FSBO Process – A Helpful List of Steps

Here is a list of typical steps for a successful For-Sale-By-Owner (FSBO) transaction:

Tour – The buyer tours the property.  Sometimes the seller will also present the buyer during the tour (or shortly afterwards) with pre-completed inspection reports, such as:
o Transfer Disclosure Statement (TDS), which is a two-page form describing the condition of the property
o Wood Destroying Organisms Report, which is an approximately 10-page inspection report discussing any observable evidence of termites or moisture/mold (or any other things that may have affected the wood or foundation of the property)
o Natural Hazard Zone Disclosure Report, which is an approximately 40-page document providing lots of boilerplate information about the geographic area and taxes and so forth
o Any other pertinent inspection reports, such as a water well report or a septic system report

Negotiate – Before a formal offer/contract is written up, the parties will usually get together to negotiate less formally (in person or by phone or email) regarding the purchase price and other key items of the sale. For example, this is a nice time to discuss details about the property’s condition (i.e., any needed pre-sale repairs) and the fixtures that will come with the property (i.e., home appliances).  It is also useful to discuss the desired move-in date (close of escrow date) and whether the buyer is also selling their current home (and whether such sale will be a condition precedent to the current sale).  Another item to negotiate is how the parties would like to apportion closing costs (i.e., escrow fee, title insurance) – you generally either want to split the closing costs 50/50, or just use the customary closing costs allocation for your county.  Expect closing costs to total about 1.5-3% of the purchase price.

Bank Pre-Approval – Buyers usually obtain a pre-approval letter from their bank before writing up a formal offer on a home.  The buyer provides a copy of this letter to the seller at the same time the formal offer is written up, or within about 1-3 days of the offer.

Contract – The parties write up the formal offer/contract.  Where the buyer does not have a real estate agent, usually it is the seller (or a FSBO attorney such as myself) who prepares the purchase contract.  Where both parties have agents, the process is generally more formalized around the use of forms and tends to involve counteroffers as well.  I also use the standard forms because typically third parties and institutions involved in the sale are most comfortable with them (i.e., escrow, lenders) and they help speed up the process.

Prepare a Checklist or Timeline – Often it is helpful to make a checklist or timeline to track each party’s responsibilities.  For example, usually the seller needs to secure a termite inspection within 10 days or so, and the buyer needs to secure a home inspection within about 17 days, and then the seller needs to confirm the loan is going to go forward (remove the loan contingency) within 30 days or so.

Escrow & Title – Within about three days of signing the purchase contract, the parties open an escrow account (often with a local title company) and give the escrow holder a copy of the Purchase Agreement. The title company then provides a preliminary title report and offer of insurance (i.e. CLTA or ALTA). The buyer also deposits with the escrow holder any initial deposit (earnest money) defined in the purchase agreement (i.e., 1% of the purchase price).

Disclosures – Within the first couple weeks or so of completing the purchase contract, the seller provides the buyer with all the required legal and real estate disclosures.  A FSBO attorney such as myself often helps prepare the required disclosures.

Inspections – The seller ensures the property is available at some convenient times to the buyer’s property inspector(s).  By law, the buyer has a certain amount of time (i.e. 72 hours) after receiving a home inspection report to decide whether to cancel the agreement and receive a full refund of his initial deposit.  The law requires that any such termination decision be made in good faith by the buyer, so for example it should not be over a trivial matter or something the buyer already knew the details about.

Funding the Purchase – The buyer works with this bank to ensure the bank makes timely payment into escrow of the loan amount, and then the buyer makes payment of any additional funds described in the purchase agreement to cover the purchase (i.e. 20% of the purchase price, plus the buyer’s share of the closing costs).

Pre-closing Walk Through – Contracts usually provide the buyer the option to do a walk through of the home about 3-5 days before the close of escrow date.  The buyer’s approval of the exact physical state of the home is not supposed to be a condition of the closing, but rather this walk-through is just an opportunity for the parties to open up a dialogue regarding any small items or loose ends.  For example, this might be a nice opportunity to discuss transferring utilities, mail forwarding, etc.  As always, parties should be reasonable with one another.  If the property is not in perfect condition, or not totally clean, generally that is a risk accepted by the buyer (unless the purchase contract states that the buyer will receive the property in perfect condition and perfectly clean).  That is the nature of an ‘as-is’ sale, and rightfully so.

Legal Transfer – Within 1-3 days of ‘closing date’, escrow pays out funds to all the relevant parties and simultaneously records the new deed.  A portion of these escrow funds go to the seller’s lenders (any banks holding a mortgage on title), and any remaining funds go to the seller.  Once these parties have been paid and the deed has been recorded, and the old lender releases the old deed of trust, and the new lender records the new deed of trust, escrow is closed.

Possession – The buyer receives the keys to his new home.  The parties are encouraged to accomplish this transfer of the keys anytime that is convenient, whether shortly before or after close of escrow.

