If you decide to buy a house for sale by owner, follow these tips to protect yourself and get the home of your dreams without too many complications.
Steps to Buy a House from an Owner
A homeowner may decide to sell his or her house without using a real estate agent. Buying a house directly from the owner can be a straightforward process, as long as you know what to expect.
Know Your Price Range
Before you set out to buy any property, you should know what your price range is. This includes hidden costs like paying for commuting costs or condo or neighborhood association fees. Existing debt loads should also play a role in the determination of price range. You can use various online calculators to figure out how much additional debt you can afford.
Once you determine your price range, you can speak with a lending institution to become pre-approved for a loan. Your lender will need the information about your debts, income, and other financial obligations to pre-approve your application. Knowing your credit score can also help here as well.
Having a pre-approval may give you some leverage during the negotiations when you want to buy a house for sale by owner.
Search for Sale by Owner Listings
There are several ways that you can look for a home that is for sale by owner, especially through websites. You can look for all of the features that you want as well as the neighborhood features that you might need. It can be enjoyable to go out and explore the homes that pique your interest.
Consider a Buyer's Agent
As you are searching for listings, you should consider using a buyer's agent. Just because the homeowner does not use a realtor, it does not mean that you can't get some outside assistance when buying a house. A buyer's agent will work in your best interest to find a house and get the best deal; their job is to protect your interests. Some sellers will pay the commission for a buyer's agent so keep this in mind when reaching out to homeowners of interest.
Speak with the Seller
You can contact the homeowner directly to ask for more information once you find a home of interest. The owner will take you on a tour of the home and you should make sure to ask questions and take notes. Be sure to look past the décor of the home since that will not be there if you buy the home but make sure to find out if the home will fit your needs.
Get the House Appraised
Once you find a home that you feel meets your needs and may be in your price range, you still have some research to do. A this point, you need to find out if the asking price of the house is in line with what the home is worth. The ways to ascertain this information are to:
- Obtain a valuation report or competitive marketing analysis (CMA): This report will tell you the asking price of other homes in the area so you can compare these to the asking price of the home that you are interested in. The CMA is generated by realtors; often you can get this report from the buyer's agent or a neighborhood real estate agent.
- Get an appraisal of the home: You should hire your own appraiser for the home, and not one that has been suggested by the seller. The appraiser will examine the home and any problems; the CMA will also play a part in the determination of the value of the home.
Hire an Attorney
You can buy a home without an attorney, but it is often a better idea to spend a few hundred dollars to hire a real estate attorney to monitor the proceedings up to the closing. Your attorney will help write up the offer and contracts and make sure taxes and other fees are paid.
Make an Offer
You should then make an offer on the home using the information that you obtained from your buyer's agent, appraiser, and the CMA. Your impressions of the home should also be taken into the consideration for the offer. During this time, you and your attorney will negotiate with the seller until details such as price, closing date, and any concessions are agreed upon.
Lock in Your Mortgage Rate
Even if you have reached an agreement, you and the seller have still not placed the home under contract. At this point, you should go back to your lender with your offer; at the same time, you may want to shop around a little bit more to make sure you have the lowest interest rate and best loan terms.
The lender will assign its own appraiser to make sure that the offer is not excessively over market value. If it is, the appraiser and the bank may not approve the loan. In this instance, you may have to go back to the seller to renegotiate.
Home Inspection
Another step involves hiring a home inspector to look at the condition of the home from top to bottom. This person should be licensed and should give you a report about any structural or mechanical problems that the home may have. This step is important because if there are significant structural or mechanical problems when you buy the home, you are responsible for repairing them. At this point, you may need to renegotiate with the seller for the cost of the repairs.
Once all of these details have been agreed upon, you and the seller should close the deal. Your attorney will make sure that your rights are protected.
Other Considerations When You Buy a House for Sale by Owner
When you buy a house for sale by owner, the experience can be enjoyable but you must remember that this is about business. Getting overly emotional about the home -even if it is the home of your dreams- can make you vulnerable to making some less-than-savvy decisions about the home. Listen to the people that you have hired to help you with this process, including your buyer's agent, real estate attorney, appraiser, and home inspector. These people are not emotionally attached to the house and can help you make the right decisions.
