For Sale By Owner Contract

Last updated: June 9, 2025

Selling a home is a significant financial and legal undertaking and many homeowners choose to navigate this process without the assistance of a real estate agent through a method known as "For Sale By Owner" (FSBO). A critical component of this process is the For Sale By Owner contract, a legally binding document that outlines the terms and conditions of the sale between the seller and the buyer. This article provides an in-depth exploration of the FSBO contract, offering homeowners a detailed guide to understanding, drafting, and executing this essential document. From key components to legal considerations and common pitfalls, this guide aims to equip sellers with the knowledge needed to successfully complete a home sale on their own.

What is a For Sale By Owner Contract?

A For Sale By Owner contract, often referred to as a purchase agreement, purchase and sale agreement, purchase contract, or real estate sales contract, is a legal document that formalizes the agreement between a home seller and a buyer in an FSBO transaction. Unlike traditional real estate transactions, where a real estate agent or broker facilitates the creation of the contract, FSBO sellers take on this responsibility themselves. The contract serves as the foundation of the transaction, detailing the rights, obligations, and expectations of both parties.

The FSBO contract is critical because it governs the transfer of property ownership, ensuring that both the seller and buyer are protected legally and financially. It addresses key aspects of the sale, such as the purchase price, closing date, contingencies, and disclosures, while also complying with state and local real estate laws.

Why Choose For Sale By Owner?

Before diving into the specifics of the FSBO contract, it’s worth understanding why homeowners opt for FSBO transactions. The primary motivation is cost savings. By eliminating the need for a real estate agent, sellers avoid paying commissions, which typically range from 5% to 6% of the sale price. For a $400,000 home, this could mean saving $20,000 to $24,000.

However, FSBO sales come with challenges. Sellers must handle marketing, negotiations, and legal documentation themselves, which requires time, effort, and a solid understanding of real estate processes. The FSBO contract is one of the most critical elements, as errors or omissions can lead to disputes, delays, or even legal liability.

Key Components of a For Sale By Owner Contract

A well-drafted FSBO contract should be clear, comprehensive, and compliant with local laws. Below are the essential components that every FSBO contract should include:

1. Identification of Parties

The contract must clearly identify the seller(s) and buyer(s) by their full legal names. If the property is co-owned (for example: by a married couple), all owners must be listed. Similarly, all buyers, including any co-buyers, should be named to avoid ambiguity.

2. Property Description

A detailed description of the property is crucial. This includes the full address, legal description (as found in the deed or title), and any additional details, such as lot size or unique features. The legal description ensures the property being sold is accurately identified.

3. Purchase Price and Payment Terms

The contract must specify the agreed-upon purchase price and how it will be paid. This section should outline:

• The total purchase price.
• The amount of the earnest money deposit (a good-faith deposit from the buyer).
• The method of payment (e.g., cash, mortgage financing, or seller financing).
• Any terms related to financing, such as whether the sale is contingent on the buyer securing a mortgage.

4. Earnest Money Deposit

The earnest money deposit is a sum paid by the buyer to demonstrate their commitment to the purchase. The contract should specify:

• The amount of the deposit.
• Who will hold the deposit (typically a title company serving as escrow agent or attorney).
• Conditions under which the deposit is refundable or non-refundable.

5. Contingencies

Contingencies are conditions that must be met for the sale to proceed. Common contingencies in an FSBO contract include:

• Financing Contingency: Allows the buyer to back out if they cannot secure a mortgage.
• Inspection Contingency: Permits the buyer to request repairs or renegotiate based on the results of a home inspection.
• Appraisal Contingency: Ensures the property appraises at or above the purchase price.
• Sale of Buyer’s Home Contingency: Allows the buyer to withdraw if they cannot sell their current home.

6. Closing Date and Costs

The contract should specify the closing date, which is when the title is transferred, and the buyer takes possession of the property. It should also outline who is responsible for closing costs, such as title insurance, transfer taxes, and escrow fees. These costs can vary by state and should be negotiated upfront.

7. Disclosures

Sellers are typically required to provide disclosures about the property’s condition, such as known defects, environmental hazards (for example: lead paint or asbestos), or other material facts. Federal and state laws may mandate specific disclosures, so sellers must research local requirements.

8. Personal Property and Fixtures

The contract should clarify what is included in the sale. Fixtures (items permanently attached to the property, like light fixtures or built-in appliances) are typically included, while personal property (for example: furniture) is not unless explicitly stated.