Please remember that these steps above are general.  Home sales are by their very nature unique (each property is unique, and every person is special just as your kindergarten teacher advised you – she was right about a lot of other things too!)

So these steps can and should be customized, and even rearranged, with the expectations and flexibility of the parties.

Greg Glaser, Attorney at Law
San Francisco Bay Area – Northern California
(925) 642-6651
Flat Fee Packages Available

Mortgage Loans – Some Tips & Terminology

Types of Loan

A conventional loan is provided by a bank, usually with a 10-30 year term providing a manageable monthly payment.

A private money loan is provided by a private investor, or a family member or friend.

Seller financing is when the buyer pays the monthly mortgage to the seller directly.  Usually the term is 3-5 years, amortized over 30 years — so the monthly mortgage amount is manageable like a conventional loan, but then the whole loan becomes due in 3-5 years, so the buyer has an incentive to refinance or sell before the whole loan (‘balloon payment’) is due in 3-5 years.

Mortgage Loan Amount

Typically a lender can offer a loan between two and three times your annual household income plus assets, assuming you are not saddled with too much debt (such as credit card debt with high monthly payments).

Fixed rate mortgages and adjustable rate mortgages

Fixed rate mortgages have an interest rate that remains unchanged for the term of the loan.

By contrast, adjustable rate mortgages change at certain intervals to reflect interest rates published from time-to-time through indexes floated by the money magicians.  That means that as this rate goes up or down, so will your mortgage payment.  Note also that caps are limits allowed in the interest rate and/or monthly payment on an adjustable rate mortgage.

If you have a convertible mortgage, then you can convert from an adjustable rate to a fixed rate, provided you are willing to pay an additional fee.

Credit Issues

If you’ve had previous credit problems, expect that you may need to explain the circumstances to your lender or broker. By keeping your debts paid-current for at least one year (following a credit problem), it does help improve your mortgage application.  Again, credit card debt is a real stain on an application.

Private Mortgage Insurance

If the buyer is not putting at least 20% down to purchase the house, then FDIC-insured loans have an extra cost called “Private Mortgage Insurance”.  The cost is basically just a monthly insurance fee.

Fannie Mae, Freddie Mac

These organizations are designed to guarantee the mortgage debt of private citizens, so that the government will bail out the lender if the loan is not repaid.  If you seek one of these loans and yet also complain about big banks being bailed out,  then I suppose you are being hypocritical. Modern history offers many examples of lending abuse between individuals, banks, and nations. It seems most people don’t even know that international financiers frequently fund both sides of the same war! For an in-depth analysis, I recommend the scholarship of G. Edward Griffin, and this documentary called Fiat Empire.


This is just another word for mortgage interest. For example, if a loan is ‘amortized over a 30-year period at 4%’, then it means the interest rate is 4% over the course of 30-years.  Just plug these two figures into a mortgage calculator (google it) along with the loan amount and you can calculate your monthly mortgage amount.


These are often charged by mortgage brokers as a kind of pre-paid interest on the mortgage. A point is equal to one percent of your total mortgage amount.  Points are prepaid because they are collected at closing (during the escrow).

Locking In

Your mortage broker can help you ‘lock in’ a loan, which means that the lender will guarantee the interest rate on your mortgage for a limited period, regardless of any interim change in market rates.  Sometimes you have to pay a fee for this lock-in guarantee.

The Appraisal

Appraisals take place about 5-20 days after a purchase contract is signed by the buyer and seller.  In a nutshell, an expert tours the home and looks at comparable property sales and then writes up a report for the lender that estimates the home’s value.  If the property is not appraised at or above the purchase price amount, the loan might not go through.  The consequences of this to the parties are specified in the purchase contract with regard to any ‘loan contingency’.


An escrow refers to the company that helps receive and payout the funds between all the parties (buyer, seller, lenders).  They also help process lots of documentation (sale, recording, etc), taxes, HOA fees, and coordinate the title insurance.  Accordingly, it is really nice to have a helpful, personable, and diligent escrow officer working on your transaction.


The ‘closing’ refers to the process of finalizing the escrow so everyone gets paid and the deed is recorded and the buyer receives the keys.  Sometimes ‘closing’ also refers to the escrow process itself (usually in its final stages).


This refers to the last stages of the escrow closing, when all the parties sign the necessary closing papers and legally transfer the property and all associated funds.

Closing Costs

I’ll plan to detail these more in another article, but in the meantime, closing costs are all the items that need to be paid in addition to the purchase price in or der to close escrow, such as: escrow fee, title insurance, prorated homeowner’s insurance, broker and lender fees, recording fees, notary fees,

Typically these add up to 1-2% of the purchase price.

Late Payments

Assuming the world does not spontaneously implode because of your unforgivable transgression… continued delinquency (late payment) or defaulting on mortgage (failing to make one or more payments) can lead to foreclosure, or judgment against you on the note for the amount owed.

