The Liabilites of Selling Real Estate By Yourself
Selling a home by yourself is doable, but risky. Before jumping in and getting a ton of books entitled “Sell Your Home By Yourself!” or “Sell Your Home in 30 Days!” consider reading up on the liabilities and your responsibilities as a home seller. Then try to figure out if you really have the risk tolerance, time and energy to devote into this process.
At first glance, the above paragraph may seem like a preamble to a fear based marketing ploy that will get you to list your home with a Realtor or Broker. It’s not. I’m not going to try to dissuade you through this article or any others. That’s not my goal. So please read on.
Liability #1: Disclosure
This category of liabilities is at the top of the list and the most important. 90% of real estate lawsuits happen because of a failure by the seller to disclose facts about the home that they didn’t consider very important (or they simply didn’t want to) but led to major problems down the road.
Here’s an example. A couple based in Northern California that I was working with sold their former home as a for sale by owner. During their tenancy there, they added a small den as an extension to the home. To save money they had hired some local workers and all the work was done without a permit or signed off by a city inspector. When the new recently owners went to refinance their property, the approval on the loan called for a review appraisal called for a review (the tight money market has stringent guidelines about value). The new appraiser correctly deemed that the new den wasn’t part of the preliminary report and shaved $50K off of the value of the home. The new owners couldn’t get anyone to refinance them and filed a lawsuit against the original owners for failure to disclose in a lawsuit. 90 days later, and after considerable stress and expense of court and legal fees, the case is still being decided upon.
Moral of the story: don’t get caught in the failure to disclosure trap. Go to this website and read it, re-read it and re-read it again to make sure that you’re disclosing everything about your home:
State of California Disclosures
Liability #2: Contracts
Type in the words CAR Forms in Google and the very first link that comes up should be this:
California Association of Realtors Forms
These are the standard contracts that are sold through the California Association of Realtors for buying, selling, leasing or renting real property. California Association of Realtors, or CAR for short, sells these to licensed brokers and Realtors for conducting real estate transactions. Brokers, Realtors and licensed agents spend months getting to know the ins and outs of these forms, what the pitfalls are, what the liabilities and responsibilities are, and how to advise homeowners of their rights in a real estate transaction. These forms are not available to the general public and therefore a slew of websites have popped up providing similar “instant” contracts that “for sale by owners” can take advantage of and use. Since I do not know of the effectiveness of these contracts, I cannot endorse them here and give you a link as to where you can get them. However, type in the words “for sale by owner” on google and you’ll see a ton of resources.
Please be careful of these contracts and take them to an attorney before you or anyone else signs them. I GREATLY ENCOURAGE THIS STEP. Please remember that you’re creating a BINDING bilateral contract for the sale of a sizeable asset. You don’t want to sign on to anything that you don’t understand or worse yet have your buyer sign something that obligates you to do more than you should. What could be worse than creating a fully enforceable contract that gives your buyer permission to get a full refund of his or her earnest money deposit if they decide to bail after they’ve lifted all their contingencies and done all the inspections? That scenario is farily common and wastes a HUGE amount of time.
Liability #3: Stress
I know this is a moot point for some but I want to comment on it anyways. I read Herb Cohen’s Negotiate This (A great book and you can get it off of my Recommended Books List). He says that the first rule in effective negotiation is to emotionally take yourself out of the situation. He goes on to say that he’s successfully negotiated out of complex big business and government disputes and failed miserably at negotiating bed times with his 7 year old. What I took out of this was that the more someone is emotionally involved with negotiating, the more they tend to deviate off of logic and reason.
What does all that have to do with stress? Selling your own home by yourself is emotionally taxing and that creates stress. People come through check out your home and put a price tag on where you live. Plus, 9 times of 10 a real estate transaction is going to be based on “wants” especially in buyer’s markets. The wants will come in way of purchase contracts requesting upgrades, cleaning, fixing things, etc with a price tag attached to each. Doing all this by yourself is a burden especially considering that acting as an island alone, you don’t know what the market standard is.
For example, if a buyer wants granite counter tops to be installed your kitchen, is it fair for them to request a $10K credit? The answer — it depends on the market. If that’s the market standard and you don’t have it, then the answer is potentially (I’d negotiate a smaller amount though and push on them to lift their contingencies in exchange). For someone new into the field, these kinds of issues do create stress and act as an overall liability.
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