5 BIGGEST FOR SALE BY OWNER MISTAKES IN MARYLAND
With real estate commissions on residential property sales running anywhere from 4% to 7% of the sale price of a house, it is only natural that sellers in Maryland try to save those funds by selling their house themselves without an agent. This is called a for sale by owner, or FSBO, sale. Are you among those Maryland homeowners looking to sell your house without an agent? If so, please consider the top five FSBO mistakes we see at our Baltimore real estate law firm.
TOP 5 FSBO MISTAKES IN BALTIMORE, MD
FSBO MISTAKE NO. 1. SIGNING A CONTRACT WITHOUT HAVING IT REVIEWED. It happens all the time, sellers think that they can change the terms after they sign a contract but once they sign they are likely locked into those terms. Sometimes a buyer, especially investors, will tell a seller that they will allow changes later but unless that agreement is in writing it is not enforceable.
FSBO MISTAKE NO. 2. NOT ATTACHING FORMS REQUIRED BY MARYLAND CODE. Did you know that if a seller does not deliver a Property Disclosure or Disclaimer Statement to a buyer on or before entering into a contract the buyer may rescind the contract and receive an immediate return of the deposit? If you did not know this and you are considering selling your house on your own, you should engage an attorney or realtor as there are many potential pitfalls of this nature.
FSBO MISTAKE NO. 3. TRUSTING THE BUYER. I know, I know . . . why so cynical? It is because we have seen some shocking things over the years. A buyer wanting to buy a property will oftentimes do whatever is necessary to get the property under contract. Is your buyer saying he wants the house for a family member? Doubtful. Has your Buyer said his offer is fair based on comparable properties? Do not believe it, do your own research. The upshot is that a fair amount of skepticism will serve you well.
FSBO MISTAKE NO. 4. AGREEING TO PAY ALL TRANSFER AND RECORDATION TAXES. Typically, in Maryland transfer and recordation taxes, which can be 3% or more of the sale price of a property, are split equally between the parties. Some buyers will take advantage of a seller who may not know this and shift the responsibility of payment of all these taxes to the seller. If the seller does not pick up on the shift in obligation it can be a pricey mistake. For example, transfer and recordation taxes on a $250,000.00 sale can run roughly $7,500.00 depending on the county. Each party would pay $3,750.00 in this example but if the buyer shifts the payment obligation to the seller that seller just cost themselves $3,750.00 that should have been paid by the buyer.
FSBO MISTAKE NO. 5. ALLOWING A BUYER THE RIGHT TO ASSIGN THE CONTRACT. What does it mean if a contract is assignable? It means that a contract purchaser will have the right to shop the contract around to see if they can obtain a higher offer on the property and pocket the difference. For example, if a contract is assignable and the seller agrees to sell a property for $100,000.00 the buyer can shop the contract and find a third party willing to pay $135,000.00. What happens to the $35,000.00 difference? It goes right in the original buyer’s pocket for acting as the middleman and this is a tough thing for sellers to experience at the settlement table because they basically lost out on receiving an additional $35,000.00.
*BONUS TIP NO. 1 If you are a FSBO seller and the buyer says that they are going to pay cash for the property, request proof of funds. They should be able to send you a bank or IRA statement showing the funds to purchase are available to them. There is no sense wasting valuable marketing time with a buyer that is unable to close.
*Bonus TIP NO. 2 The size of the deposit is usually an indicator of how serious a buyer is about settling on the house you are selling. If the deposit is only $100.00 your buyer is getting himself in a position to walk away from your transaction and is minimizing his loss.
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*There are a number of factors and variables that can change the analysis above, it is important that you engage legal counsel to advise you on your transaction.