I Want to Buy or Sell a House Without a Realtor – How Do I Do It?

For many people wanting to buy or sell a home, working with a Realtor is the way to go. With access to the Multiple Listing Service and other industry contacts, information and techniques, Realtors can help buyers find the houses that meet their needs, and can help sellers find ready buyers. However, there are times when a buyer and seller come together without a Realtor’s involvement, and they just need to figure out the steps to getting the sale completed. This article will go through those steps one-by-one.

As you review the steps below, keep in mind that these steps will frequently be happening simultaneously.

1. Sign a Written Purchase and Sale Agreement

Having a well-drafted written purchase and sale agreement is critical to getting a purchase and sale transaction started right. The purchase and sale agreement will set out important details, such as timelines, contingencies and the amount of earnest money. Some examples of these details include:

• Does the buyer have the right to have an inspection done, and if so, what is the deadline for getting it done, and what happens if problems are found;
• Can either party terminate the purchase and sale agreement;
• What happens if the title insurance commitment shows a problem; and,
• How much earnest money will the buyer put down, who will hold the earnest money, and who gets the earnest money if the sale doesn’t close.

These are just a few of the details a properly drafted purchase and sale agreement will cover. Many lawsuits have been filed over the years due to failed real estate transactions. Those failures are frequently caused by disagreements over the rights and obligations of the buyer and seller, due to confusing or inappropriate terms or problems arising that are not addressed by the purchase and sale agreement. Because of the level of detail and complexity involved, the help of an experienced real estate attorney is critical to avoid the pitfalls and ensure a smooth transaction. For many people, buying a house (and selling a house) is the biggest financial transaction that they will enter into during their lifetime.

2. Begin Implementing Terms of Agreement

Immediately after the purchase and sale agreement is signed, Buyer and Seller each have some work to do. The following subsections describe the steps between signing the agreement and closing in a typical transaction.

2.a. Seller: Request Title Insurance Commitment

In most sales, the buyer will insist on receiving title insurance, which provides insurance coverage to help fix any title defects that arise after closing that were not disclosed on the title insurance commitment. The title insurance commitment shows the terms under which the title insurance company will issue the title insurance policy, including any recorded documents that will be exceptions to the policy. Because there is no coverage for issues relating to the exceptions, it is important to get the title insurance commitment quickly after the purchase and sale agreement is signed and deliver it to the buyer for review. Any well-written purchase and sale agreement will require the seller to deliver clear title at closing, and allow the buyer to terminate the sale if the seller will not be able to do so.  In Washington, it is common practice for the seller to pay the premium for the buyer’s title insurance policy.  If the buyer is getting a loan to finance the purchase, the buyer will pay the premium for another title insurance policy for the lender.

2.b. Seller: Deliver Seller Disclosure Statement to Buyer

Like many other states, Washington requires a seller of real estate to provide a disclosure statement to the buyer. This disclosure statement must be delivered within 5 days after the purchase and sale agreement is signed. The contents of the disclosure statement are dictated by RCW 64.06.020. Subjects covered by the disclosure statement include easements and boundary issues, water supply, sewer service, roof and other structural aspects, environmental matters, and homeowners association questions. There are limited exceptions to the requirement of delivering a seller disclosure statement, and a buyer may waive the right to receive the disclosure statement unless the seller answers “yes” to any of the environmental questions.

2.c. Seller: Open Escrow

Generally, it is the seller who opens escrow with a closing agent, who is typically identified in the purchase and sale agreement. Escrow is opened by delivering a copy of the signed purchase and sale agreement to the closing agent. In Washington, closings are handled either by an attorney’s office or by a title company.

2.d. Buyer: Schedule Inspection

Buyers of real estate are universally advised to get an inspection done. The purchase and sale agreement will typically set a deadline for the buyer’s inspection, and will also give the buyer an inspection contingency – that is, the right to terminate the purchase if the buyer is not satisfied with the results of the inspection. Many buyers don’t take the inspection seriously enough; they save money by having a cursory inspection performed, rather than insisting on going through the home in detail. These buyers are then unhappy to learn that they have no recourse against the seller for problems the inspection failed to uncover, unless the seller gave the buyer false information about that problem.

2.e. Buyer: Apply for Financing

Most buyers are going to finance their real estate purchases, and a well-written purchase and sale agreement will provide both a deadline for applying for a loan, and a contingency in the event the buyer is unable to get the loan. For buyers who know they will need financing for a purchase, it is a good idea to apply for pre-approval before even signing a purchase and sale agreement. That will speed the process after the buyer finds a home and signs an agreement, allowing the parties to agree to a quicker closing. In a hot market, being pre-approved is essential to getting an offer accepted.

3. Buyer: Review Information from Seller and Inspector

The buyer should end up with three documents to review with information about the property: 1) the title insurance commitment; 2) the seller disclosure statement; and, 3) the buyer’s inspection report. The buyer should do a thorough review of each of these documents, including asking questions or seeking more information. If there are exceptions to the title insurance commitment other than property taxes that will be paid at closing and the seller’s mortgage that will be paid off at closing, the buyer should consider having the exceptions reviewed by an experienced real estate attorney.

4. Buyer: Submit Objections and Repair Requests to Seller

If there are troublesome exceptions to the title insurance commitment, the buyer should notify the seller of them. The purchase and sale agreement will normally give the seller an opportunity to clear up any such exceptions. Likewise, any material defects disclosed by the inspection report may be presented to the seller for repair before closing.

5. Seller: Review and Reply to Objections and Repair Requests

The seller is under no obligation to remove the title exceptions or make the repairs requested by the buyer, but the buyer’s request is usually presented as an either-or proposition: either take care of these, or I will terminate the purchase and sale agreement. In the case of title exceptions, if they are truly material to the buyer’s ability to own and control the property, the seller will have no choice but to deal with them in some way, or lose the sale. With repairs, there ends up being some back-and-forth in most transactions, resulting in the seller addressing the most serious, and the buyer accepting the property with the more minor defects. If the parties come to an understanding regarding any title exceptions and physical defects, an addendum will be signed to set out the details of their agreement and waive any other aspects of the buyer’s contingencies on the subject. It is not uncommon for the parties to get creative with the terms of these addenda, and it is to everyone’s benefit to have the final language written by an attorney to eliminate ambiguity to the extent possible.

6. Closing

Although it seems exceedingly complicated when looking at it step-by-step, more often than not real estate purchase and sale transactions make it to the finish line – closing. The closing agent will prepare the documents necessary to transfer title from the seller to the buyer, and will handle the exchange of the purchase price and the payment of fees and costs of closing. A good closing agent can make the whole process go smoothly and quickly, reducing the chances of a last-minute problem preventing a timely closing.

Conclusion

Given the complexity of even a “basic” home sale, as well as the significant amount of money involved in purchasing a home, a well-written purchase and sale agreement is crucial. Fennemore’s attorneys have decades of experience handling real estate sales from both the buyer’s and seller’s sides. If you are buying or selling a property without a Realtor, we can help ensure it gets done right.