9. Default and Dispute Resolution

This section outlines what happens if either party fails to meet their obligations. For example, if the buyer backs out without a valid contingency, they may forfeit their earnest money deposit. The contract may also specify how disputes will be resolved, such as through mediation or arbitration.

10. Signatures and Dates

Both parties must sign and date the contract to make it legally binding. Some states require notarization or witnesses, so sellers should verify local requirements.

Legal Considerations for FSBO Contracts

Creating a legally valid and enforceable FSBO contract requires careful attention to state and local laws. Real estate regulations vary significantly, and non-compliance can lead to serious consequences. Below are key legal considerations:

1. State-Specific Requirements

Each state has its own real estate laws governing sales contracts. For example:

• In California, sellers must provide a Transfer Disclosure Statement (TDS) detailing the property’s condition.
• In New York, attorney review is common, and contracts may need to be drafted or reviewed by a licensed attorney.

Some states require specific language or clauses, such as those related to radon gas or flood zones.

Sellers should research their state’s requirements or consult a real estate attorney to ensure compliance.

2. Title and Deed

The FSBO contract should confirm that the seller has clear title to the property, meaning there are no liens, encumbrances, or disputes that could prevent the transfer of ownership. A title company or attorney should conduct a title search to verify this.

The title search is usually conducted once the purchase contract is signed by both parties (seller and buyer) and submitted to the designated title company or real estate attorney to prepare for closing. It is a best practice for the title company or real estate attorney to provide the buyer and their lender with a title commitment, which is an insurance to protect against title issues that, however unlikely, may arise.

The title commitment will stipulate any outstanding liens that must be resolved by the seller in order for clear title to be transferred to the buyer. The title company or real estate attorney will coordinate with the seller so that any liens are paid off via the settlement statement at closing using the purchase price proceeds from the buyer. This means the seller will receive proceeds net of any liens that are paid off in order to convey clear title.

Liens that may cloud title (prevent clear title until paid off) include but are not limited to utility liens for unpaid water/sewer/garbage, state and federal (IRS) tax liens, child support judgements, mechanics liens, etc.

3. Fair Housing Laws

Sellers must comply with federal and state fair housing laws, which prohibit discrimination based on race, color, religion, sex, national origin, disability, or familial status. The FSBO contract should not include terms that violate these laws.

4. Property Condition Disclosures and Liability

Failure to disclose known defects can result in legal liability for the seller. For example, if a seller knows about a leaky roof but fails to disclose it, the buyer could sue for damages after closing. Full transparency is critical to avoid post-sale disputes.

Most states in the United States require sellers to provide some form of disclosure about the property’s condition, but a few operate under the caveat emptor ("buyer beware") principle, where sellers are not obligated to proactively disclose defects unless specifically asked or if the defect poses a health or safety risk. The following states have limited or no mandatory property condition disclosure requirements, based on available data:

• Alabama: Follows the caveat emptor rule. Sellers are not required to provide a disclosure statement unless the defect impacts health or safety, or if the buyer specifically asks about defects. Sellers must avoid fraud or misrepresentation.
• Arkansas: Also follows caveat emptor. Sellers are not required to provide a disclosure form, but real estate agents must make a reasonable effort to identify issues, and sellers cannot commit fraud.
• West Virginia: Operates under caveat emptor. Sellers are not required to disclose property conditions unless asked, but real estate agents must be honest, and federal lead-based paint disclosures apply.
• Wyoming: Follows caveat emptor. Sellers are not required to disclose defects unless asked, but must disclose known issues that affect health or safety. Federal lead-based paint disclosures are required.
• Alaska: While Alaska requires a Residential Real Property Transfer Disclosure Statement for known defects, this requirement can be waived if both the buyer and seller agree.

Even in these "buyer beware" states, a seller cannot simply remain silent in all situations. Common exceptions to the caveat emptor doctrine include:

Fraudulent Misrepresentation or Concealment: A seller cannot actively lie about the condition of the property or intentionally hide known defects. For example, if a buyer directly asks if the basement has ever flooded and the seller untruthfully says no, they could be held liable. Similarly, taking active steps to conceal a major crack in the foundation would likely constitute fraud.

Fiduciary Relationship: When a special relationship of trust exists between the buyer and seller, the seller may have a greater duty to disclose.

