First Home

DT86 · Apr 6, 2014

Hello guys and gals,

My girlfriend will be graduating nursing school this fall. We have been looking very casually for our first home together and she has been on my tail to get her a ring.

Some real nice folks that own property which connects to my family farm have bought another home that better suits them as the get a little older. They approached me about buying their home before it goes on the market.

One realtor has told them what he would list it for but they have not committed to him. They expressed that they understand how convenient it would be for me and would sell it for "much less" before it was listed.

I have known these people my whole life, they built the house 28 years ago and are nice folks.

This is a different league than the starter homes we have been looking at but is possibly a once in a life time opportunity to own a home that connects to our family farm.

So...

What do I need to know about buying a "for sale by owner" vs going through a realtor?

How can I establish a good price that is "much less" than what it would be listed at and everyone still feel that it is fair?

Thanks

murphy1244 · Apr 6, 2014

DT86 said:
Hello guys and gals, My girlfriend will be graduating nursing school this fall. We have been looking very casually for our first home together and she has been on my tail to get her a ring.

.....That posted before I meant to, stand by......

Good Luck! :thumbsup:

DT86 · Apr 6, 2014

murphy1244 said:
Good Luck! :thumbsup:

Thanks bud.

Read it again, it posted before I got done so I edited it. ...inaudible mumbling about fat fingering on the iPhone...

dave1949 · Apr 6, 2014

You may have to pay something, but you could each (you and the current homeowner) hire an appraiser that works for a bank. That's something that would happen anyways if you finance it. Hopefully, you could split the difference of the two appraisals and everyone would be happy. On the other hand, if they come in with way different values, it could muddy the waters.

Unless they really want to do you a favor, what you and they stand to save by selling it to you unlisted is the typical realtor's fee which is a percentage of the actual selling price.

Existing homes here are selling for less than it would cost to build them new. Looking at it that way, if you like the house it is probably a better value than building new.

Better go ring shopping. :laughing:

General Lee · Apr 6, 2014

You could hire a realtor for you, and he/she will do some price comps (compare) with similar homes in the area. Compare that with the price the sellers are gonna give. I would still do the home inspection and such. Thats about all I got on the issue, good luck!

murphy1244 · Apr 6, 2014

Go on the Auditors web site and find the current value, Cut 30% of that for under current value. The Bank will want a contract that you can get from a office supply store. I bought my first house that way and the Bank wrote up the contract. You should split the closing costs.

dave1949 · Apr 6, 2014

murphy1244 said:
Go on the Auditors web site and find the current value, Cut 30% of that for under current value. The Bank will want a contract that you can get from a office supply store. I bought my first house that way and the Bank wrote up the contract. You should split the closing costs.

That's the tricky part--how did you translate "much less" into 30% off?

If you mean the tax auditor's site, the assessed tax value can vary greatly from market value in different states. I have no idea how VA does it.

mark02tj · Apr 6, 2014

I cant really help with the "right price" question but I will address a bit of the For Sale By Owner (FSBO). I sold a house without a realtor and it was pretty painless. I went to a real estate lawyer and he drew up the contract. Most real estate contracts are pretty standard stuff so your lawyer will probably have one on his computer. When you apply for the mortgage you will need to give them a copy of the contract. They will pretty much take over from there. They might ask you if you have a preference for the title agency to handle the closing. You probably wont have a preference so you can let them choose or ask to see which agency might have different costs. Your attorney might have a preference for this as well. Dont be afraid of the process and dont be afraid to pay for a couple of hours of the attorneys time.

You might be able to find a real estate person to "run comps" (comparables or comparisons) on similar properties in your area to help figure out a price. Find someone that will do that for a fixed fee. DO NOT hire a "buyers agent". A buyers agent is going to charge a comission/fee based on the price of the house. Sites like zillow.com might be able to help as well.

If you can find comp information that includes the original asking price and the final selling price of a home it might prove helpful to you in coming to an agreement with your neighbor. For example it might be that the average house sells for 96% of what it was listed for. So if the neighbors realtor (that they havent signed with yet) tells them that the house will list for $200,000 then, on average, it should sell for $192,000. Then there is the realtors comission of 7% ($13440) which means the neighbor would expect to net $178,560. If they offer it to you for less than that - they are great neighbors. Between 178 - 192, they are saving you some money while putting a bit more in their own pocket - a win-win.

Hope this helps and doesnt confuse things for you. GOOD LUCK and all the best to you and your soon to be fiance!!

2458n · Apr 6, 2014

mark02tj has hit the main points. Is there someplace close for your loved one to work? How about schools Etc. If you need to resell will the house appeal to a wide market of buyers? The thing that is attracting you is the same for every real estate deal location, location, and location. Make sure this is a joint deal between you and the girl. Best wishes.

mjcountrybumpkin · Apr 6, 2014

Call me DT. Just done same thing last year. Very painless.

