How For Sale By Owner/FSBO Transactions Work in Michigan

For Sale by owner, FSBO, transactions are very popular in the Ann Arbor area and throughout Washtenaw County. Contact attorney Bill Ager for a free consultation to learn about the FSBO process. He will walk you through the entire process for a reasonable flat fee. The following are the basics of how a FSBO transaction works in Michigan.

Basics of a For Sale By Owner/ FSBO

FSBO for a Seller

If you plan to sell your home, you have two choices: You can use a real estate agent or you can handle the sale yourself. Since using a real estate agent typically costs a seller a 6% commission of the sale price, selling your home yourself will save you a substantial amount of money.

However, in a FSBO home sale a seller has responsibilities for the sale, which may include obtaining an appraisal of the home for an understanding of the current market value based on the sale of comparable properties that have recently sold. Knowing the sale price of recently sold comparable properties in the same geographical area of the home will provide a seller with a basis to determine a sale price.

Unless a prospective buyer is already interested in the home, a seller is also responsible for marketing their home and showing it to prospective buyers. Marking a property may include listing your home as a FSBO on web sites or notifying residents in your neighborhood, homeowners Association or condominium Association that you are selling your home and to contact you about persons who may be interested in seeing the home. A seller can also list their home on real estate multi listing services for a fee.

A seller must also decide whether they will agree to work with a buyer’s agent who has a potential purchaser interested in the property. A buyer’s agent will usually ask for a commission of 3% of the sale price as part of the sale. Depending on the circumstances, a seller can accept the commission as part of the transaction, negotiate the commission lower or inform the buyer’s agent that the payment of the commission will be the responsibility of the buyer.

With an agreed upon sale price, an enforceable sales contract is drafted, reviewed, finalized and signed. A sales contract contains specific agreed upon provisions that control the sale, including contingencies for the seller inspecting the property and obtaining financing. A title company is also engaged in the sale process to issue an owner’s policy of title insurance and closing documents and to conduct the closing

FSBO for a Buyer

If you are a buyer, you also have the choice of using a real estate agent to help you find a new home or finding a home yourself. If you use a real estate agent, the agent will usually ask for a 3% commission from the seller to pay as part of the sale. Sometimes this can be a disadvantage for a buyer when negotiating a purchase of a FSBO home because the seller will factor in the buyer agent’s commission that has to be paid from the sale price.

As a buyer, you can avoid involving a buyer’s agent when purchasing a FSBO home if you are able to take on the responsibility of searching for FSBO homes. Many websites provide listings of available FSBO homes. As a buyer you can also send out notifications to neighborhoods, homeowners and condominium associations to ask about owners who may be considering selling their homes.

As a buyer you must have an understanding of what you can afford so it is highly recommended that you talk with a lender and ask for a preapproval letter regarding the price range for a potential purchase. In addition, a buyer should have an understanding of the general market value of a desired home when negotiating a sale price even though an appraisal contingency may be included in the sales contract.

Basic FSBO Legal Requirements

Documents must be in Writing

The State of Michigan, like other states, has specific legal requirements that apply to the purchase and sale of real estate. One important requirement is that all contracts for purchase or sale of real estate must be in writing. A seller in a FSBO transaction should require an agreeable offer to be submitted in writing. Conversely, a buyer should be prepared to make an acceptable offer in writing. An offer made and accepted in a phone call or with a handshake is not enforceable. Also, any changes to a signed contract must be in writing including the removal of contingencies in a contract for inspections and financing.

Seller Disclosure Requirements in FSBO Transactions

In addition to the sale contract, state and federal laws require the seller to provide additional documents in a FSBO sale. One of the most important is the Seller’s Disclosure Statement. Under the Michigan Seller Disclosure Act of 1993, the seller must provide this form to a prospective buyer prior to signing a sales agreement.

In the Seller’s Disclosure Statement form, a seller provides a prospective buyer with known information about the home, appliances and systems in the home. Although the information that the seller provided in the disclosure statement is not considered a warranty of the property, the information is considered representations made by a seller about the property that the buyer can rely on for the purchase. Consequently, a seller’s failure to fully and accurately complete the disclosure form as required by the Seller Disclosure Act can have serious consequences, including cancellation of the sale or even a court action against the seller for fraud and misrepresentation after the sale is completed.

Federal law also requires that for homes built before 1978 a seller must provide a buyer with a fully and accurately completed Lead Based Paint Disclosure form that disclosed the presence of any known lead-based paint and/or lead-based paint hazards present in the home.

Request A Free Consultation with an Experienced Ann Arbor Real Estate Attorney About the FSBO Process

In my real estate practice at Ager Law Office, I assist both buyers and sellers in For Sale By Owner / FSBO transactions. For a reasonable flat fee, I provide a full explanation about how FSBO works and assist clients through the whole process from start to finish, including preparation and review of the required documents. I also assist clients with sales and purchases involving a real estate agent.

From my Ann Arbor office, I serve clients throughout Washtenaw County. To schedule a free consultation about purchasing or selling your home in a FSBO transaction, call (734) 649-0784, send an email to bill@agerlawoffice.com, or use the online contact form.