For Sale By Owner Contract California: Don't Skip This in Your Contract! (2024)

409,000 home sellers across the country opted to sell FSBO in 2023. Each of them saved nearly $10,000 in listing agent commissions. Moreover, 55% of millennials are comfortable selling their homes themselves. While sellers are open to FSBO, for 7% of them the paperwork was a major issue.

The problem with FSBO paperwork is drafting the contract and to ensure you don’t get a bad deal. FSBO Paperwork can systematically be resolved with the help of real estate attorneys. Or, you can opt for a FSBO Flat Fee MLS platform like Houzeo.

When you sell with Houzeo you get contract assistance from listing to closing. You benefit from saving thousands in listing agent commissions in the Golden State. You also get maximum exposure to home buyers by listing on the California MLS.

What Is a For Sale By Owner Contract California?

A For Sale By Owner contract contains the terms and conditions of your home sale. These terms include contingencies, deadlines, and closing processes. A For Sale By Owner contract in California is also called a “For Sale By Owner purchase agreement”.

Who Draws up Contract in For Sale By Owner?

The seller draws up the contract when selling a house by owner in California. You can even hand-draft the FSBO contract and get approval from:

• A Real Estate Attorney: They specialize in real estate contracts and paperwork. They usually charge approximately $150 to $300 per hour.
• The Buyer Agent: The buyer’s agent can also help draft the contract. You can pay commissions to buyer agents in California ranging from 2% to 3%.
• A Transactional Agent:They can draft a contract without representing you in negotiations. They might charge anywhere from $150 to $400 per hour.

What Major Aspects to Include in Your FSBO Contract?

A well-drafted FSBO purchase agreement protects you and the buyer throughout the transaction. In the contract, you need to include elements such as:

1. Purchase Price and Closing Details

A simple For Sale By Owner contract has the purchase price, down payment, and closing date. Mention who pays the closing cost, or if it should be split between both parties. Also, include contingencies if the conditions of the home sale are not fulfilled.

2. Financing of the Deal

Define parameters if the buyer needs to finance the property through cash or via a lender. This should include the loan the buyer opts for and the earnest money deposit. Add a timeframe for the buyer to secure the financing.

Also, include the option to return the buyer’s earnest moneyif the financing falls through. For all-cash deals, mention the minimum percentage of a bank transfer or if you’d like hard cash.

3. Home Inspection Contingency

Allow the buyer to arrange for a home inspection. Set in place certain clauses should any critical issues arise during the inspection. Also, set a deadline for the inspection or any repairs if you undertake them.

If extreme cases arise, determine the dealbreakers for a termination of the sale. In minor instances, decide if the home’s price will be renegotiated.

4. Deed for Title Transfer

A deed mentions the exact title you will transfer to the buyer. The most common way to transfer a property title is by warranty deeds. Unless married, be careful how you want to hold property jointly in California. A deed is completed at the time of purchase and can be amended to include or exclude certain names.

Double-check the name on your property in official land records from the county assessor’s office. You must also include the timeline for the transfer of the title. This section should specify the title company as well as who pays for title insurance.

5. Default Provisions

Here you should clearly outline the consequences if either party breaches the contract. Specify methods to handle missed payments and delays. Mention contingencies in case of a failure to close within the predetermined date.

Ensure that none of the contingencies give you the bad end of the deal. If any contingency applies, you should be able to back out of the contract.

6. Seller Disclosures

This section must include relevant California seller disclosure forms. Here you must pledge that you abide by California’s laws for seller disclosures. It contains details such as the ownership history, tax status, and any known home defects.

Was your home built before 1978? Then make sure you submit the “Lead-Based Paint Disclosure” (addendum) with the contract.

7. Dispute Resolutions

This section notes procedures for settling disputes that may arise throughout the transaction. List arbitration or different mediations as a substitute for dispute resolution. Instead of going to court, hire a real estate lawyer to help you reach the best amicable solution.

What Are Some For Sale By Owner Contract California Contingencies?

A well-framed clause helps you avoid nasty surprises when selling FSBO. You can protect yourself from worst-case scenarios by including contingencies such as:

Subject to Finding Replacement Property Contingency*: You can back out of the sale if you can’t find a new property within a specified timeframe (e.g., 30-60 days). Avoid the crisis of renting interim housing or being pushed into a hasty purchase.

Sale of Seller’s Current Home Contingency*: This contingency allows you to back out of the current sale within a specific timeframe. You are protected from financial difficulties due to overlapping mortgages or from owning two properties.

Appraisal Contingency*: This contingency protects you if the property doesn’t appraise for the agreed-upon purchase price. The contract could specify that the buyer covers the difference (appraisal gap) in cash, renegotiation, or termination.

*Note: These contingencies might be less attractive to buyers. Weigh the risks and benefits carefully.

What to Clarify in Your CA FSBO Contract?

While taking a look at contingencies and clauses when selling a house in California, do not forget to clarify the basics in your contract such as:

• Seller Name: Your name should match what is in public records. If incorrect, the title company will not close on the property without an explanation.
• Earnest Money Deposit: The final purchase price should include an earnest money deposit. This is to protect you in case the buyer backs out under the wire.
• Closing Deadline: The deadline should include an exact closing date. Add dates for contingencies about financing and inspections as well.

California For Sale By Owner Contract Template

For Sale By Owner Contract California

Source: loc.gov

Ready to Draw Up Your California FSBO Contract?

If you’re sure then the FSBO contract protects your interests, especially without a Realtor. The contract helps you with clarity regarding legality, reduces risk, smooths the process, and ensures adherence to regulations.

While it may seem daunting, it isn’t! You just need to go through steps to verify important contract elements and you are good to go. Finally, keep track of all paperwork when selling your house without a realtor.

If you aren’t sure and still want to sell FSBO opt for Flat fee companies like Houzeo. Houzeo can help you from listing to closure.

**Remember: While this blog highlights key clauses, consulting a real estate attorney is highly recommended. This ensures your FSBO contract is tailored to your specific situation and complies with all California real estate regulations.

» Need More Clarity?Read these exclusiveHouzeo reviewsand learn why it is one of the best Flat Fee Multiple Listing Services in California.

Frequently Asked Questions on CA FSBO Contracts

Other Agreements You Should Know About

• Exclusive Agency Agreement: What is an exclusive agency agreement, and should you opt for it?
• Exclusive Right to Sell Agreement: Why is the right-to-sell agreement the most popular contract?
• Open Listing Agreement: Why do agents across the US not recommend an open listing agreement?
• Net Listing Agreement: Know what makes this agreement only valid in 3 states?

• California
• For Sale By Owner
• For Sale By Owner Contract