When you are ready to sell your home, you will want to get as much for your property as possible. You could save thousands of dollars by selling your own home rather than paying a real estate agent. That being said, California’s real estate sales can be complicated, and it’s essential to have a complete understanding of the process before moving forward alone. Here is more on selling your own property in California (for sale by owner).
Disclosures are Critical
Under California law, sellers must disclose all “material facts” that could impact a buyer’s decision to purchase a property. These facts may include details such as past flooding, foundation issues, or termite damage. A for sale by owner (FBSO) seller must disclose this information in writing so that the buyer can make an informed decision before moving forward with the purchase. A seller is not obligated to seek out issues for the buyer. The disclosure requirement only applies to those issues about which the seller knows or has reasons to know of.
In California, material facts are often listed on a “Transfer Disclosure Statement” form created by the parties or obtained from a real estate broker. The form will give you a place to describe your home’s condition, including appliances, the AC Unit, plumbing, electrical system, foundation, flooring, landscape, fencing, ceilings, and several other critical areas. You can also add other known facts that may impact the property’s value and desirability.
With disclosure, it’s crucial that you are forthcoming with available and known information. Otherwise, you could face legal consequences after the sale.
You Need to Do a Title Search
It may come as a surprise that when you sell your own home in California, you are still going to need to pay to have a title company conduct a title search. While it may sound unnecessary, the title company will perform the search and provide a report that your property is free and clear of liens and other encumbrances.
If a buyer uses a mortgage lender, the lender will need a good title search report and insurance before agreeing to move forward with the transaction. Even with a cash buyer, the buyer will most likely want an updated official title report showing that the property’s ownership record is clear.
Additionally, you may have to pay for the buyer’s title insurance policy. In some parts of California, it’s standard practice for the buyer to pay for the title insurance policy, while in others, it’s the seller’s obligation. The parties may also agree to split the expense.
Purchase Contracts are Legally-Binding Documents
Although you, the buyer, and the buyer’s real estate agent may be non-attorneys, you will all be working with a legally enforceable real estate purchase contract. Even if you understand the terminology, it’s crucial that you know what each party’s obligations are under the document. As an FSBO seller, you may be presented with a purchase contract prepared by an attorney working with the buyer’s agent. This document may have written provisions that are not in your best interest. Therefore, it will be critical that you review the contract’s proposed terms with a California real estate attorney before signing. A better alternative would be to work with a California real estate attorney from the beginning. Your attorney can draft the real estate contract with the right language to protect your interest, along with all of the other documents that you will need to complete your FBSO transaction.
Using an Escrow Agent
Once your FSBO property is under contract, it’s standard practice for the buyer’s earnest money to be put into an escrow account. The seller will place the deed to the property with an escrow agent pending the sale. The agent will hold onto the funds and the deed until the transaction is completed. There are some rules and limitations when it comes to selecting an escrow agent. Namely, a seller can’t mandate that a buyer use a particular agent as a condition of the sale.
Transfer Taxes
In California, counties, and sometimes cities, impose a transfer tax when a property is sold. The seller sometimes pays this added tax, and at other times it’s paid by the buyer. The parties can negotiate on this point, but it can get complicated if an FSBO seller doesn’t want to pay, and an agent insists that they do so.
Unexpected Issues Can Come Up
In an ideal world, your FSBO transaction would go through without a problem. However, there is always the possibility that something could come up that could delay or even disrupt your sale. The good news is that by working with an experienced real estate attorney, you can help ensure that you have the documents and advice you need for every stage of the FBSO process.
Contact the Law Office of Raffy Boulgourjian
Attorney Raffy Boulgourjian is a California real estate attorney with over twenty years of experience representing clients in residential and commercial real estate cases. He has the knowledge and expertise to protect your real estate interests during every stage of your transaction. Contact Mr. Boulgourjian today to schedule a free legal consultation to discuss your California real estate needs.