By Owner Home Purchases
Be Careful What You Pay. You should be very careful when buying a home direct from the seller without a realtor. If you know the market and the neighborhood in which you are buying you should be okay. Many buyers just guess on the price of the house. Realtors control the information on recent home sales so it’s hard to obtain this without their help. Zillow and eppraisal will give you an approximate value. With all of the short sales and foreclosres closing everyday, values are still sinking some. All of the points mentioned above in buying through a realtor apply to By Owner purchases too. Once you know how much to pay for the house, I suggest the following:
- Make a Verbal Agreement on the Price. Some sellers won’t do this, but the majority will. It’s not binding on either of you. Then get the name and phone number of the seller’s attorney. Call me and I will put together a real estate contract. Usually this is faxed to the other attorney, who looks it over. We make any changes then the buyer signs it and brings it or mails it to the seller. This process usually takes anywhere from 1 day to 5 days.
- Make the Contract Contingent on Appraisal. Because you are buying by owner it is wise to make the contract contingent on an appraisal. Your mortgage lender will require this anyway, so we will just use theirs. If the property appraises for less than the purchase price you can cancel the contract, or better, negotiate a reduction of the purchase price.
- Do Home Inspection. It’s important to do a complete professional home inspection and to have the attorney notify the seller in the 5 day period of any problems.
- Don’t Forget to Do a Walk-Through. For some reason, By Owner buyers always forget to do a walk-through the day before closing. A home inspection is done when you first sign the contract, and a walk-through is done the day before closing. The purpose of each is different: the home inspection is to find defects that you want fixed, the walk-through is to be sure that the house is in the same condition as when you signed the contract.
- Get a Cashier’s Check/Wiring Instructions/Insurance for Closing. The Buyer brings in a cashier’s check (no personal checks) to closing payable to him or herself to pay for the house at closing as long as the amount owed is less than $50,000.00. If more than $50,000.00 is owed, the funds MUST be wired. Cash or personal checks aren’t accepted. The Buyer also brings in a homeowners insurance policy in at least the amount of the mortgage.
Attorneys Fees for Real Estate By Owner Closings. I charge a flat fee of $500.00 for By Owner closings.