REAL ESTATE: For Sale by Owner
I have a number of clients lately that are in the process of selling their own homes without using a real estate agent. This is possible and doable; however, there are some issues to keep in mind.
First, this will not be all profit. While you will save the sales commission, there are other costs associated with the sale of a home that you will pay whether you use an agent or not. It is not simply a matter of placing a “For Sale” sign in the front yard and hoping for the best.
Transfer tax: In Michigan, there is a real estate transfer tax that is imposed on the seller of the property. It is based upon the amount that the property is sold for. It is $.75 per five-hundred dollars value for the County portion of the tax and an additional $3.75 per five-hundred dollars value for the Michigan portion – total is $4.50 per five-hundred dollars value or $9.00 per thousand that must be paid at the time the property is transferred and the deed recorded.
Title Insurance: This guarantees to the buyer that you own the property and that it has no title defects. The title insurance company researches the title to assure that this is the case and then issues a policy of insurance based upon the selling price of the property. In the event that there is an issue with ownership or liens that were undiscovered by the title company, the insurance policy is there to assure that this will be paid for.
Document Preparation: If you are for sale by owner, you will need the correct documents for your transaction. You should have a professionally prepared Purchase Agreement that covers all of the bases. The cost of legal counsel to prepare this for you is far less expensive than doing it yourself and making costly errors.
Closing: It is unlikely that your attorney will be the one to actually prepare the closing statements, tax proration, etc. This, in Michigan, is ordinarily done by the title company. There will be a charge for this service. The closing is often held at the title company office as it has the ability to cut all of the necessary checks for the transaction.
If you are selling on a Land Contract, it will be necessary to have some alternative documents prepared. Again, it is wise to have these done by a professional. You will want your rights as a seller protected in the event that the buyer does not make the required payments down the line.
If you are well prepared and have the right assistance, you may be able to sell by owner. It is important that you consult the appropriate professionals to make sure that you are doing it right.