To sell a house, you gather proof of ownership and payoff figures, make the disclosures federal and state law require, choose between a listing agent, a for-sale-by-owner approach, or an iBuyer, sign a written purchase and sale agreement with the buyer, clear any title problems, and then sign a notarized deed at closing while the settlement agent distributes the money and records the transfer. Along the way you may owe capital gains tax on your profit, though a large exclusion often wipes it out for a primary residence. Here is how each step works, what it costs, and where the legal risks sit.
Documents To Pull Together Before You List
Start with the deed, which is the document proving you legally own the home. If your copy has gone missing, the county recorder or registrar of deeds where the property sits keeps public records of every transfer and will issue a certified copy for a small fee. Pull a recent property tax statement too. Unpaid taxes become liens, and liens have to clear before the sale can close.
Call your mortgage lender and ask for a payoff statement. It shows the exact balance owed, including accrued interest and any prepayment fee, so you and the closing agent know how much of the proceeds will go to satisfy the loan. If the home sits in a homeowners association, order the HOA resale package. It typically includes governing documents, bylaws and covenants, a financial summary of the association, any outstanding assessments, and pending rule violations. Buyers and their lenders usually want this package in hand before closing.
Choose How To Sell
Listing With a Real Estate Agent
Hiring a licensed agent begins with a listing agreement, a contract that authorizes the agent to market the property and negotiate on your behalf. It spells out the listing price, how long the agent has the authority, and the agent’s compensation. Compensation is fully negotiable and is not set by law.
Total commissions have historically run around 5% to 6% of the sale price, split between the listing agent and the buyer’s agent. That changed in August 2024. Under a settlement with the National Association of Realtors, offers of compensation to a buyer’s agent can no longer be made through multiple listing services.1National Association of Realtors. NAR Provides Final Reminder of August 17 Practice Change Implementation You can still offer to pay the buyer’s agent through direct negotiation outside the MLS, but you are no longer automatically expected to cover both sides. Depending on what you negotiate, your total commission cost may drop.
For Sale By Owner
Selling without an agent, called FSBO, means you handle pricing, marketing, negotiations, and paperwork yourself. You save on the listing-side commission, but every federal and state disclosure requirement still applies to you. Without an agent’s fiduciary duty backing you up, review every document carefully, or hire an attorney to review it, before you sign. FSBO sellers often still pay a buyer’s agent if the buyer brings one, though that too is negotiable.
iBuyers
iBuyers are companies that use property data and market algorithms to make near-instant cash offers. These sales usually close in days rather than weeks, and the company typically buys the home as-is. The service fee can run close to a traditional commission, so the savings may be smaller than they look at first. Not every home qualifies, and offers are generally limited to certain markets.
The Disclosures the Law Requires
Lead-Based Paint
If the home was built before 1978, federal law requires a Lead-Based Paint Disclosure before the sale. You must disclose any known lead-paint hazards, hand over any inspection or risk-assessment reports in your possession, and give the buyer an EPA-approved information pamphlet about lead-paint dangers. Knowingly skipping this disclosure can trigger civil penalties and personal liability of up to three times the buyer’s damages if lead-related harm occurs.2Office of the Law Revision Counsel. 42 USC 4852d – Disclosure of Information Concerning Lead Upon Transfer of Residential Property
Property Condition
Most states require a written disclosure about the physical condition of the home. The forms ask about known defects in major systems, like plumbing, electrical, heating, cooling, and the roof, along with environmental issues such as mold, past flooding, or pest damage. Specific questions vary by state, but the principle is uniform: the buyer is entitled to know about material defects you are aware of before signing a contract. Answering honestly is your best protection against a later fraud claim.
The Purchase and Sale Agreement
The purchase and sale agreement is the binding contract that governs the whole transaction. Under the Statute of Frauds, which every state has adopted, a contract for the sale of real estate must be in writing and signed by both parties to be enforceable. A verbal deal to sell a house carries no legal weight.
A proper agreement includes a legal description of the property (not just the street address, but survey-based identifiers like lot and block numbers), the purchase price, and the buyer’s earnest money deposit. Earnest money typically runs 1% to 3% of the purchase price, sometimes higher in competitive markets, and sits in escrow to show the buyer is serious. If the buyer walks away without a valid contractual reason, you may keep the deposit.
Contingencies
Contingencies are clauses that let a party exit the contract if certain conditions are not met. The most common ones in a residential sale:
- Financing contingency. The buyer can cancel if they cannot secure a mortgage within a set timeframe.
- Inspection contingency. The buyer has a window to hire a professional inspector. If significant problems turn up, the buyer can ask for repairs, negotiate a price reduction, or withdraw.
- Appraisal contingency. If the lender’s appraisal comes in below the agreed price, the buyer can renegotiate or exit. Lenders only finance up to appraised value, so any gap has to be covered with extra cash or resolved between the parties.
Some buyers add an appraisal gap clause, promising to cover a shortfall up to a stated dollar amount with their own cash. When comparing offers, one with this clause can be worth more than a slightly higher bid without it, because the deal is less likely to collapse over a low appraisal.
