How to Sell a House by Owner in Alabama

Alabama lets an owner sell his or her own home without a real estate license (Ala. Code 34-27-2). The local rules to plan for are who drafts the deed, what you must disclose under the state’s buyer-beware rule, and the deed tax the county probate judge collects at recording.

Who runs the closing in Alabama?

Alabama law does not require an attorney to run the closing. A title company or a real estate attorney can search the title, issue title insurance, hold the money and handle the closing. One rule is specific to Alabama: Ala. Code 34-3-6 treats drafting a deed or other legal document for someone else for pay as the practice of law, and it bars companies that search or insure titles from drafting deeds unless they own an interest in the property. So the deed is drafted by an Alabama attorney or by you as the owner. Whoever drafts it, the deed must show that person’s name and address, or the probate judge will not record it (Ala. Code 35-4-110). As a for-sale-by-owner seller you can agree with the buyer in the contract on which title company or attorney will close.

What must you disclose when selling a house in Alabama?

Alabama applies caveat emptor, or buyer beware, to the sale of a used home, and no state law sets a seller disclosure form. The Supreme Court of Alabama restated the rule in Nesbitt v. Frederick (2006), citing earlier cases such as Ray v. Montgomery (1980): a seller of used residential real estate ordinarily has no duty to disclose defects. The court recognizes three exceptions. You must disclose known defects if a fiduciary relationship exists between you and the buyer, and Ala. Code 6-5-102 treats hiding a material fact you are obliged to disclose as fraud. You must disclose a known defect or condition that affects health or safety and that the buyer does not know about and cannot readily see. And you must disclose known defects when the buyer asks specifically about a material condition.

Courts have upheld “as is” clauses, even against claims based on a buyer’s direct question, and have turned away fraud claims from buyers who did not inspect. Still, Ala. Code 6-5-101 treats a misrepresentation of a material fact that the buyer acts on as fraud, so answer questions truthfully. The buyer-beware rule does not cover a new house; the court notes Alabama has dropped it for new home sales.

If the house was built before 1978, the federal lead rule applies on top of state law. Give the buyer the EPA lead pamphlet, any lead records or reports you have, a Lead Warning Statement in or attached to the contract, and 10 days to test for lead unless you agree in writing on another period or the buyer waives it. Keep the signed disclosure for three years.

What transfer taxes do you pay in Alabama?

Alabama’s deed tax is $0.50 for each $500 of value, or fraction of $500, which is about $1.00 per $1,000 (Ala. Code 40-22-1). The county judge of probate collects it before the deed is recorded. Only the value above any mortgage on which Alabama mortgage tax has been paid is taxed, so when the buyer’s loan is recorded with the deed, the Dale County Probate Office figures the deed tax on the price above the loan amount, unless the loan is to a tax-exempt institution. On a $250,000 cash sale the deed tax is $250; with a $200,000 loan recorded at the same time it is $50. The buyer’s mortgage carries its own tax of $0.15 per $100 of debt.

The statute does not say whether the buyer or the seller pays the deed tax, so settle it in the purchase contract. The deed must also come with proof of the price or value, usually the Department of Revenue’s Real Estate Sales Validation Form (Form RT-1). The form is not needed if the deed itself contains the required price or value information. Intentionally leaving out proof after the probate office asks for it, or giving false proof, brings a penalty of $100 or 25% of the tax, whichever is greater. Recording fees are set county by county: Tuscaloosa County charges $3.00 per page plus a $2.00 probate judge fee, while Dale County charges $13.00 for the first page and $3.00 for each added page. Ask your county probate office for its current schedule.

Can you sell without an agent in Alabama? The bottom line

Yes. The license law exempts owners selling their own property. Plan for a deed drafted by an Alabama attorney or by you, truthful answers and health or safety disclosures under the buyer-beware rule, the federal lead disclosure for a pre-1978 home, and the deed tax and Form RT-1 at the county probate office. Record the deed promptly, since an unrecorded deed is void against a later buyer without notice (Ala. Code 35-4-90).

This guide is general information, not legal advice. For guidance on your specific situation, consult a licensed Alabama attorney or your closing agent.

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Selling by owner in a neighbouring state: Florida, Georgia, Mississippi, Tennessee.