« Go Back

Legally speaking: Working with FSBO sellers and buyers — safe or sorry?

By Peg Ritenour, OAR Vice President of Legal Services/Administration

The OAR Legal Assistance Hotline receives an array of real estate-related legal questions — including license law issues, disclosure, contract law, ethics and commission problems, among others. In an effort to help you work “within the law,” we’ve launched a new “Legally Speaking” feature exclusively on the OAR Daily Buzz that spotlights some of the timely questions that are being asked by REALTORS. This one concerns getting involved with FSBO sellers and buyers…

Have you ever been approached by a FSBO seller who has already found a buyer and negotiated the terms of sale and just wants you to write the purchase contract for a flat fee? Or has a buyer approached you to do this? Are you allowed to do this?

There are several concerns that REALTORS should have about doing this. The first is the potential that they could be found to have engaged in the unauthorized practice of law for merely writing a purchase contract and doing nothing else in the transaction. Under Ohio law a person must be licensed as an attorney to write a contract for third parties. However, REALTORS have always been permitted to assist parties by “filling in the blanks” on purchase contract forms drafted  by an attorney as long as they are doing so in the course of providing services as a real estate licensee. Therefore, if a REALTOR is only writing the purchase contract and isn’t providing any other services, he could potentially be found to have engaged in the unauthorized practice of law.  To avoid such a claim, the REALTOR should make sure that he is providing other services for the parties in the transaction (i.e., provide information and assist with financing, the inspection, the closing process, etc.).

The next important point that must be remembered is that REALTORS in this situation must comply with all license law requirements, including agency disclosure. Thus, the first thing a REALTOR needs to clarify with the parties is who their client is in this situation. Is it the seller, the buyer or both? (“Neither” is not an option under Ohio law!)

And finally, it is important to understand that whenever a REALTOR is involved in a real estate transaction — even in a limited capacity — he is still obligated to meet his fiduciary obligations to his  client — and this usually involves more than just writing a purchase contract. In addition, the REALTOR should be discussing his client’s specific needs and situation and should physically view the property with their client. Other factors that need to be addressed could include whether the property is properly priced, whether the seller is “upside down,” has the buyer been prequalified, what is the condition of the property, has the seller completed the necessary disclosure forms,  does the buyer have all necessary information regarding schools, zoning, etc. These are just some of the things that are typically discussed with a client by a licensee to assure they are protecting the best interests of their client.

So the bottom line is…while it may look like an easy way to make a quick fee for very little work, just writing a purchase contract is not as simple and risk free as it may appear. Agents approached to do so should definitely consult with their broker or manager before doing so.

(Please note that Ohio law does require use of a Waiver of Duties form in certain circumstances. Such an example would be a business model often referred to as “fee-for-service,” “flat-fee,” “minimum service,” or “MLS entry-only brokerages.” For more information on this topic click here.

Tags: legal