As Realtors, we always talk about the pitfalls of selling property "FSBO" without an agent. It's not just the marketing and negotiation expertise that professional Realtors bring to the table, but also our ability to navigate the 3 inch stack of paperwork, disclosures and risk management issues that come with every transaction. One "T" left uncrossed can easily lead both buyer and seller to court for any number of reasons. Depending on the statistic you believe, 60 - 80% of FSBOs will eventually see the light and list their home with a professional.
What we rarely discuss is FRBOs (For RENT by Owner). My partner and I attended a two hour summary training session this morning just on the legal issues that owners and tenants both face when entering into a Residential Lease Agreement. We just barely scraped the surface of the issues in this short review session. Owners must understand what they are legal required to provide to tenants, the maximum deposits that can be secured, the legality of pet deposits, prepaid rent and discriminatory practices. What if a tenant wants to do an inspection? Can smokers be turned down? Can the number of occupants be limited? How much notice is needed to terminate a lease? What happens if the sellers wants to sell? Does the tenant have allow potential buyers into their home? What is the point of a Move In/Move Out Inspection? What forms should an owner use? How about disclosures? What does an owner have to disclose to a tenant vs. a buyer? Does the owner have to keep all the applications s/he receives? What happens if a Notice of Default is filed on a property? How does the eviction process work? How long does an owner have to return the deposit? What documentation is necessary for deductions from the deposit? What rights does a tenant have when a home is foreclosed upon? What recourse does a tenant have if the owner stops making payments on their mortgage? What terms should a prudent tenant negotiate on their lease? Should a tenant record their lease to protect themselves from future eviction from a superior interest in the property? What does it mean when a bank offers "cash for keys" to a tenant? Why would they do this?
If any of these questions leave you scratching your head as a home owner or potential tenant, you must contact a Realtor to represent you. For homes listed for lease on the MLS, the commission to the agent is usually paid by the seller. As a seller, the commission paid to make sure the lease is handled with the same care as a sale is critical and worth every penny. Every one of us reading this has probably heard more "nightmare" tenant and leasing stories than purchase/sale stories. The reality is the lease transaction lasts much longer - usually 12 or more months - and the opportunities for complications and problems is exponentially higher.
Don't put yourself at risk. Hire a professional and experienced Realtor or Property Manager to help you with your next lease transaction, regardless of whether or not you are the home owner or tenant!
Have a great day,
Nancy Moeller, CPA, Realtor
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