With Orlando’s fast-growing economy and projects such as the Creative Village in downtown Orlando and the Medical City in Lake Nona, Orlando has earned the ninth spot on Forbes’ list of “Fastest Growing Cities.” Clearly, people are moving to Florida at a high rate, and these transplants need homes. In this climate, sellers may wish to explore selling their homes “by owner” – that is, without hiring a realtor – and homebuyers may wish to know more about purchasing a home which is being marketed as “for sale by owner.”  This article will briefly address some of the considerations.

There are pros and cons to selling a home by owner.  The first and most obvious advantage is a by owner seller will not be required to pay a realtor’s commission which can be as high as six percent (6%) of the sales price. Second, the owner will be responsible for all conversations and negotiations with prospective buyers – meaning that the owner has control over how the home is marketed and presented to prospective buyers. Third, websites like Zillow, Craigslist, and Forsalebyowner.com offer practical and cost-effective ways to market a home for a sale without a realtor. Finally, the closing process is the same in any home sale. If the buyer is financing the purchase, a closing agent will likely be required – which expense will be the same regardless of whether a realtor is involved.

There are also disadvantages to selling a home by owner. First, the home may not be marketed as extensively as if a realtor were involved. An experienced realtor can make a home look appealing to a wide range of potential buyers. Also, the home will automatically not be listed in the Multiple Listing Service (“MLS”) which limits its exposure to potential buyers. While some realtors may be willing to list the property on the MLS listing for a fee, independent realtors have no incentive to show a property for sale by owner as there is nothing to guaranty the realtor will receive  a commission. Second, by owner sellers are required to conduct all showings of the home and negotiations themselves.  While this affords sellers a certain level of control, it may also be time-consuming and stressful.  Third, the seller will want to ensure he or she is pricing the home realistically. A realtor familiar with the local market can be of assistance in pricing a house.  Remember, the sales price will include the realtor’s commission.  An alternative to getting input or the sales price from a realtor is to hire an appraiser. Finally, sellers tend to be emotionally invested in their homes, which makes negotiating objectively difficult.

When it comes to purchasing a home that is for sale by owner, there are few disadvantages for the purchaser.  Properties for sale by owner tend to be owner-occupied, and as a result are better-maintained than properties that are vacant.  Additionally, buyers have the opportunity to ask questions about the home of someone who knows the home extensively and has been responsible for its maintenance.  Regardless of the information provided by the seller, we recommend that all purchasers obtain a home inspection during the due diligence period in order to identify any problems to be addressed before closing.  Finally, as long as a closing agent is involved, the closing process will be the same as for a transaction where a realtor is involved.

Although saving a realtor’s commission may be cost-effective, it is not advisable for either the seller or purchaser to attempt to handle the complex aspects of the transaction, such as the contract negotiation and closing, without the assistance of a lawyer.  If the closing agent is a lawyer, the agent may simultaneously act as the seller’s or buyer’s counsel and make certain that the seller’s or buyer’s rights and long term obligations are clear and enforceable. The attorney serving as closing agent will not be able to represent both the seller and buyer.  Finally, attorneys are in the best position to help sellers comply with the many legal aspects of the transaction, such as ensuring that all necessary disclosures (such as radon and lead-based paint disclosures) are made and identify any title or survey defects or concerns.

While participating in a for sale by owner transaction may be a compelling option for a number of reasons, sellers and buyers should ensure that they have the support of a legal professional to help protect their rights, ensure they are allocating and paying the appropriate costs among the parties, and memorializing the post-closing obligations of each party. Buying and selling a residence is one of the most significant financial transactions most of us will engage in. Protect yourself by engaging an attorney.