver's seat when shopping for mortgages.
Until recently, looking for a mortgage meant tedious telephone calls and a series of in-person visits to financial institutions.
Today, however, just about anybody with a decent credit history and steady income can venture online to a service like LendingTree and have multiple lenders compete to offer them a mortgage.
Title Companies Weed Out Any Potential Problems
Although a seller or buyer's attorney often will be responsible for bringing a title agency aboard, in many cases the FSBO party selects this important professional. In either case, the title company provides absolutely essential services as the deal nears the home stretch.
"We do searches … and make sure there are no problems, no liens," says Michael Haltman, president of Jericho, New York-based Hallmark Abstract Service LLC. Anything out of the ordinary like liens, unresolved legal action and a lack of occupancy certificates that take into account home additions, all are best dealt with before closing, and a title company's search will find these irregularities.
Some of the little things can turn out to be big things — like fences. It's important, Haltman says, to find the original title and its property surveys. "You don't want to go to contract and find out that the fence you thought was yours is your neighbor's," he warns.
Agencies also provide title insurance, which most lenders require. This insurance protects the lender (and a separate policy protects the buyer) from unforeseen problems that don't show up in the title search.
According to Jennifer Ferri of Fort Myers, Florida-based Title Junction LLC, most services are the same for both FSBO sellers and buyers when it comes to title insurance. "They all start the same, as a contract. They all end the same, as a closing with title insurance being issued," Ferri says. "But the middle is unique to individual transaction. It's kind of like a sandwich: two pieces of bread, but always something different on the inside."
Attorney Raimondi sums it up well: "FSBO can be a very beneficial and cost-effective means to buy or sell a house, because there is no (standard) commission involved. However, it is important to make sure that you still assemble a great team — attorney, inspector, lender — who can guide you through the process and make sure that one of the biggest investments that you can make is a successful one."
Her advice: "It is much better to spend a little money up front to ensure a smooth transaction, than to have to come to an attorney later because something was missed that should not have been."
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