Q: Trouble restoring macbook to factory settings.

For 2011 models and later: What to do before selling or giving away your Mac - Apple Support.

For 2010 models and earlier: Before Selling or Giving Away Your Pre-Lion Mac

Follow these instructions until you get to Step 5:

          What to do before selling or giving away your Mac - Apple Support

When you reach Step 5 you will need your Snow Leopard or earlier installer disc that came with the computer when it was new.

1. Follow these steps for installing the original version of OS  that came with the computer.

     1. Boot the computer using the Snow Leopard Installer Disc or the Disc 1 that came

         with your computer.  Insert the disc into the optical drive and restart the computer.

         After the chime press and hold down the  "C" key.  Release the key when you see

         a small spinning gear appear below the dark gray Apple logo.

     2. After the installer loads select your language and click on the Continue

         button. When the menu bar appears select Disk Utility from the Utilities menu.

         After Disk Utility loads select the hard drive entry from the left side list (mfgr.'s ID and

         drive size.)  Click on the Partition tab in the DU main window.  Set the number of

         partitions to one (1) from the Partitions drop down menu, click on Options button

         and select GUID, click on OK, then set the format type to MacOS Extended

         (Journaled), then click on the Apply button.

     3. When the formatting has completed quit DU and return to the installer.  Proceed

         with the OS X installation and follow the directions included with the installer.

     4. If you are planning to sell or give your computer away, then do the following:

        After you reformat your hard drive and reinstall OS X, the computer restarts to a

        Welcome screen and asks you to choose a country or region. If you want to leave

        the Mac in an out-of-box state, don't continue with the setup of your system. Instead,

        press Command-Q to shut down the Mac. When the new owner turns on the Mac,

        the Setup Assistant will guide them through the setup process.