Direct Inquiry: If a buyer makes a specific inquiry about a particular aspect of the property's condition, the seller is generally obligated to answer truthfully and not provide misleading information.

Health and Safety Risks: In many of these states, sellers may be required to disclose known defects that pose a direct threat to the health or safety of the occupants. This can include issues like the presence of lead-based paint (a federal requirement for homes built before 1978), asbestos, or a dangerously faulty electrical system.

Statutory Disclosures: Some specific issues may be governed by state or federal laws that mandate disclosure, overriding the general principle of caveat emptor. For instance, some states have specific disclosure requirements for issues like the source of water, the type of sewage system, or the presence of an underground storage tank. Some states, like Missouri, have county-specific rules that deviate from the state’s general policy. Always check local regulations in addition to state laws.

Role of Real Estate Agents: It is crucial to note that real estate agents in caveat emptor states may have different and often higher disclosure obligations than the sellers themselves. Professional licensing laws and codes of ethics often require agents to disclose any known material facts about a property to all parties in a transaction.

For prospective homebuyers in these states, the message is clear: due diligence is paramount. This includes obtaining a professional home inspection, carefully reviewing any available documents, and asking pointed and specific questions of the seller and their agent. While caveat emptor may be the law of the land, understanding its exceptions is key to a secure and informed real estate purchase.

5. Electronic Signatures

Many FSBO contracts are executed electronically, especially in today’s digital age. Electronic signatures are generally legally binding, but sellers should ensure they comply with the Electronic Signatures in Global and National Commerce Act (E-SIGN) and state-specific laws.

Drafting an FSBO Contract

While it’s possible to draft an FSBO contract from scratch, most sellers use a FSBO contract template or hire a professional to ensure accuracy. Below are steps to create an effective FSBO contract:

1. Use a Template

Many online platforms offer state-specific FSBO contract templates for a small fee while OfferMarket provides its standard For Sale By Owner Contract and state-specific disclosure forms for free. These templates are designed to meet local legal requirements and include standard clauses. Popular sources include:

• LegalZoom
• Rocket Lawyer
• Local real estate associations (for example: Realtor associations)

When using a template, sellers should customize it to reflect the specifics of their transaction and always consult with an attorney to review.

2. Consult a Real Estate Attorney

Even in FSBO transactions, consulting a real estate attorney is highly recommended. An attorney can:

• Review the contract for legal compliance.
• Ensure all necessary disclosures are included.
• Advise on state-specific requirements.

The cost of hiring an attorney is typically far less than the potential cost of legal disputes.

3. Be Clear and Specific

Ambiguity in a contract can lead to misunderstandings or disputes. Use clear, concise language and avoid vague terms. For example, instead of stating “appliances included,” specify “stainless steel refrigerator, dishwasher, and oven included.”

4. Include Contingencies

Contingencies protect both parties by allowing the transaction to be canceled under specific circumstances. However, sellers should be cautious about agreeing to too many contingencies, as they can delay or derail the sale.

5. Review with the Buyer

Before signing, both parties should review the contract carefully. This ensures that everyone understands the terms and agrees to them. If the buyer has an attorney or agent, they may request changes, which should be negotiated promptly.

Common FSBO Contract Pitfalls and How to Avoid Them

FSBO sellers often encounter challenges when drafting and executing contracts. Below are common pitfalls and strategies to avoid them:

**1. Incomplete or Incorrect Information

Failing to include essential details, such as the legal description of the property or specific contingencies, can render the contract invalid. To avoid this, double-check all information and use a checklist to ensure nothing is overlooked.

2. Ignoring Local Laws

As mentioned earlier, real estate laws vary by state. Sellers who fail to comply with local regulations risk legal challenges. Research state-specific requirements or consult an attorney to ensure compliance.

3. Poor Negotiation

FSBO sellers may struggle with negotiating terms, especially if they’re inexperienced. To avoid unfavorable terms and wasted time and effort:

• research comparable sales in the area
• understand market conditions
• confirm buyer's proof of funds
• be prepared to walk away if the buyer’s demands are unreasonable or the buyer's delays drag on

If the buyer says they are purchasing with cash, ask for and verify their bank statement(s). If they say they are buying with financing from a lender, ask for and verify their proof of fund or "pre-approval" letter and confirm with the lender that the buyer's credit score and liquidity has been reviewed. It is easy for buyers to provide fake pre-approval or proof of funds because they plan to assign the contract to another buyer for a fee so this step will require research.)

