Should you get help with the paperwork?
Selling FSBO doesn’t mean you have to handle the paperwork yourself. When you
get an offer from a buyer, you can get broker representation for a small
fraction of what you’d pay a traditional agent. Our affiliated brokerage,
Chalkboard Realty, will provide
seller representation from contract to close of escrow for just $3,400—and
that’s payable only if escrow closes.
Arguments in favor of getting help:
1. Buyer’s agents sometimes set up the contracts so their buyers can easily
wiggle out of them if better deals come along. A good broker will catch these
Example #1: In her offer, Betty Buyer made the deal contingent on her
getting a loan at a 5% interest rate. Steve Seller agreed. Two weeks later,
Betty Buyer declared that she wasn’t able to get such a loan, and she walked
away from the deal with her deposit. By specifying such a low interest rate,
Betty deliberately created a contingency that was sure to fail—giving her an
Example #2: Bob Buyer made a low initial deposit of $1,000 on a $500,000
home, and agreed to increase the deposit by $9,000 two days later. Sally
Seller agreed. On the day before escrow closed, Bob backed out of the deal.
His penalty? Just the initial $1,000 deposit. Sally hadn’t noticed that
she’d agreed to a standard clause in the contract specifying that only the
initial deposit would serve as liquidated damages in case the buyer
2. A good broker will see that the disclosures are handled properly.
Example #1: Scott Seller didn’t give Bart Buyer the Natural Hazard
Disclosure Form until three days before escrow was to close. Bart,
meanwhile, had found a cheaper house and wanted to get out of the deal. When
he got the Disclosure, he claimed that he wouldn’t have bought Scott’s house
if he had known the house was near an earthquake fault. He was able to walk
away from the deal and take his deposit with him.
Example #2: Buyer Betsy bought Sally Seller’s house in 2005 for $500,000.
In 2006 it was worth $400,000. Betsy, looking for a way to get her money
back, discovered that a registered sex offender lived three doors away, and
that Sally had never filled out a Sex Offender Data Report Disclosure Form.
Betsy successfully sued to rescind (undo) the purchase.
3. Escrow officers offer only limited help. Their role is simply to follow
the parties’ escrow instructions and prepare the documents necessary to close
escrow. They have no obligations with respect to the disclosures that need to be
made in order to comply with state law and avoid future litigation. It’s not
their responsibility to catch your mistakes or offer advice.
4. A good broker will help you negotiate your contract, prepare all
disclosures, coordinate inspections and appraisals, and maintain a timetable to
help ensure everything gets done on time. He or she can also troubleshoot
problems and “make deals happen.”
Example: Seller Samantha wanted to sell her home in June but she faced a
prepayment penalty of $6,000 if the loan was paid off before August.
Samantha’s broker called the lender and negotiated a penalty of just $600.
What about “errors and omissions” insurance?
Some listing agents get “errors and omissions” insurance to protect them from
litigation in the event that the paperwork wasn’t handled properly. Agents often
tout this insurance as a reason to hire them to help with the paperwork.
Be wary. Errors and omissions insurance is designed to protect agents, not
sellers. If an agent is sued by a buyer, the agent’s insurance company may
respond by suing the seller rather than extending protection to them. Indeed, a
former litigation counsel for a Fortune 500 real estate corporation once told me
that sellers are usually better off if the agent doesn’t have errors and
omissions insurance. The best way to protect yourself from litigation is to be
open and honest about any problems with your property, and to have an
experienced broker or attorney review all your documents before you submit them.