Buying 'for sale by owner' homes is not really as difficult as it is thought to be. We are so reliant on real estate agents nowadays, that it hardly ever occurs to us that we can actually opt for homes for sale by owners and save on the agent's commissions. Moreover, dealing in homes for sale by the owner also leaves more scope for negotiation, directly between the owner and the prospective buyer. On the other hand, leaving the agents out through a 'for sale by owner' buy, leaves the buyer vulnerable to several disadvantages. The buyer may end up paying more because the property valuation done by a known agent is absent. Further more, real estate agents are thorough with their inspections, without them, there's scope for making a bad buy, in case the owner has withheld pieces of vital information. Last but not the least, leaving out the agent means that one must do all the required paperwork. Since agents are trained, their contracts are free of loopholes. That may not happen with a buyer-owner contract. Let us first have a look at some myths pertaining to buying such homes, before we move on to actual buying home in such a situation.
Misconceptions
- Many believe that house sale by owners is not a serious business as most are just testing the demand waters. On the contrary, most for sale by owners are serious selling initiatives.
- There is a perception that 'for sale by owner' houses are not flexible on prices. The perception comes as most people believe that these sellers are trying to save on agent commission and thus need every penny. A National Association of Realtors survey proves otherwise, as its findings say that most 'for sale by owners' sales get less than those that go via real estate agents.
- Many people assume that the owner has not appointed an agent so that he can get away with hiding vital information. People need not worry about this as most laws make disclosure of material facts mandatory in real estate sales.
The following points must be sequentially followed to make your 'house for sale by owner' buy, a smooth and easy process.
- Establish a Budget: Use mortgage and EMI calculators to determine a price you can afford to pay for a house in the time being. Do not stretch beyond your finances for housing loans as mortgages are usually long term liabilities and you can never predict your ability to pay that far along the future. Maintain a healthy debt level when you reach an affordable house budget.
- Prior Approval For Finances: Such big decisions cannot be based on no backing. Get a prior financing approval from your bank or other financial institutions before going ahead with your house search. With your financing amount at the back of your mind, you will lower your chances of falling impossibly in love with a house well outside your reach.
- Begin Your House Search: You can look at the local house listing newspapers in your area or the area you are targeting. You can also search some real estate website, especially the 'for sale by owners' listings. Sundays are usually open days to view houses on sale. You can just drive around your locale, hunting for such houses. Searching for the perfect house is the most fun part of this whole process.
- Establish a Communication Line With the Owner: Call or email the seller to intimate him about your interest in his house. Ask questions and settle on a mutually convenient time to view the actual property. When inspecting the home, do not get carried away with the feel or look of the house, ask pertinent question about the drainage, water seepage, title deed, etc.
- House Valuation Analysis: If you do not wish to pay for a proper valuation report, you can make one yourself. Find out the going rates in the same area and locality. Look at similar houses and do a comparative analysis. Make sure that you factor in all the remodeling and renovation expenses done on the house, along with the age of the construction, etc. Reach at a fair valuation yourself.
- Get Yourself an Attorney: Loosen your purse strings a little and solicit the help of a real estate attorney. He will go a long way with serving you with counsel, advice on a fair offer and the legalities involved with the process. Local attorneys will be helpful in keeping the contract aligned with the local laws and ordinances.
- Make an Educated Offer: Make an offer that is neither too high nor too low, based on your research. An offer is only legit if it is in written form. Sellers often give higher asking prices expecting buyers to drive for hard bargains so don't be embarrassed of quoting your price, no matter how low it is, if you think it is a fair valuation.
- Sort Out Your Bank Deal: If the seller agrees with your offer, don't waste any time and rush to your bank. Lock in your mortgage rate immediately when the offer is accepted. There is usually a 30 to 60 day lock-in period with mortgage products and that should give you enough time to settle the other nitty-gritty of the contract. Keep in mind that there is one more step before you actually close the deal.
- Home Inspection: Hire a good home inspector to go through with a thorough inspection of the house, from the foundation to the top. Look for structural problems or plumbing issues, for these are the most troublesome. Renegotiate your offer once you get a conclusive home inspection report, to include any problems you want the owner to sort out before the buy deal.
- Clinch the Deal: Keep your paperwork simple and in line with the local laws of real estate. Your attorney and mortgage financier should both be a part of this process and should assist you with any contract related glitches. Once all the concerned parties sign the contract, the home is yours.