4. Not Disclosing Defects

Sellers who fail to disclose known issues with the property can face lawsuits or financial penalties. Always provide full disclosures and document them in writing.

5. Rushing the Process

FSBO transactions can be time-consuming, and sellers may feel pressured to close quickly. However, rushing can lead to mistakes. Take the time to review the contract, consult professionals, and ensure all terms are fair.

The Role of Professionals in FSBO Transactions

While the goal of FSBO is to save money by avoiding real estate agents, certain professionals can still play a valuable role:

• Real Estate Attorney: As noted, an attorney can draft or review the contract, ensuring it meets legal standards.
• Title Company: A title company can conduct a title search, provide title insurance, and handle escrow services.
• Home Inspector: Even if the buyer hires their own inspector, sellers may benefit from a pre-inspection to identify and address issues before listing the property.
• Appraiser: An appraisal can help sellers set a realistic price and avoid disputes over the property’s value.

These professionals can provide expertise and peace of mind, often at a fraction of the cost of a real estate agent’s commission.

Sample FSBO Contract Outline

Below is a simplified outline of an FSBO contract to illustrate its structure. This is not a substitute for a state-specific template or legal advice but serves as a starting point.

• Parties: This agreement is entered into on [Date] between [Seller’s Full Name(s)] ("Seller") and [Buyer’s Full Name(s)] ("Buyer").
• Property: The property located at [Full Address], legally described as [Legal Description], is the subject of this agreement.
• Purchase Price: The purchase price is $[Amount], payable as follows:
  • Earnest money deposit: $[Amount], to be held by [Escrow Agent/Attorney].
  • Balance due at closing via [Cash/Mortgage/Seller Financing].
• Contingencies: This agreement is contingent upon:
  • Buyer securing financing by [Date].
  • Satisfactory home inspection by [Date].
  • Property appraising at or above the purchase price.
• Closing: Closing shall occur on [Date] at [Location]. Closing costs shall be paid as follows: [Specify].
• Disclosures: Seller shall provide all required disclosures, including but not limited to [List Specific Disclosures].
  • Fixtures and Personal Property: Included in the sale: [List Items]. Excluded: [List Items].
• Default and governing law: In the event of default by either party, [Specify Remedies]. This contract shall be governed by the laws of the state/commonwealth of [Specify state/commonwealth]
• Signatures:
  • Seller: _________________ Date: _
  • Buyer: _________________ Date: _

Tips for a Successful FSBO Transaction

To maximize the chances of a smooth FSBO sale, consider the following tips:

Price the Home Competitively

Research comparable sales in your area to set a realistic price. Overpricing can deter buyers, while underpricing may result in lost profits.

Market Effectively

Use online platforms including OfferMarket, social media, and local advertising to reach potential buyers. High-quality photos and detailed descriptions can make your listing stand out. Let your neighbors know your house is for sale, they may have friends or family that are eager to move into the neighborhood.

Be Responsive

Promptly respond to inquiries and be flexible with showings to accommodate buyers’ schedules.

Screen Buyers

Understand whether your prospective buyer is a primary residence homebuyer, real estate investor, or a wholesaler. Make it clear that you are only selling to a proof of funds verified end buyer and you require valid proof of funds to be submitted with the offer.

Negotiate Confidently

Understand your bottom line and be prepared to negotiate on price, contingencies, or closing costs.

Hire Real Estate Attorney

A trusted real estate attorney can advise during negotiations, prepare and review documents and enforce your contract in the event the other party fails to perform.

Stay Organized

Keep all documents, including the contract, disclosures, and correspondence, in a secure, organized manner.

Conclusion

Selling a home through a For Sale By Owner transaction can be a rewarding way to save on commissions and maintain control over the process. However, the FSBO contract is the cornerstone of a successful sale, requiring careful attention to detail, compliance with legal requirements, and clear communication between parties. By understanding the key components, legal considerations, and potential pitfalls, sellers can confidently navigate the FSBO process.

For those embarking on an FSBO journey, investing time in research and, if necessary, consulting professionals like real estate attorneys or title companies can make all the difference. With a well-drafted contract and a thorough understanding of the process, homeowners can achieve a successful sale while protecting their interests and minimizing risks.

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Related reading: What documents do I need to sell my house without an agent?