✏️ Editor’s Note: Realtor Associations, agents, and MLS’ have started implementing changes related to the NAR’s $418 million settlement. While home-sellers will likely save thousands in commission, compliance and litigation risks have significantly increased for sellers throughout the nation. Learn how NAR’s settlement affects home sellers.
409,000 home sellers across the country opted to sell FSBO in 2023. Each of them saved nearly $10,000 in listing agent commissions. Moreover, 55% of millennials are comfortable selling their homes themselves. While sellers are open to FSBO, for 7% of them the paperwork was a major issue.
The main problem with FSBO paperwork is drafting the contract. This issue can systematically be resolved with the help of real estate attorneys. Or, you can opt for Flat Fee MLS platform like Houzeo, that will connect you with real estate attorneys in your area.
With Houzeo, you get a detailed guidance of the FSBO process. You benefit from saving thousands in listing agent commissions in The Empire State. You also get maximum exposure to home buyers by listing on the New York MLS.
What Is a For Sale By Owner Contract New York?
A For Sale By Owner contract contains the terms and conditions of your home sale. These terms include contingencies, deadlines, and closing processes. A For Sale By Owner contract in New York is also called a “For Sale By Owner purchase agreement”.
Who Draws up Contract in For Sale By Owner?
Who draws up a contract in For Sale By Owner entirely depends upon the state you live in. Usually, the seller drafts the contract when selling a house by owner. But in New York, some rules and regulations are laid down for legalities during real estate transaction.
The state law mandates having a real estate attorney to handle the paperwork and legal aspects of the transaction. The law includes having separate attorneys to represent both parties during the sale process. A real estate attorney usually charge approximately $150 to $300 per hour.
What Major Aspects to Include in Your FSBO Contract?
Although an attorney will look out for your legal and financial well-being throughout the process. Here are some major aspects you must check in the drafted contract before moving ahead with the proceedings:
1. Purchase Price and Closing Details
A simple For Sale By Owner contract has the purchase price, down payment, and closing date. Make sure a mention of who pays the closing cost, or if it should be split between both parties is made. Also, check for contingencies if the conditions of the home sale are not fulfilled.
2. Financing of the Deal
Parameters if the buyer needs to finance the property through cash or via a lender should be defined. This should include the loan the buyer opts for and the earnest money deposit. A timeframe for the buyer to secure the financing must also be added.
Also, the option to return the buyer’s earnest money if the financing falls through should be included. For all-cash deals, the minimum percentage of a bank transfer or if you’d like hard cash must be mentioned.
» Home Value Calculator: Get an estimate of your property’s worth before planning your budget.
3. Home Inspection Contingency
Allow the buyer to arrange for a home inspection. Set in place certain clauses in case any critical issues arise during the inspection. Also, set a deadline for the inspection or any repairs if you undertake them.
If extreme cases arise, determine the dealbreakers for a termination of the sale. In minor instances, decide if the home’s price will be renegotiated.
4. Deed for Title Transfer
A deed mentions the exact title you will transfer to the buyer. The most common way to transfer a property title is by warranty deeds. Unless married, be careful how you want to hold property jointly in New York. A deed is completed at the time of purchase and can be amended to include or exclude certain names.
Double-check the name on your property in official land records from the county assessor’s office. A timeline for the transfer of the title should be included. This section should specify the title company as well as who pays for title insurance.
5. Default Provisions
Consequences should be clearly determined if either party breaches the contract. Methods must be specified to handle missed payments and delays. Mention of contingencies in case of a failure to close within the predetermined date should be there in the clause.
Ensure that none of the contingencies give you the bad end of the deal. If any contingency applies, you should be able to back out of the contract.
6. Seller Disclosures
This section must include relevant New York seller disclosure forms. Here you must pledge that you abide by New York’s laws for seller disclosures. It contains details such as the ownership history, tax status, and any known home defects.
Was your home built before 1978? Then make sure you submit the “Lead-Based Paint Disclosure” (addendum) with the contract.
7. Dispute Resolutions
This section notes procedures for settling disputes that may arise throughout the transaction. List arbitration or different mediations as a substitute for dispute resolution. A real estate lawyer can help you reach the best amicable solution.
What Are Some For Sale By Owner Contract New York Contingencies?
A well-framed clause helps you avoid nasty surprises when selling FSBO. You can protect yourself from worst-case scenarios by including contingencies such as:
Subject to Finding Replacement Property Contingency*: You can back out of the sale if you can’t find a new property within a specified timeframe (e.g., 30-60 days). Avoid the crisis of renting interim housing or being pushed into a hasty purchase.
Sale of Seller’s Current Home Contingency*: This contingency allows you to back out of the current sale within a specific timeframe. You are protected from financial difficulties due to overlapping mortgages or from owning two properties.
Appraisal Contingency*: This contingency protects you if the property doesn’t appraise for the agreed-upon purchase price. The contract could specify that the buyer covers the difference (appraisal gap) in cash, renegotiation, or termination.
*Note: These contingencies might be less attractive to buyers. Weigh the risks and benefits carefully.
What to Clarify in Your NY FSBO Contract?
While taking a look at contingencies and clauses when selling a house in New York, do not forget to clarify the basics in your contract such as:
- Seller Name: Your name should match what is in public records. If incorrect, the title company will not close on the property without an explanation.
- Earnest Money Deposit: The final purchase price should include an earnest money deposit. This is to protect you in case the buyer backs out under the wire.
- Closing Deadline: The deadline should include an exact closing date. Add dates for contingencies about financing and inspections as well.
New York For Sale By Owner Contract Template
For Sale By Owner Contract New York
Source: loc.gov
Ready to Draw Up Your New York FSBO Contract?
If you’re sure then the FSBO contract protects your interests, especially without a Realtor. The contract helps you with clarity regarding legality, reduces risk, smooths the process, and ensures adherence to regulations.
While it may seem daunting, it isn’t! You just need to go through steps to verify important contract elements and you are good to go. Finally, keep track of all paperwork when selling your house without a realtor.
If you aren’t sure and still want to sell FSBO opt for Flat fee companies like Houzeo. Houzeo can help by connecting you to the top real estate attorneys near you.
**Remember: While this blog highlights key clauses, consulting a real estate attorney is highly recommended. This ensures your FSBO contract is tailored to your specific situation and complies with all New York real estate regulations.
Reviews: America’s Best FSBO Websites
We’ve reviewed the best paid and free For Sale By Owner Websites in 2024.
» Need More Clarity? Read these exclusive Houzeo reviews and learn why it is one of the best Flat Fee Multiple Listing Services in New York.
Frequently Asked Questions on NY FSBO Contracts
How to write a For Sale By Owner contract in New York?
A For Sale By Owner real estate contract must include both party names, addresses, and the home's price. Additionally include disclosures, selling timelines, financing options, and more.
How does a For Sale By Owner contract work?
A FSBO contract works like the traditional "Real Estate Purchase Agreement". The only difference is that a real estate attorney draws up the For Sale By Owner contract agreement instead of the seller. One contingency is to determine who pays closing costs.
Who draws up contract in For Sale By Owner?
An attorney draws up the For Sale By Owner real estate contract. Both the buyer and seller need to have their separate New York real estate attorney during the transaction.
Other Agreements You Should Know About
- Exclusive Agency Agreement: What is an exclusive agency agreement, and should you opt for it?
- Exclusive Right to Sell Agreement: Why is the right-to-sell agreement the most popular contract?
- Open Listing Agreement: Why do agents across the US not recommend an open listing agreement?
- Net Listing Agreement: Know what makes this agreement only valid in 3 states?
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