By TW Shortt, Contributor, Focus on Finance
Broker/Owner, REALTY WORLD Knox Realty Group — The Fort Knox Office™
Selling a home without a real estate agent — known as a For Sale by Owner (FSBO) transaction — may look like a way to save money on commissions. But many homeowners underestimate the legal complexities of real estate deals, exposing themselves to risks that can outweigh any savings.
Disclosure Requirements: More Than Meets the Eye
One of the biggest mistakes FSBO sellers make is failing to properly disclose problems with the property. In Kentucky, as in most states, sellers are legally required to reveal known issues such as foundation cracks, water damage, roof leaks, or pest infestations.
Some sellers assume “buyer beware” applies. It does not. Even honest mistakes on disclosure forms can lead to lawsuits after the sale closes. Courts have repeatedly held sellers accountable for failing to disclose material defects—even when the buyer ordered their own inspection.
A famous New York case, Stambovsky v. Ackley (1991), illustrates the point. There, a seller had advertised her home as haunted in magazines and newspapers. When the buyer later discovered the home’s ghostly reputation, the court allowed him to back out and reclaim his down payment. Known as the “Ghostbusters case,” it showed that sellers can be held liable not only for physical defects but also for reputational issues tied to the property.
Contracts: Not a Do-It-Yourself Job
Another common pitfall in FSBO sales is improper or incomplete contract drafting. Real estate purchase agreements must comply with state and sometimes federal law. Leaving out key terms can spark costly disputes.
Essential details such as inspection contingencies, title conditions, deadlines, closing procedures, and remedies for breach are often overlooked in do-it-yourself contracts. Sellers who rely on generic forms pulled from the internet may end up with vague or unenforceable agreements, increasing the chances of litigation.
Why FSBO Deals Often End in Dispute
Disputes in FSBO transactions are common for three reasons:
- Incomplete Documentation – Missing or unclear terms create confusion and conflict.
- No Neutral Party – Without an agent or attorney, there is no one to mediate or flag problems early.
- Emotional Stakes – Selling your own home can cloud judgment, leading to personal reactions during negotiations.
Without professional guidance, even experienced sellers can miss crucial steps that protect their legal and monetary interests.
The Bottom Line
FSBO transactions may seem like a way to save money, but they are fraught with legal landmines. From disclosure requirements to contract details, the risks are real—and in many cases, far more expensive than paying a commission.
As the “haunted house” case of Stambovsky v. Ackley reminds us, what you do not disclose can come back to haunt you.
This article is for informational purposes only and does not constitute legal advice. If you are considering selling your home without a broker, consult with an attorney.
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