I very recently posted my home on forsalebyowner.com just to gauge what sort of response I would get… well I immediately started getting emails and people who wanted to see the house (before I even finished painting!). Now people are ready to make offers and I’m not sure how to proceed. I didn’t expect things to move this fast. So my questions is this: How does an offer work? is this the same as putting the house under contract? can multiple people make official offers? would this cause resentment if someone made an offer first and I tell them I want to give a few others a chance to make an offer? finally, what does making an official offer generally entail? is verbal okay or there some sort of form? Thanks so much for any and all advice!
Talk to a lawyer in your state. Verbal is not okay. Offer + acceptance of terms = contract. The offer (to sell) could be made by you, so be careful. State laws vary on such things as disclosures that must be made, transfer taxes etc, so that’s all I can say at this point.
Disclaimers. IIAL, but not your lawyer and you are not my client. The above is just general information, not legal advice. See a lawyer in your state for that.
How does an offer work? Someone gives you a price they’re willing to pay. It’ll also show how much they can put down, wanted possesion date and any chattels (washer, pool table, curtains, etc) wanted and conditions (IE - Conditional to passing home inspection)
Under “contract?” Thats a term I haven’t heard of.
Multiple offers? Absolutely! Thats the best case as it could lead to a bidding way and the only way is up. However, once you accept an offer thats pretty much it, but people can still make offers under a conditional sale incase the conditions fall through.
What does it entail? See my first paragraph. Thats the basics of it.
Verbal OK? Well, maybe for a few hours but insist on getting a contract written out. If you can’t get any pre-made ones, get it written up by a lawyer.
Oh yeah, GET A LAWYER. They’re full of advice and you’re going to need one anyhow to do the property transfers and such.
Stupid Question: Didn’t you go through this when you bought the house or did you inherit it?
Note: Laws vary from state/state, country/country, and I live in Canada. Another reason to GET A LAWYER!
IAAL. I have no idea what IIAL means.
I have no idea what IIAL, means either, or IANAL for that matter. But to answer your question I did not inherit this house I bought it during the construction phase. There were 100 homes built and a mad frenzy to buy…we were ushered in like cattle, told how much we would pay, signed a pile of paperwork, signed the checks…waited…repeat process at closing. So that was my experience…you can say I’m somewhat ignorant
If I were you I would read EVERYTHING at ForSaleByOwner.Com.
If you use dialup a tool you could use is called a Spider or Web Site Mirroring Program. You can find some here or by searching here. I like this one. These programs will mirror a site on your hard drive so you can peruse at your leisure without having to wait for the pages to load. (Have a few megs of space available.)
Then I would Google search for more information. Use your own search criteria.
I would also try to contact people who had already sold their home without listing with a real estate agent.
Then armed with this information I would know if I should contact a broker or a lawyer or not.
I am a real commercial real estate agent (in MD) and one of the reasons the residential agent’s contract packets are 4X thicker than mine, even though my deals are much larger on average, is the legal and state paperwork and related addendums dealing with the specific representations made in the contract in order to protect both parties.
You would be wise to get a lawyer specializing in real estate. The specific wording of a real estate contract is very critical, especially if difficulties emerge during the due diligence period.
Re your questions RE laws vary somewhat state to state so this information below is represented as typical for MD only, but from what I have seen is somewhat generic to the process in most states.
How does an offer work? -
**They (the buyers) make an offer (typically with a contract if they want to be taken seriously) and you accept or reject the offer, or accept it contingent on some modification of the terms. If the offer is made via a written contract and it is agreeable, you will sign it as is to accept it, or you can reject it, or accept it with written modifications you place in the contract they have to accept and initial for the contract to be ratified and valid. **
Is this the same as putting the house under contract?
Once the contract is ratified (ie signed and initialed where necessary by both parties) and all necessary signatures and initals are affixed the property is “under contract”. Often the contract calls for a deposit to be tendered and held (usually by an attorney, title company or RE Agency) as part of the deal
Can multiple people make official offers?
Yes of course
Would this cause resentment if someone made an offer first and I tell them I want to give a few others a chance to make an offer?
It’s a judgement call. You can piss people off and lose deals this way if they get the impression you are shopping their offer around for a better deal. Unless you are offering a world beating deal or the buyer is in love with your property, many buyers will move on if you tell them you are going to be actively collecting offers.
What does making an official offer generally entail? See “how does an offer work” above
Is verbal okay -
Is there some sort of form?
**Why yes! Usually there is the main contract where the terms of the deal are spelled out and then there are a number of related addendums that cover a variety of items depending on the specifics of the deal and the property. **
If someone is interested in buying your home, they will usually put down a “binder.” This is a small amount - a couple hundred dollars maybe. The binder is good for a short period of time, usually about a week. You may not accept multiple binders and you may not enter into contract before the expiration of the binder.
During the term of the binder agreement, the seller and buyer will negotiate a contract “in good faith.” If they cannot agree on terms, the binder is void, the binder deposit returned to the buyer, and neither party has any further obligation to the other.
If you can agree on terms, you go to contract. This is when a down payment is made. The down payment is held in escrow. Once the contract is signed, it is very difficult to get out of it. The seller can be sued for “specific performance” - meaning you are forced to sell the property as agreed - or the buyer may forfeit the down payment to the seller as “liquidated damages” if he refuses to buy the property as agreed.
