The world of real estate has changed dramatically over the years. A hand-shake is no longer a prudent way of sealing the deal, and closing at the kitchen table is out.

Unfortunately, the type of person who tries to sell "by owner" doesn't seem to understand the complexities of selling real estate as the year 2000 approaches. Selling real estate today requires a great awareness of current law, contracts, and the intricacies of closing the transaction.

Probably the best way to illustrate the shortcomings of dealing with the typical FSBO is to provide a snapshot of the complexities that a real estate agent must navigate in the sale of a simple residential home. Let's begin Part I with a look at what the real estate agent must do to prepare a home for the most routine transaction.

Before the home is even offered for sale, the agent must:

- Research the condition of title to determine if any deeds will be required from a prior owners. This is common where the previous owner has provided financing to the current seller.

- Discover whether there are any unpaid liens or special assessments that would be accelerated for collection upon sale. Many owners don't realize that the new sewers, or other similar municipal improvements, which are paid for over many years, are typically due in full, upon closing.

- Check the assessment and assessor's records for pertinent information.

- Obtain and complete proper disclosure forms per state law.

- Conduct substantial research to assure that the property is marketed at a price which not only will result in a fair sale, but can be supported by the future buyer's lender.

- Determine whether there are any unique factors that would make the property difficult to finance with the typical lender. Older homes, properties with private water and sewer, non-conforming zoning use or even homes with substantial acreage or numerous out-buildings can all be difficult to finance.

- Obtain an updated Certificate of Occupancy in many municipalities requiring substantial advance planning.

- Review the existing financing to determine it's assumablility. And, if it is indeed assumable, then the lender must be contacted to determine the steps necessary to complete this kind of transaction.

- Perform a financial analysis to assess whether or not the owner can or should offer to finance the sale themselves, if the owner has substantial equity.

- Contact local municipalities and land surveyors, if there is substantial property being sold, or any planned partitioning will occur. Additionally, many state agencies may be involved in this process or at least must be consulted to ensure that accurate information is conveyed to the purchaser about the property's future zoning and development potential.

- Review the rules and regulations if the property is a condominium or subject to a Homeowner's Association to determine if there are any limitations on the use of the property of which a potential purchaser should be informed.

While there are countless other intricacies that may apply to the typical transaction, the above list alone clearly demonstrates what few outside of the real estate profession realize: that the path to successfully selling real estate today contains numerous steps, many of which are mined with obstacles large enough to cause the transaction to fail.

That is the number one reason why working with FSBO's is such a risk - the high rate of failure to close.

In Part II, we'll look at why that is too often the case.

Part II: Why the Transaction Doesn't Close

Published: May 21, 1998

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Editor's Note: This article reflects the opinions of Stephen Canale only and not necessarily the views of this or any other publication, organization or Website owner.