Buying a House For Sale by Owner

Buying a house is traditionally done through a process which begins by contacting a real estate agent. Your real estate agent represents you, as the buyer, in dealings with the other agent who represents the seller. A real estate agent's services are a good thing to have if you're unfamiliar with the way the real estate market works. But understand that agents earn, on average, 2-3% of the sale price of the home. That money must come from somewhere, so it's generally built in to the selling price. You can avoid the commissions by purchasing a home being sold directly by the owner.

These homes will be listed as for-sale-by-owner properties in various real estate listings. Buying a house in this manner means you'll be dealing directly with the owner and your respective lawyers. It's not difficult to do if you have competent legal representation, but there are some things you need to be aware of in order to carry out this transaction legally and to the mutual benefit of both parties.

Inquire About State Regulations

The first thing you need to know is the fact that different states have different regulations regarding how real estate is bought and sold. Some states are very relaxed in their regulations and a simple one-page purchase offer is all that's needed to get the ball rolling. Other states, like New York for example, require a plethora of forms and disclosures to be filled out along with a purchase offer. Failing to abide by state regulations could ultimately result in a void of the sale, so don't take any chances. A local real estate lawyer is the best one to advise you on what your state requires. As the buyer, your lawyer is the one who will draw up the contract and present it to the seller.

Get Pre-approved for a Mortgage

A pre-approved mortgage is always a benefit regardless of whether you use a realtor or not. While pre-approval does not guarantee you a mortgage, it does give you a ballpark figure regarding what a bank is willing to lend you. If you're curious to find out what you can afford before attempting the loan application, you can use one of many mortgage calculator tools found on the Internet. These calculators take into account current interest rates, taxes, and income to help you determine how much mortgage you can afford.

When you are ready to pre-qualify for a mortgage, have a good idea of how much money you want to spend. You most likely will not get any kind of solid commitment from a mortgage lender until you have a specific house for them to look at. But with a pre-approval what you're looking for is a statement by the lender that you're considered a good risk and that they will lend you money within reason. This gives you a leg up as you start searching for your new home.

Negotiations with Home Sellers

Real estate agents like to get as much money out of the deal as possible because it increases their commissions. As middlemen, negotiations with your real estate agents can be complicated, time consuming, and extended back-and-forth affairs. When you're dealing directly with the homeowner, negotiations tend to be quicker and easier to accomplish. If both parties understand that a mutually beneficial deal will close the sale faster, they are more likely to negotiate in good faith and in a fair manner.

That being said, the seller is unlikely to accept your offer immediately upon receipt. If he's a wise seller he will take that offer to his attorney for thorough review. As a buyer, you can help the house buying process along by ensuring that your offer is fair, in line with current market conditions, and includes everything that you expect from the seller. Writing the offer is one area where your lawyer is invaluable. Should you choose to write an offer on your own, look online for sample offers relative to the state in which you reside.

Be Careful With Uncooperative Sellers

In a perfect world every seller would be honest and every buyer would be able to trust him. Unfortunately, that's not the reality of life. If you make an offer to a seller contingent upon the home's inspection, and he is reluctant to provide certain details about the house, that's a red flag to be wary of. If the homeowner is unwilling to be flexible in regards to the property's condition and possible repairs that need to be made, that's also something to be concerned about. An honest seller trying to make a fair deal should not be afraid of inspection, or be unwilling to make minor property improvements to complete the sale.

After the Offer

Once an offer has been made and accepted it's time to move on to the mortgage lender. Your lender will require a copy of the signed offer along with a list of other paperwork. He'll let you know exactly what he needs and when he needs it. Be aware that lenders can be notoriously slow when there's no agent involved, so you may have to keep on them all the way through the process. While the mortgage is being processed have the house inspected as soon as possible. The lender will also send an appraiser to look at the house in order to ensure it is indeed worth the sale price. Any red flags raised by the inspector or the appraiser should be taken seriously in order to avoid future problems.

Closing the Deal

While it's possible to get by without an attorney, where their services are most important is in closing the deal. A title search must be conducted, transfer taxes must be paid, deeds must be drawn up, and other legal work may also need to be done. While you could do that all yourself, the legal loopholes are often more complicated than the average home buyer understands. A real estate attorney is an expert in such things and is the best qualified to handle this for you.

Your desire to buy a house for sale by owner may have been partially motivated by the desire to save some money. But bear in mind that your attorney’s fees will generally be only a few hundred dollars in addition to standard closing costs. Spending a few hundred dollars to make sure all your ducks are in a row is still far less than the commission you pay by using a real estate agent. And besides, if you did go through a real estate agent you'd be hiring an attorney anyway.

Purchasing a home directly from the seller can be a rewarding way to buy a home without paying for the services of a real estate agent. Depending on your state it can be a complicated process, so be careful every step of the way. Be sure to do your research, perform due diligence on the house you want to purchase, and hire a competent lawyer who will represent you properly. If the process is done correctly, you'll wind up with a mutually beneficial transaction that might just get you the home of your dreams at a great price.