Prepayment Penalty

Most mortages do not have a prepayment penalty, so there is no extra fee or interest charged if you decide to pay off the loan early.  In other words, without a prepayment penalty, there is no balloon payment on interest.

Lease Option

That if the price is right, a ‘rent to own’ option can be the best way to  secure the right to buy from a willing property owner, and still keep  your ‘options’ open. One way to look at the situation is that you are  paying the owner a premium rent for the option to purchase if you  choose.

Buying in 2012

If you don’t have enough money to buy right now, look on Craigslist for a “Lease with Option to  Purchase” (also called a “lease option” or “rent-to-own”).

In the present day, I generally don’t recommend buying a house in  the suburbs or city unless you need to live there.  If you can find organic rural homestead land  with water rights, do yourself a favor and buy it (or rent it) for your family and then farm it organically. Read the literal-based gospel too and search out who YHVH is.   My research suggests that we are experiencing the end of an age, so watch and prepare: www.LogicalHierarchy.com/Watch-for-Signs.pdf

Comparative Advantage of Buying And Selling Real Estate Without a Realtor

Selling real estate can actually be pretty straightforward, so it is routinely accomplished without a realtor simply by utilizing the services of a closing attorney or a FSBO Attorney, such as myself.  With that said, some folks (especially first time sellers) really do benefit from having a realtor help them appraise, market and show the property.  Realtors tend be very personable as well, and they are trained in providing step-by-step guidance and negotiations through the process. Indeed, real estate agents tend to advertise that they can negotiate a higher price (or lower price) for the property – and apparently that’s correct, as evidenced by data compiled by the National Association of Realtors. So this is not a blog for criticizing realtors in order to promote some cost-saving alternative of a FSBO attorney (i.e., thesis – antithesis).

Rather, this is a blog to highlight that if you are a confident and intelligent homeowner who is comfortable marketing and showing your own property, and you don’t mind spending $1k or $2k on a skilled FSBO attorney, then proceeding without a realtor might be an attractive option for you because: (a) saves you money, (b) promotes direct information and communication between the parties, and (c) promotes traditionalism. The same analysis applies to buyers who proceed without a realtor – most people know how to use the internet to find homes for sale, and a FSBO attorney can help you negotiate and document every step of the transaction.

So what I want buyers and sellers to understand is that they should independently determine what is right for their own needs in relation to their own skills… the correct answer depends on your circumstances.

Here’s how FSBOs save money: (a) no real estate commissions, (b) reduced sales price means lower annual property taxes and transfer taxes at sale, (c) reduced sales price means reduced monthly mortgage and interest (this helps creditworthiness), and (d) reduces sales price means reduced closing costs.

a. Commissions

The typical 6% commission charged by two real estate agents is added to the total cost of the home.  Either the buyer pays this commission in the purchase price, or the seller pays this commission by taking a hit on his home sale profit. So by eliminating the commission from the price of the home, both parties stand to benefit.

b. Loan Amount

Lenders use the purchase price to set the ‘loan to value ratio’ that is key to determining the buyer’s eligibility to purchase the home. Therefore, purchasers without a realtor have a slight advantage in this sense – the less you borrow, the less interest you pay.

c. Closing Costs

The escrow fee and title insurance premium are typically determined in relation to the purchase price. So a lower purchase price reduces these closing costs.

d. Tax

There are also two key tax advantages to a FSBO in California: (a) tax assessors use the purchase price of the home to set the assessed value, so by lowering the purchase price, the buyer lowers the annual property tax, and (b) the closing cost item of city and county transfer taxes are set as a percentage of the purchase price, so by lowering the purchase price the buyer also lowers the transfer taxes.

Where a FSBO seller has priced his home at, or slightly below the market value of the home, the seller has anywhere from three to six percent “negotiating room” because a commission will not be paid on the transaction. Therefore, it can be in the seller’s best interest to sell FSBO to help the home sell faster (because the home is more competitively priced than those listed or sold by full priced real estate agencies), and because the seller can ultimately net more from the sale.

Consider the example of a $600,000 home. Assume full service realtor commissions are six percent, or $36,000. In this scenario, the seller will only net $564,000 from the sale; $600,000 – $36,000 = $564,000. If the seller decides to sell FSBO, the price of the home can be significantly lowered, let’s say to $580,000. The seller then benefits by $16,000, the difference between the $580,000 sales price and the $564,000 net proceeds if listed with a full service agent. The buyer benefits by $20,000 because the purchase price was $20,000 less. It is a win-win situation for both buyer and seller.

Without real estate agents, you deal directly with the buyer or seller. When communication is direct and informative, this can add confidence to the agreement.


There is also a traditionalism that may come with a home sale by the owner. Talk to your family members about their property buying history and you may find what I did: one of our family homes was sold on a handshake in Davis, California. A gentleman’s agreement was reached on the essential terms of the deal, and then everything was put down in writing later. In a way, it helps builds community.

Greg Glaser, Attorney at Law
San Francisco Bay Area – Northern California
(925) 642-6651
Flat Fee Packages Available