EddieWalker · Apr 7, 2014

You don't need a realtor if you already found the house you want and you can agree to the price. Negotiate the fees how you feel is fair. Usually both sides split them 50/50, but if they are selling it to you at below market price, you might want to pick up some of those fees. It's up to you. A survey is nice, but if you know where the pins are, most banks will accept a legal description instead of paying for a survey.

To know if the price is fair, you need to see what houses of similar age, size and location have sold for. The bank that you are going to use for the loan will do this for you before approving your loan. You should hire a home inspector and have him go through the entire house. Just because they are great people doesn't mean they took care of the house or even know what's wrong with it. Termites are sneaky and easy to miss. Water damage, foundation issues and cracks in the walls that nobody noticed or just assumed where natural can all be huge concerns for you down the road. Is the electrical up to code and has anybody done any illegal modifications that might lead to a fire? That's very common, both by home owners, a friend and sloppy contractors.

You can hire an appraiser to find the current value and they will also run the comps for you. Usually they are just a couple hundred bucks.

If you and the seller come to an agreement on the price and you decide to go forward, then go to the title company of your choice and tell them that you are buying the house from them and you want them to do the paperwork. You can also go to a real estate lawyer. I've done both and neither is any better then the other. Usually it's the bank that prefers one over the other because that's who they have worked with the most. Ask your banker who they like to use, it makes things go smoothly.

Never fall in love with a house before you buy it. It should always be treated as an investment that you will one day sell and make a profit on. If not, don't buy it. Simple as that.

Good luck,
Eddie

mjarrels · Apr 7, 2014

Never buy a house with some one you are not married to.

mark

bigtiller · Apr 7, 2014

mjarrels said:
Never buy a house with some one you are not married to.

mark

Excellent advice, along with forget the Realtor, get a real-estate lawyer.

DT86 · Apr 9, 2014

We have determined that this house is more than we feel comfortable paying monthly. It would put us in a real bind until she graduates this fall. The best I can hope for is for it to sit on the market a while and maybe make an offer later on.

Thanks for all the replies, I learned things I can use when the next one comes along.

dmccarty · Apr 9, 2014

It can be a problem getting a comparable for a house in the country. When we got our house refinanced a few years ago, the houses used for comparables were not even close to be a comparable but the appraiser used the best he could find. In a long term, depressed market, knowing the value of a house can be problematic. You can try various websites that list houses or pay an agent a few dollars to print out a list of homes in the area that have recently sold.

Have you told the owners that you cannot afford the house until your girlfriend graduates this fall? They very well might take a contract that says the house will sell after she graduates and say no later than 1/1/2015 or some such.

Good Luck,
Dan

DT86 · Apr 9, 2014

I know what you mean about finding comparable homes.

We plan to meet with them this afternoon and see what happens.

EddieWalker · Apr 9, 2014

A friend of mine offered a seller a deal to lease the house for two years with a contract to buy it after the two year lease was up for an agreed upon price. It covered the sellers mortgage and nobody was buying at that time, so it turned out to be a win win for everyone. There are always options if you really want the place and they really want to sell it.

Eddie

dave1949 · Apr 9, 2014

Yep, where there is a will, there is often a way. Owner financing for several years could be an option to explore too. Lease to own, rent to own, are at least worth talking about. It sure sounds like they would like to see you in that house.

mark02tj · Apr 9, 2014

This may come too late since you say you're meeting with them this afternoon, but.... dave1949, dmccarty and Eddie Walker all have good points about leasing with an option to buy or seller financing. Hopefully you can deal direct with the sellers/neighbors and keep their kids out of the "negotiations". I'm not suggesting that by keeping the kids out of things that you'd take advantage of them, but merely that the children will often look out for their own interests instead of what might be best for their parents or what their parents desire. Hopefully you also know their kids but sometimes even that's not good.

If you do end up with owner financing, be sure that you can refinance with a bank at any time so you can lock in a low, fixed rate when the time is right. Also, be sure that you're not forced to go for financing upon the death of the either or both of the parents - the loan should transfer to the estate. Otherwise one of the kids could try to force you to refinance the loan before you're ready.

I know I sound like I'm down on family members, but that's not really the case. I'm a (now non-practicing) CPA and have seen all sorts of situations where "nothing should go wrong" instead go very wrong. Money does strange things to people when relatives die and if your neighbors die while you're still paying things, one (or more) of the kids will want to get "their share" as quickly as possible which could spell trouble for you. Just like I advised earlier in this thread, pay for a couple of hours of time for a good real estate attorney.

I do wish you and your lady the best of luck with this!! I remember just how excited I was when I bought my first house (in 1988) and I also remember what went wrong after the sale so hopefully I (along with folks on this forum that are a LOT smarter than me!) can help save you some headaches.