FOR SALE BY OWNER INDIANAPOLIS
Is there anything more exhilarating than selling your house without paying a big commission? In 2017 thirteen percent of all home sales in the United States were transacted without a realtor, according to the National Association of Realtors. That equates to approximately 716,300 homes sold without paying a real estate agent, nationwide.
Most real estate sales end happily ever after, including the For Sale By Owner Indianapolis (FSBO) transactions. That is most, but not all. Because the seller is typically in receipt of the net sale proceeds at closing, sellers rarely find themselves with any complaints. The overwhelming majority of real estate lawsuits are initiated by disgruntled buyers, who sue their sellers. The buyer takes the risk that they won’t have problems with their home, and the seller takes the risk they won’t be sued. Capeesh?
So, buyers and sellers are both at risk in the real estate game. Since buyers almost never pay their realtor to help find them a home, they should have few reservations about hiring a qualified, experienced real estate broker to help them. However, many realtors won’t waste their time negotiating with a FSBO, because it is too easy to find a home with an advertised commission split right on their multiple listing service. Where the buyer desires to buy a home from a FSBO, then hiring a real estate attorney is very much advised.
Sellers, on the other hand, must weigh the high cost of a commission against the value of the services provided. It is hard to argue that those commissions aren’t worth paying, when you don’t already have a buyer, just as it is hard to justify paying a large commission when you do have your own buyer. That is because the value of having a professional listing on a multiple listing service is quite significant. A seller can’t sell, if he or she doesn’t have a buyer.
Real Estate brokers vs. Real Estate attorneys, what’s the difference?
They offer very different services, designed to facilitate a clean real estate closing. Real estate brokers / agents cannot give legal advice and they cannot practice law. Yet most every document from the listing agreement to the deed of sale is a legal document. These real estate professionals work with pre-drafted forms that merely require them to fill in the blanks. The forms are by and large very well drafted, and time tested. These real estate professionals also offer access to a net based multiple listing service that broadcasts your listing to everyone who has access to that system, including buyers without real estate agents. They put signs in your yard; hold open houses and make your home available for viewing to potential buyers. Of course, this comes at a cost of 6 or 7% of the purchase price. It’s not exactly cheap.
The real estate lawyer, on the other hand, prepares the documents and agreements that make up the real estate transaction and help insure their client is protected whether they represent the buyer or the seller. The fees for these legal services are typically much less than a real estate commission, but the attorney typically is paid whether the sale closes or not. Many attorneys will provide continued support for a subsequent transaction at a reduced fee if the original purchaser fails to close, since much of the work necessary to transact the closing has already been done. Real estate lawyers understand the law as it relates to your sale or purchase and are the only real estate professionals who can advise you as to your rights and risk of liabilities.
The FSBO desiring to avoid the high cost of a sales commission may find hiring a real estate attorney to be a very affordable alternative to hiring a real estate broker, particularly, if they already have a buyer. Expending some effort to guard against potential disputes is key to any “sound business plan” and while selling a house may not necessarily be business, guarding against risk is “good business” for everyone.
The risks inherent in a real estate transaction are substantial. If buying a house is the largest single purchase most Americans will ever make, then the potential for financial loss may likewise be the biggest risk they ever take. Common disputes include breach of the purchase agreement (breach of contract), earnest money refunds, fraud – actual and constructive, easement rights, undisclosed special assessments, defective construction, mold, closing cost apportionment, title problems, zoning issues, restrictive covenants, flooded basements, defective septic tank systems, encroachments, insect infestation, radon gas, taxes, mechanic liens, tax liens, judgment liens, claims for specific performance, and more. While the risk is inherent, it can be substantially minimized with the assistance of a real estate professional, whether that is a real estate broker or a real estate attorney. The point is perhaps best summed it with the old adage that an ounce of prevention is worth a pound of cure. There are few if any transactions where this advice would be more warranted. Go it alone at your own substantial risk.
Rob McNevin is a real estate attorney located in Indianapolis who has been practicing since 1995. He is a partner with McNevin & McInnes, LLP with years of experience in real estate and construction related matters.