YOU NEED TO HAVE A LAWYER FOR THESE NEGOTIATIONS. YOU NEED TO HAVE A LAWYER TO INSURE DUE DILIGENCE. YOU NEED TO HAVE A LAWYER TO PROTECT YOUR RIGHTS. YOU NEED TO HAVE A LAWYER. I CANNOT SAY IT TOO MANY TIMES. YOU NEED TO HAVE A LAWYER.
OK, so now you’re in contract. Lots of things happen now. Both buyer and seller have obligations to perform to get ready for closing. Title searches, inspections, mortgage approval, etc. If everything goes the way it’s supposed to, a closing is arranged. That’s where you sign your name so many times that you forget how it’s spelled.
GET A LAWYER.
What’s to keep people from making any sort of offer? Like I could offer someone $10M. That doesn’t mean I would give them the dough though.
I’m looking for a house, myself. I made an offer, but it was turned down. The counter offer was the full price with a warning that the seller wants to raise the price. (Obviously, I walked.)
In any case, there is a contract-type thing I had to fill out when I made the offer. It says:
So there doesn’t appear to be anything the Seller could do if the Buyer offers an outrageous amount. I suppose the Buyer could be sued for breach of contract if he doesn’t terminate the deal within the specified three days.
Under basic contract law, there has to be a ‘meeting of the minds’ in order for a contract to be created.
If I offer handy a gillion semolians for his house (assuming his house is not worth near a gillion semolians) he isn’t reasonable in assuming that it’s a genuine offer and that I was serious. If the offer is truly outrageous, the ‘I was only joking’ defense could work if he sued me for breach of contract.
As said above, ‘Under contract’ means the buyer and seller have signed a contract to sell/buy the house at a later date (closing date). There are several things that can cause a contract to be terminated before closing.
Financing contingency - This is language in the contract that the sale is contingent on the buyer obtaining a loan under terms set forth in the contract (eg. 30 year fixed at 7%. Set at whatever the loan market is currently at). If the buyer, despite reasonable efforts, can’t obtain a loan, the contract is voidable. That’s why cash offers are better, as the seller doesn’t have to worry about the buyer not being able to finance the home.
Sale of home contingency - Language that the buyer must receive a bona fide offer to buy his home within a certain date. This is used if the buyer needs his equity as a downpayment. Again, this is not as firm as a cash offer.
Inspection contingency - The buyer has 10 days to conduct, at his own expense, an inspection by a certified inspector. If the house is truly a piece of crap, the buyer can void the contract. It has to be a real, problem, not something fixable.
Attorney approval contingency - The buyer can take the signed contract to an attorney, who can offer changes to the seller (or seller’s attorney) to negotiate (other than price) If they can’t agree on modifications, the buyer can void the contract.
The financing contingency depends on whether the buyer can make an offer in cash. The attorney approval clause and inspection clause I have seen on every residential real estate contract form I’ve seen in Illinois.
Oh, yeah. As a lawyer (not yours obviously)
GET A LAWYER! There’s a lot of details and possibilities that can get you in a lot of trouble. Here, they only charge 4-600 bucks, which, on a house worth say $100,000, isn’t that much.
The broker, you can do away with if you are confident that you are setting an adequate price for the home.
Probably not something you want to hear at this point.
If you are generating this much interest, similar properties must be very much in demand. With no experience in listing and selling property, I’d advise you to pull your listings and acquire the services of a real estate agent.
Although their services are dear, it could very well end up putting more money in your pocket than if you try to complete the sale on your own. A good agent will do a market survey to determine the true value of your property, recommend any improvements that will add immediate value to your property and safely walk you through the process.
There really is a lot to know, but if you are interested, you can carefully watch the process and learn enough to do your own sale in the future.
I like FSBO’s myself, because I often get deals from folks that don’t have the first clue about what they are doing.
Great post. One quibble: the two clauses mentioned above aren’t always in the contract form itself, especially if it originates with a broker. There are usually form riders to these contracts that do have these contingencies, so a buyer making an offer needs to make sure that those riders are included, if the contingencies aren’t in the contract form itself. In my inexperience, honest brokers include these clauses automatically. Dishonest ones leave them out and hope the buyer doesn’t notice.
IIAL = I is a lawyer?
Well, this is my first time selling a house…but…since all of the home models are basically the same (some have certain options, some don’t) I was able to easily determine the market value by looking at recent sales of homes near mine that are the same model. I’ve had calls from real estate agents and they all tell me that my price is about right. The reason I’m getting so many offers is probably because I’m in a very hot real estate market.
Thanks to everyone for all of the advice…it has given me a lot to think about.
Click on REAL ESTATE
From that page:
SELLING A HOUSE
Then read, here is some of that page:
" Legal Encyclopedia Articles
Timing a House Sale and Setting the Price Before you sell your house, you must prepare the property and set the right price. Do You Need a Real Estate Agent to Sell Your House? You may not need a real estate agent to sell your home. These frequently asked questions will help you decide. Holding an Open House Without a Real Estate Agent Tips for FSBOs holding an open house and talking with potential buyers. Required Disclosures When Selling Real Estate
What you need to tell potential home buyers about your property."
I’ll save Johan a step. On this issue of disclosures, Handy’s favorite site featuring vague, general and incomplete statements of the law says:
“Check with your real estate broker or attorney or your state department of real estate for disclosures required in your state.”
In other words, kinda what bernse, Cillasi, Astro and yours truly have already said in this thread. Except for the part about calling a state bureaucrat for legal advice. Hey, it might work. Wouldn’t bet on it, though.