Selling your house (or townhouse or condo) is one of the most important legal and financial transactions you'll ever have. Knowing what to expect and understanding each main step in the sales processhelps you skip frustration and headaches until your sale closes.
Learn the basics if you're a first-timeseller, or take a refresher if you're a seasoned seller. After all, homes are unique, and not all sales are alike.
Using a Real Estate Broker or For Sale by Owner
Selling your home isn't that difficult, but itcan be time consuming and there are lots of details to manage, so most homesales are made through a real estate broker or agent. Know the basics ofworking with these state-licensed sales professionals.
Generally, a "sales person" is areal estate broker, or a sales agent working under a managing or sponsoring broker's authority.
Working with a Real Estate Broker or Agent
In many states, brokers and agents can represent the seller, the buyer or both (called dual agency). When you contact a broker or agent, you should be given a consumer disclosure explaining all possible roles. Ask questions on items you don't understand. You'll enter into a listing contract to sell your home. You can specify that the broker works for you as a seller's agent alone.
Real estate brokers and agents have what's called a fiduciary duty to the party they're representing. This means they are your legal agents and are held by law to specific duties found in state law, or your listing or brokerage agreement, or other contract. These duties include:
- Using reasonable care and skill
- Obeying your lawful instructions
- Accounting for all money in the agent's control
Seller's Property Disclosure
Many states require home sellers to disclose defects in their property that affect health and safety. You can use a standard form, called a seller's property disclosure statement. Complete the form, even if a given item doesn't impact the sale or the final sales price. Common disclosure items include:
- Title issues
- Roof defects
- Plumbing and sewage problems
- Property drainage problems
- Foundation instability or cracks
- Heating and air conditioning system defects
- Water leakage of any type, including in basements
- Termites and other insect infestations
- Lead paint (required by the federal Residential Lead-Based Paint Hazard Reduction Act of 1992)
Be accurate and truthful as you complete the disclosure form. Ask your real estate lawyer for help if you're unsure on how to answer any items. Remember that disclosure helps avoid problems later on, and benefits you and your buyer all around.
Getting an Offer: The Purchase Agreement
When a serious buyer wants to buy your home, you'll receive a written offer, sometimes called a purchase and sale agreement, containing all the terms of the sale.
Know what to expect in an offer because you won't have much time to decide to accept or make a counteroffer. Common counteroffer terms are:
- A higher purchase price
- A higher deposit
- Less time for the buyer to remove contingencies, such as getting financing or selling his or her current home
- Excluding items from the sale, such as appliances or window treatments
- Time for your attorney's review of the contract
Legal Title Issues
One key term in the purchase and sale agreement is that you give the buyer clean title, or "clear and marketable" title to the property. This means there aren't any issues or conflicts with the ownership rights you're selling. Examples are possible past owners or mortgage holders who could turn up claiming property rights.
Your real estate lawyer or title insurance company will do a title search, looking for any problems. A title insurance policy is also issued to cover any title defects that didn't turn up in the title search, such as a mortgage, lien or easement missed or not recorded in public records.
Closing and Costs
The closing is the completion of the sale: the buyer pays the sales price, and you transfer title to the buyer, along with the keys. There's a lot of work leading up to closing, and some costs forsellers to pay.
Common seller's costs are:
- Paying off all existing mortgages and liens against the property
- State transfer taxes
- Local transfer taxes (the duty to pay these taxes varies by location and custom)
- Real estate sales commission to your broker or agent
Generally, you don't have to attend the closing. Your lawyer can represent you, taking signed documents and the keys.
Lawsuits and Your Sale
Lawsuits arising from home sales are the exception, and not the rule. Most sales are completed successfully, even if they take more time than the sellers would like, or there are problems to solve along the way.
Common causes behind lawsuits are:
- Breach of contract – breaking some term of the purchase agreement
- Disclosure or defect issues – the buyer finds a problem with the home and thinks you're liable
- Fraud or misrepresentation – you said or made representations that weren't true, but the buyer relied on them
- Sales commission claims – the right to payment or amount of the commission is disputed
The solution or remedy sought in these cases is usually money damages, or specific performance, which means to do what the contract requires. An example is a buyer who wants you to complete a sale after you change your mind about selling.
No matter if it's your first sale or your fifth, you're ready to sell, from contract to closing.
Questions for Your Attorney
- Can I cancel a contract if the buyer misses deadlines and I'm worried about getting to closing?
- Do I owe my real estate agent a commission if I find a buyer?
- How do I cover past repairs on a disclosure form? If there are no problems after a repair, is there anything to disclose?