Today we are going to go step by step over how to do the paperwork on a for sale by owner real estate deal. Buying a for sale by owner can be extremely overwhelming, especially if you’ve never done it before. Once we’re done today, you’ll be able to find an off-market deal and lock up that contract.
The paperwork side of the deal can be the most daunting part of the process. Realtors can be awesome, but if you can do a for sale by owner without a realtor, you can usually save yourself a lot of money doing it that way. Many of the properties I have purchased have been for sale by owner. I own over $14 million of real estate and I’d say more than half of that has been purchased through this process that we’re going over today.
Step 1: Research Title Companies
I’ve had the chance to work with multiple title companies in my area. I’ve come to find they’re all pretty good, however some of them are especially good. They have certain people working there that really know their stuff.
I have worked with AmeriTitle in the past. I do all of my closings here because of one employee: Kylie. Kylie has helped me with around 10 properties so far. Everyone goes to a realtor to help them with paperwork. The title company probably has more helpful knowledge for you than most realtors. They often help realtors with questions that real estate classes don’t always teach.
A standard for sale by owner contract. It starts with basic information:
Address of the property
Legal description: The title company can pull up county records for the address if you don’t know the lot and block. If they can find a deed with a legal description, that will help you know what to put here.
Earnest money: Not a requirement. A lot of times people have the terms worked out with the seller or their buyer. If you don’t feel like you need earnest money, it’s not required. You’re welcome to put 0 or N/A.
Balance of purchase price to be paid as follows: For the amount of the purchase price minus your earnest money: are you getting a loan for the rest of that purchase price? Or are you bringing in cash, loan, check, or however you’re going to pay for the rest of the transaction? You might down 25% cash, 75% loan.
Easement and liens: List anything that might be on the property.
Closing date: The date you want the transaction to be fully closed. The day you own it (buyer) or no longer own it (seller).
Assessment: If there is a homeowner’s association or taxes, we debit or credit each party accordingly so that everything breaks even.
Confirm dates: Is there any reason you don’t want to use the closing date for the date we use on the prorations for county taxes or any other assessments you have on your property? The title company can tell you what assessments are on your property.
Additional terms and conditions: Anytime I negotiate anything, whether it’s an additional 2% on my closing costs, getting the seller to fix or handle something, I plug it into this section. Here again I also write out that I have 10 days to do my inspection period just to be comfortable that it’s well documented. I like to be over the top making sure they understand that I get my earnest money back if I find anything unsatisfactory during that inspection.
Items excluded from the sale: A lot of times in a for sale by owner, they have things that they want to clarify that you will not be taking ownership of.
One negotiating tactic that I love is to tell the seller that I want to split all of the closing costs. A lot of times sellers don’t really know that that also means splitting the financing closing costs. On all of those, I put “shared equally.” This allows you to negotiate a little more help on the deal. If they agree to split all closing costs, then we can save a big expense. This depends on what type of financing you are getting. Not all loan types allow all fees to be shared in specific ways.
The title company has a packet that will tell you FHA, VA, Conventional, what those terms mean and who can or can’t pay what in fees. There are also some fees that vendors don’t allow closing costs to cover. Those are typically for closing costs and prepaids. Maybe it doesn’t cover specific fees. That will be a thing for the title company’s info packet to tell you. If you know a great lender, they should know everything about that end of things.
If you don’t understand something, Google it! Read it and ask questions till you get it. It’s ok. There are no stupid questions.
If you’re trying to push a for sale by owner deal through, you’re going to get it filled out, signed, bring it to the title company and you’ll be set. I’ve filled a bunch of these out but I still have questions even to this day. There’s always slightly different wording I want to ask about or other questions that come up.
I can’t emphasize this enough: it is so important to find a good title company. You need someone who can really help you through the process. This is why for sale by owner is not at all intimidating. If you find the right title company, they can make it so easy for you. They will tell you exactly what to do and walk you through each step. The big place you get worked over, is if you don’t negotiate properly. You want to make sure you:
Get your purchase price right.
