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For sale by owner (FSBO) seller contract tips in Illinois

Posted on by February 26, 2018

for sale by owner in ChicagoFor 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.

Other Disclosures

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

leadResponding 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:

lead based paint disclosure form
lead based paint pamphlet

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

radonLike 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:

radon disclosure form
radon pamphlet

The disclosure and pamphlet must be given to the buyer before a buyer becomes obligated under a real estate contract.  If they are not given in time, the prospective seller must provide the disclosure and allow the prospective purchaser an opportunity to review the disclosure and amend their offer before the seller can accept the contract.

Illinois Residential Real Property Disclosure

The Illinois Residential Real Property Disclosure Act was enacted to require home sellers to disclose known material defects to prospective buyers.  The law requires that a seller of residential real property must complete all applicable items in a disclosure document required by the law and must deliver the disclosure document to the prospective buyer before entering into a written agreement for the purchase and sale of the residential real property.
While this is a topic for a future blog post, I always prefer that sellers, whether for sale by owner or represented by a real estate agent, over-disclose rather than under-disclose.  The law provides that if a seller fails or refuses to provide the disclosure document prior to the conveyance, the buyer shall have the right to terminate the contract.  Further, a seller who knowingly violates or fails to perform any duty under the law or who discloses known false information will be liable in the amount of actual damages, court costs, and possibly (probably) attorney fees.

A Real Estate Attorney

No mention of what a for sale by owner seller needs to handle a residential sale closing would be complete without mentioning that the seller needs the help of a real estate attorney!  Obviously, most folks in Chicago and the suburbs utilize the services of a real estate closing attorney.  An attorney can assist with advice on the contract, how to complete disclosures, how to handle offers, and a wide range of other issues that may come up during the pre and post contract formation stages of a real estate closing.  For more, feel free to review our FSBO seller attorney services information.  Home sellers who are interested in selling their property as a for sale by owner transaction should feel free to contact us to to discuss how we might be able to assist with a for sale by owner transaction.

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