Real Estate law

For Sale by Owner in Denver, Colorado

A for sale by owner (FSBO) transaction is a sale of real estate, whether it is a single family residence, apartment building or commercial property, (most of the time it is residential property because there is a lot more residential property) where a seller has elected not to use a real estate agent to assist the seller with the sale of their property. There is no requirement in the State of Colorado that a real estate agent must be engaged to sell real estate and many sellers elect to sell real estate without real estate agents.

MY BACKGROUND.

I have more than thirty-five (35) years of real estate experience, including many FSBO transactions, and I will help you with your FSBO. I will explain in detail all of the steps you must take to sell your property and I will make sure you are well-protected by preparing a good contract for you.

Often what precipitates a seller to engage an experienced real estate attorney like myself instead of using a realtor is that the buyer is a tenant, a family member, or a friend (someone who has an existing relationship with the seller and with whom the seller feels comfortable) and it is more economical for me to be involved than a real estate agent because my flat fee for representing a seller will be substantially less than the thousands, or tens of thousands, of dollars that a real estate agent charges.

There are four (4) steps in a FSBO transaction, and they are:

1. Find a buyer.
2. Negotiate the contract and sign the contract.
3. Go through the due diligence and conditions stated in the contract.
4. Closing.

Find a Buyer.

Finding a buyer is usually the hardest part of any transaction. You must find someone who would like to purchase your property and who is willing to pay you what you believe the fair market value is for the property.

For residences, Zillow is a good source for values, but it is an approximate amount, it is not an exact science and Zillow does not know the condition of the property or anything unusual or unique about your property. My recommendation, whether residential, apartment building or commercial property, is always to pay for an appraisal to help you determine what you think the purchase price should be.

You should also initially be concerned about how the buyer will pay for the property. Naturally, a cash purchase is always the best but if the buyer will be obtaining a loan, you should ask the buyer for a preapproval or prequalification letter because you want to make sure that the potential buyer is qualified before entering into a contract with the buyer. This document will help you determine that the buyer has met with a lender and has a good chance of being approved for a mortgage for the purchase price that is stated in the contract. There is not much sense in investing time and energy with a buyer who will not be able to secure a loan for the purchase.

You should also request proof of funds from the buyer (bank statement for example) to confirm that the buyer has the amount of money that the buyer must contribute towards the purchase above the amount of the loan.

Negotiate the contract and sign the contract.

After you have found a buyer and have negotiated the very basic part of the contract, the purchase price, you are ready to negotiate the rest of the provisions of the contact.

In Colorado, there are pre-approved contracts that all realtors and all attorneys use because they are standard and address all of the issues in the sale of property. The key is to know how to complete the contract, what information and documents to insert, and what boxes to mark.

The material parts of the contract include:

1. The amount of earnest money is inserted.
2. Title insurance is provided by a title company by a certain deadline.
3. The buyer inspects the property by a certain deadline.
4. Seller provides seller’s disclosures concerning the condition of the property by a certain deadline.
5. Seller provides Lead-based disclosures and a lead-based pamphlet for residences built priot to 1977 by a certain date.
6. The buyer’s mortgage is approved by the buyer by a certain deadline.
7. Date of closing is stated.

For 2-5 above, the buyer has a certain number of days to object after the documents or information is provided to the seller.

For number 6, the buyer may object to the loan within a certain number of days after the terms of the loan are provided by the lender to the buyer.

An additional issue is that the seller should not allow the contract to be assigned by the buyer without prior written consent because the seller does not want to be involved with anyone that the seller does not know.

Go through the due diligence and conditions stated in the contract.

After the contract is signed, the parties work through the contingencies in the contract.

Seller chooses the title insurance company and makes sure the title insurance company timely provides a title insurance commitment to the buyer. The buyer reviews the title insurance commitment and has a certain number of days to object to any part of the title insurance commitment. If buyer objects, the seller and buyer try to resolve the objection.

Buyer will inspect the property and will usually hire a company to inspect the property and provide a report to the buyer. Buyers will often scope the sewer lines. There is an inspection deadline that the buyer must meet and if there are any objections, seller and buyer will try to resolve the objections to keep the sale moving forward.

Most of the time (if probate is involved disclosures will not be provided since the personal representative will not know the condition of the property and sometime sellers will not provided disclosures for a variety of reasons including the property is sold in “as is” condition), sellers will provide seller’s property disclosures to the buyer which states the condition of the property based upon the seller’s knowledge and the buyer will review them as part of the inspection process and deadline.

After the contract is signed, buyers will work on their lending and there will be deadlines where if the buyer does not like the terms of the loan, the buyer may terminate the contract and receive its earnest money back.

For homes built before 1978, sellers must disclose how much lead paint there is and a form and a pamphlet is provided in the buyer from the seller. In many years of practice, I have never seen a sale fall through because a lead-based paint disclosures. However, the disclosure is the law and sellers must comply with the law.

Closing.

If all of the contingencies have been met and the buyer has been approved for the loan, the parties are ready to close.

The title company will prepare all of the closing documents that seller and buyer will sign at closing.

Title companies prepare all of the closing documents ahead of closing and send them to the seller and buyer to allow them to review them prior to closing and ask any questions prior to closing if they would like.

Two (2) of the most important documents signed at closing are the seller’s settlement statement and the buyer’s settlement statement. These statements set forth all of the “numbers” for the transaction. For the seller, you have the sales price and all of the deductions reduce the sales price (such at title insurance, recording fees, real estate taxes for the current year, payment of any mortgages) resulting in the net amount that the seller will receive. For the buyer, you have all of the charges and credits (including the earnest money, credit for current year’s real estate taxes, recording fees, the amount of the new mortgage) with the final amount being the amount that the buyer must wire to the title company for closing.

Protecting Buyers’ Interests In FSBO Transactions.

I understand both sides of FSBO transactions, which means that I also represent parties who are looking to purchase property without a real estate agent.

If you are the buyer in a FSBO, I will prepare the contract or review a proposed contract in order to advise you about all of the potential pitfalls and to fully protect you. One of the requirements that you should always request as a buyer is for the standard exceptions to be deleted by the title insurance company. Therefore, any problems with boundary disputes or mechanic’s liens will be covered by title insurance and the title insurance company hires an attorney to resolve the matter at its expense instead of you hiring an attorney to resolve the matter at your expense.

CALL ME.

I am committed to protecting your best interests so that you may effectively sell your property independently or buy a property indepdendently.

Please call me at 303-782-4900 and we will discuss your situation and how I may help you with the sale of your property by FSBO or the purchase of a property by FSBO.