Understanding Sell By Owner Contracts
Thinking about selling your home without a real estate agent? You’re not alone. Many homeowners are choosing the For Sale By Owner (FSBO) route to save on commissions and take control of the selling process. This guide breaks down everything you need to know about sell-by-owner contracts, including how to draft your real estate agreement and how owner financing contracts work.
Whether you're selling a house, vacant land, or a rental property, this guide is designed to give you confidence, clarity, and the right tools for a successful sale.
What Is a Sell By Owner (FSBO) Contract?
A seller-by-owner contract, also known as FSBO agreement, is a legally binding document between a homeowner and a buyer. It outlines all the important terms of the sale, like the purchase price, closing date, and any conditions that must be met. This contract ensures both parties understand their rights and responsibilities, reducing the risk of misunderstandings.
Why it matters: A solid contract protects you, helps avoid disputes, and keeps the sale moving forward smoothly.
✅ Learn more about FSBO basics on Nolo
Key Parts of FSBO Real Estate Contract
1. Property Information
Include the full address, parcel number (if available), and any key features or fixtures included in the sale. The more details, the better.
2. Purchase Price
Clearly state the agreed-upon price. If there are any conditions related to appraisal or inspection, those should be spelled out here, too.
3. Deposit and Payment Terms
Outline how much the buyer will put down, how payments will be made, and where the deposit will be held. Clear terms prevent payment disputes.
4. Contingencies
Common contingencies include financing, home inspection, and the sale of the buyer's current home. These give both parties a way to back out if certain conditions aren't met.
5. Closing Date
Set a specific closing date when the ownership officially changes hands. Make sure both parties are prepared by that time.
6. Signatures
The deal isn’t valid without signatures from both the seller and the buyer. Everyone involved should fully understand the terms before signing.
📄 Download sample FSBO contracts from LawDepot
What Is an Owner Financing Contract?
In owner financing, the seller acts as the lender instead of the buyer going through a bank. The buyer agrees to pay the seller over time, usually with interest.
It can be a great option if:
The buyer can’t qualify for a traditional mortgage.
The seller wants to generate passive income through interest.
You both want to speed up the transaction.
Key Elements of an Owner Financing Agreement
Interest Rate: Set a fair rate that reflects market conditions.
Payment Terms: Include the payment frequency and whether there’s a balloon payment at the end.
Default Terms: Spell out what happens if the buyer misses payments—late fees, interest hikes, or foreclosure.
Loan Duration: Define how long the buyer will take to pay off the balance.
How to Create a FSBO Contract (Step-by-Step)
Writing your own real estate contract can feel intimidating, but with the right steps, it’s totally doable.
Step 1: Research State Laws
Every state has its own FSBO rules. Be sure to check local requirements about disclosures, timelines, and wording.
Check your state's FSBO laws at LegalZoom
Step 2: Use a Template
Start with FSBO contract template to save time. Many are state-specific and cover key elements.
Step 3: Personalize the Terms
Add your property’s details, sale price, closing date, and any agreed-upon conditions. Don’t forget to include any items like appliances or fixtures.
Step 4: Add Required Disclosures
Depending on your state, you may need to disclose:
Lead-based paint (for homes built before 1978)
Flood zones
Property defects
Step 5: Review with a Real Estate Attorney
Having a professional look over your contract can prevent costly legal issues. It’s worth the peace of mind.
Special Considerations for Different Property Types
Vacant Land
Include zoning info, access rights, and any known easements. These impact the value and how the land can be used.
Commercial Properties
Address any existing leases or tenant agreements. Include who’s responsible for managing those post-sale.
Rental Properties
Clarify whether current tenants will stay, and include lease transfer details.
Understand landlord responsibilities during a sale at BiggerPockets
Tips for Writing a DIY Real Estate Contract
If you're confident handling the paperwork yourself, keep these in mind:
Be Clear and Direct: Avoid vague language. Define all terms upfront.
Cover All the Bases: Include payment terms, deadlines, responsibilities, and contingencies.
Get Feedback: Have someone you trust review the contract before signing.
Stay Updated: Real estate laws and best practices change. Keep learning.
Browse real estate contract tips from Rocket Lawyer
Final Thoughts
Selling your home yourself can feel overwhelming at first, but with a little research, a solid contract, and maybe some legal guidance, it’s absolutely doable. Not only can you save on commissions, but you also get full control over how and when your property is sold.
The key to success? Preparation. By understanding the key parts of an FSBO contract, customizing a solid agreement, and staying informed about your responsibilities, you’ll be set up for a smooth, confident sale.
Take your time, ask questions, and don’t be afraid to bring in a pro for a final review. With the right tools, selling your house by owner can be a smart, rewarding experience.