Give yourself 10 days for the inspection.
Clarify that you can get your earnest money back if within that 10 day inspection period, you find the inspection unsatisfactory OR, if you can’t get financing. Make sure you put this in so you can bail out.
Get the closing cost divided properly, especially if you negotiated that.
Do these things and put yourself in a place where you can get a big win. I am so grateful for Kylie and AmeriTitle. She’s always been able to work with me because of multiple properties when it comes to their portion of my closing costs. This is a helpful hint: don’t abuse it. Be reasonable. Just ask if they have any wriggle room. Kyle has always been able to find a way to save me money compared to other title companies out there.
Title companies are just like everyone else. If they compete, you win. Make sure you get them to compete and make sure you find a good one. It’s so important to find a good one, because then the process is going to be smooth. They can make it extremely quick too. Because I use a good loan officer and an incredible title company, I’ve gotten to the point where I can close within 15 days of getting a for sale by owner (or anything) under contract. That’s extremely important to me so that I can push deals through.
If you do an inspection, this addendum section gives you the ability to renegotiate or change your addendum. This is awesome, because when you do your inspection, you should be pushing them hard to get more off. You can list everything in the addendum to alter that agreement.
The Property Condition Disclosure Form page is for the seller to fill out. This is so you can know what you’re getting into. It gives them the opportunity to say any issues with the property.
Everything else is pretty easy. You’ll get your information from your lender. Make sure you have all the right contact info from the seller, the buyer, plug everything in properly and then you are good to go.
That’s it! I know it seems extremely simple and you’re wondering what a realtor really gets paid for. Here’s the deal: realtors understand the market, they make sure you’re getting a good deal, they can help you walk through properties, they can do all of that for you. If you know what you’re doing and you find a killer off-market deal or for sale by owner deal, I want you to know that the process is not that complicated.
It’s worth it to go learn it, figure it out for yourself, go through the process a few times and you’ll understand it. The most important part is to make sure you’ve got the purchase price right. That comes down to negotiating, and understanding the numbers. When it comes time for the paperwork, you just plug in the numbers. Same with the closing costs.
After you negotiate a good deal, it’s not complicated to fill out all the boxes. If you do get lost along the way, you hopefully have a good title company that can give you direction. When I get under contract, I like to have the form ready and with me to fill out with the seller on the spot.
If you’re not ready for that yet, and you get them to agree to a price, you can bring them with you to the title company and walk through it with the seller there. What I prefer to do so they don’t get cold feet during that process, is to go and get it filled out perfectly so you understand everything on the agreement. Then you bring the filled out agreement to the seller and tell them how it works. If they have questions, you can then bring them to the title company to answer any questions.
At this point, it’s time for you to go find a killer deal and get it under contract. Don’t be scared at all when it comes to doing a for sale by owner. Especially if you find a solid title company to walk you through the process.
The biggest mistake you can make is not using a title company. They’ll make sure it’s a clean title. They’ll help you go through the whole agreement. They’ll make sure everything is filled out. On top of having a title company, it’s also important to ensure you are:
Negotiating the right price to where the numbers work.
Giving yourself that 10 day inspection period. You want to make it so you can get your money back if you’re not happy with the inspection.
Check all the right boxes when it comes to closing costs. That is a pretty large expense. Negotiate it to the best of your ability. Don’t get taken advantage of or get stuck with closing costs that you weren’t expecting. The title company will walk through that, but also take advantage of your loan officer. They can explain all those expenses. Worst case scenario you are covering half the total. Best case scenario you are getting the seller to cover all of those.
Do your research! Shop out multiple different title companies, pick the one where you know the person knows what they are talking about.
If you do that, it’s hard to go wrong with a for sale by owner. You have someone you can ask questions to, and trust they are going to go in and do that work. It’s so crucial that you use a title company. It is not worth saving money by skipping them. They’re going to make sure it’s got a clean title and that the whole transaction is good to go. My goal is to help you build that huge passive income.