Fixtures and Personal Property
A frequent source of last-minute disputes is whether a given item stays with the home or leaves with you. Items permanently attached to the property, called fixtures, generally transfer to the buyer unless the contract specifically excludes them. A built-in dishwasher is typically a fixture. A freestanding refrigerator usually is not. A chandelier, a built-in bookshelf, or a wall-mounted television bracket can go either way. If you want to take something that could reasonably be considered attached, list it as an exclusion in the agreement.
Clearing Title Before Closing
A title search examines public records to confirm you have clean ownership and that no one else holds a competing claim. It looks for outstanding liens, unpaid taxes, undisclosed easements, boundary disputes, recording errors, and other defects that could stop a clean transfer. Fixing what turns up, whether that means paying off an old lien or correcting a name on a prior deed, is typically your responsibility and has to happen before closing.
Title insurance covers defects the search may have missed. There are two types. A lender’s policy protects the mortgage holder only and is almost always required when the buyer takes out a loan; it ends when the mortgage is paid off. An owner’s policy protects the buyer for the full purchase price and lasts as long as they own the home. Who pays for which policy varies by local custom and shows up in negotiation.
Taxes on the Sale
The Section 121 Exclusion
Profit on the sale of your primary residence can be subject to federal capital gains tax, but Section 121 of the Internal Revenue Code lets you exclude up to $250,000 of gain from your income, or $500,000 for a married couple filing jointly, if you meet the ownership and use test.3Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
To qualify, you must have owned and used the home as your principal residence for at least two of the five years before the sale date. The two years do not have to be consecutive; any 24 months (730 days) of residence within the five-year window counts. For a joint couple claiming the $500,000 figure, only one spouse has to meet the ownership requirement, but both must meet the use requirement.4Internal Revenue Service. Publication 523 – Selling Your Home You can use the exclusion only once every two years.
Reporting the Sale
The closing agent usually files Form 1099-S with the IRS to report the sale proceeds. If your gain is fully covered by Section 121 and you certify that the home was your principal residence, the closing agent may not have to file the form.5Internal Revenue Service. Instructions for Form 1099-S – Proceeds From Real Estate Transactions If you do receive a 1099-S, you have to report the sale on your federal return using Form 8949 and Schedule D, even if your entire gain is excludable.4Internal Revenue Service. Publication 523 – Selling Your Home Any gain above the exclusion is taxed as a capital gain.
If You Are a Foreign Seller
If you are not a U.S. citizen or resident, the buyer is generally required to withhold 15% of the total sale price under the Foreign Investment in Real Property Tax Act and send it to the IRS.6Internal Revenue Service. FIRPTA Withholding An exception applies when the buyer plans to use the property as a personal residence and the sale price is $300,000 or less.7Internal Revenue Service. Exceptions From FIRPTA Withholding Foreign sellers who believe the withholding exceeds their actual tax liability can apply for a reduced withholding certificate or claim a refund when filing a U.S. tax return.
Closing the Sale
Who Runs the Closing
In most states, a title company or escrow agent manages the closing. Roughly a dozen states require a licensed attorney to oversee or conduct the transaction. Even where attorney involvement is optional, bringing one in can be worthwhile for FSBO sellers or for sales complicated by liens, estate issues, or boundary disputes. Your state bar association or a local title company can tell you where your state falls.
The Closing Disclosure
When the buyer is financing the purchase with a mortgage, federal law requires the lender to provide a Closing Disclosure, a standardized form that itemizes every fee, credit, and adjustment in the transaction.8GovInfo. 12 CFR 1026.38 – Content of Disclosures for Certain Mortgage Transactions (Closing Disclosure) The lender is ultimately responsible for the form, though it often delegates preparation to the settlement agent. In an all-cash sale with no lender involved, the settlement agent typically prepares a similar closing statement. Both parties sign to confirm the final financial breakdown.
Final Walkthrough
Most contracts give the buyer a walkthrough shortly before closing. The buyer confirms the home is in the same condition it was in when they signed the contract, any agreed-upon repairs are done, included fixtures and appliances are still there, and your personal belongings are gone. Leaving the home clean and in the expected condition prevents last-minute disputes that can delay or kill the closing.
Seller Closing Costs
Sellers pay several costs out of their proceeds at closing. Amounts vary by location, but expect to see:
- Agent commissions, negotiable but historically the largest single expense.
- Transfer taxes, charged by most states when property changes hands, with rates ranging from a small fraction of a percent to around 2% depending on the state and sale price. About a dozen states charge none.
- Title insurance, with the seller paying for the buyer’s owner’s policy in many markets.
- Prorated property taxes through the closing date.
- Mortgage payoff, including accrued interest and, with some lenders, a prepayment fee.
- Recording and administrative fees for filing the deed, notary services, and document delivery.
Signing and Recording the Deed
At closing you sign the deed, the document that formally transfers your ownership interest to the buyer. Your signature typically has to be notarized to confirm your identity and intent. Once the deed is signed and funds have been distributed, the closing agent delivers the deed to the county recorder or clerk’s office for recording. Recording creates the permanent public record that the property now belongs to the buyer and officially ends your legal interest in the home.