Courtesy of Realtor.com
The seller’s agent is typically the person who draws up a real estate purchase agreement. But what happens if the home is for sale by owner (or FSBO) and the owner isn’t represented by a real estate agent at all?
A FSBO sale can occur in a seller’s market or when sellers want to maximize their profits on a sale by not having to pay a commission to a real estate agent.
So if the buyers want to make a written offer on property, who will be tasked with drawing up the purchase agreement, or the contract outlining the terms and conditions of the sale?
Some buyers may wonder what their next step will be without an agent to guide them through writing a contract and closing the sale. It’s not unheard of for buyers to move on, because they are afraid to sign a contract without the help of an agent.
Experts say the solution is to turn to the buyer’s own representation for writing a contract.
“Typically, if the seller does not have a Realtor®, the buyer’s agent ends up doing most of the work,” explains Ryan Hardy, a real estate broker with Gold Coast Realty in Chicago.
Who Drafts The Purchase Agreement For A FSBO?
As a real estate buyer, a purchase contract is one of the first steps toward closing the sale.
“In layman’s terms, a purchase contract is simply the written contract between the buyer and seller outlining the terms of the sale,” Hardy explains.
Most real estate purchase contracts include details such as the purchase price, closing date, and any contingencies the sale hinges on—such as the real estate passing inspection or appraising at a value that the buyer’s lender agrees is high enough to warrant a mortgage.
Real estate purchase contracts generally also contain financing contingencies, meaning you get your earnest money deposit back if you can’t get a mortgage. This makes sense, because most buyers can’t fulfill a contract to buy residential property if they can’t get financing.
Buyers can have real estate agreements drawn up by a real estate attorney or agent. A title company or Realtor can help the buyer find someone to write a contract if necessary.
If the seller doesn’t have an agent lined up to draft the purchase contract, the buyer’s own real estate agent can take care of the transaction paperwork as a transactional agent, also known as a dual agent, says Joanne Bernardini, a Realtor with Coldwell Banker–Casa Bella Realtors in Linwood, NJ.
You may also need help writing up a contract if someone is selling property on a land contract. A land contract is used when the owner provides financing when going to sell, so that you do not have to get a mortgage elsewhere to purchase the property.
The contract stipulates the amount of the loan, the interest rate, and what happens if you fall behind on property taxes or payments. You and the seller can negotiate the terms of the agreement, including the interest rate on the loan.
Keep in mind that certain states do not allow dual agency in real estate transactions, and that some states see it as an ethical dilemma.
If you as the buyer decide to use a transactional agent for the contract, think of them as “one person who neither represents the seller nor the buyer but facilitates the documents necessary for the sale,” says Joyce Mitchell of Mitchell & Associates, in Bigfork, MT. If you have any doubts about the contract, consult your own attorney.
Who Pays The Fees To Draw Up An Agreement To Purchase A FSBO?
The cost of drawing up a purchase contract is typically included in the real estate seller’s commission fee, paid at closing from escrow as part of closing costs.
However, if an owner doesn’t have a real estate agent because it’s a FSBO, and the buyer’s agent is doing the work of preparing the transaction, that doesn’t mean the buyer needs to foot the bill.
The buyer just needs to be prepared to ask the seller to pay the portion of the commission for writing the contract, says Kaera Mims, a Realtor with Liz Moore and Associates in Newport News, VA.
“If you have a real estate agent in mind, I would discuss the scenario with them, and they can contact the seller on your behalf to schedule the showing and ask about compensation,” Mims says. “I find that some sellers will pay the agent’s commission if I bring them a ready and willing buyer. We just have to ask.”