For Sale By Owner
For lots of reasons, many folks don’t want to hire a real estate agent to list their home for sale. Whether it is a hot seller’s market, a desire to avoid the extra cost of a broker commission, the ease of listing a property online, or just the desire to test the waters, many property owner are trying to sell their real estate as “for-sale-by-owner” also known as FSBO without the assistance of a real estate broker. Selling a piece of real estate in Illinois can be a daunting task. Prospective sellers need to be ready to respond to interested buyers. Those buyers probably also lack the help of a real estate agent. Without appropriate documentation to get a deal on paper, a for sale by owner seller might lose a potential buyer. So, what does a seller need to have on hand to be prepared for a sale transaction? This article will detail some of the basic documents needed in the Chicagoland market. Please be aware, that the documents linked in this article are samples only and may or may not be right for any particular situation. All sellers should obtain the advice and assistance of an Illinois real estate attorney to assist them with their transaction!
Real Estate Contract
The most obvious of the required documents is the real estate contract. The parties must reduce their agreement to a writing. Many real estate boards and real estate interest groups have prepared form contracts that are in common use in Chicagoland. Here are some of the most common documents needed for a for sale by owner transaction:
The Multi-Board Residential Real Estate Contract
The Chicago Association of Realtors Condominium Purchase and Sale Contract
The Chicago Association of Realtors Apartment / Investment Contract
The Chicago Association of Realtors Residential Real Estate Contract
The Chicago Association of Realtors Vacant Land Contract
The contract is the rule book for the deal. It sets out the basic terms that will guide the parties to the closing table. Most buyers and sellers are not attorneys and real estate transactions are “big dollar” transactions. It is not that hard for buyers and sellers, especially without the help of a real estate agent, to get confused about the process or technicalities of a closing transaction. Luckily, most of the common real estate contract forms have some provision for attorney review or attorney modification. These clauses are not always a “get-out-of-jail-free” card. For lots of reasons that are the subject of a future blog post, there is not a “right of rescission” in a real estate contract. However, these clauses are better than nothing so that a buyer and a seller can get a for sale by owner contract signed without having to pass the document back and forth between attorneys (although, truth be told, we attorneys would probably prefer that!).
A contract is not “accepted” until an offer is made by one party and accepted by the other party. If an offer is made and the other party makes a change to the offer rather than just accepting it as the offer was made, then the second party has made a counter-offer (the mirror image rule) and now the original offeror must accept the counter-offer to have a contract. The parties must also communicate that there has been an acceptance.
That’s easy to say in theory. It is much harder in practice. Because there are other ways a contract can be formed or where a seller can be liable to a buyer (ie. unjust enrichment, partial performance, etc.), for-sale-by-owner sellers should always be very careful not to give any prospective purchaser the impression that they “have a deal” without a signed, accepted contract.
What most for-sale-by-owner sellers should do is to have a blank contract available for prospective buyers (along with the required disclosures we will discuss below) to use in making offers. Because it is good form and because a seller never knows what kind of other offer may come along, a seller should never make the first offer. Leave it to the buyer to make the offer.
In addition to a contract, there are a number of other documents that a for sale by owner seller should make available to prospective purchasers. These documents are not specific to a for sale by owner closing. While the contract that a seller makes available to the prospective buyer should not be filled in, it is important that the other disclosures are available and properly completed.
Federal Lead Paint Disclosure
Responding to the health dangers from lead paint in homes, the federal government enacted the Residential Lead-Based Paint Hazard Reduction Act to educate about lead based paint hazards and to protect families from exposure to lead from paint, dust, and soil. For closings after 1996, the law requires that sellers disclose known information about lead-based paint and lead-based paint hazards in real estate built prior to 1978 (when lead-based paint was phased out).
A prospective seller must provide to a prospective buyer:
In the disclosure form, a seller will have to (a) disclose any known information concerning lead-based paint or lead-based paint hazards, including the location of the lead-based paint or lead-based paint hazards and the condition of the painted surfaces within the real estate and (b) provide copies of any records and reports about lead-based paint or lead-based paint hazards available to the seller. The seller will also have to give a purchaser a ten day period to do a lead based paint inspection. The form and pamphlet are available in many languages and the law requires that they be in the same language as the contract. Both the buyer and seller must sign the disclosure.
Illinois Radon Disclosure
Like the lead-based paint law, the Illinois Radon Awareness Act was enacted to protect home buyers from the dangers associated with radon gas. Beginning with closings in 2008, the law requires that sellers disclose known information about known radon gas hazards in the real estate.
A seller must provide to a prospective buyer: