buying a home from a FSBO deal

[oklahomajewel]

Okay, y'all.... just want some insight.

I haven't done a ton of house buying or selling, but the realtor/friend is coming tonite to see my house and has given me a starting value of $109900 on my house but there will be some allowances. I have a mortgage of $57k.

I have already looked a bit and called about some houses I've seen for sale, and around here there are some good neighborhoods with 1000 s/f and under small houses , older houses, that seem to be asking around $56-75K , depending. Some that were around $56k were in the worst shape or crappy areas.

Well, I called on one yesterday and am going to look at it today. It's a For Sale By Owner, been empty a month the owner had it for 20 years. It's small, but the garage is already insulated and has ch&a to be converted or can still use as a garage. 2bd, 1 ba... big yard and shed out back. Thing is -- I want a small house, just me cuz one kid going to college and the other going to live with his dad then college. This house has --- here's the kicker--- NEW storm windows, 5 yr old roof, 2 yr old CH&Air , bathroom has been remodeled ... exterior looks really neat and clean, etc.

HE IS ONLY ASKING $55900 !!!! I've chatted to 2 neighbors around the house, one was the next door neighbors and they were friendly and said good things about the neighborhood...

So... what's the procedure for giving him earnest money like $1000 contigent on my house selling in the next ...60 days? If I give him earnest money and he agrees to hold the house for me while mine sells, then he can't go back on it , right? If I have earnest money and something signed, he can't take an offer from someone else for a higher selling price, or decide he doesn't want to sell it., etc?

What do I need to look out for or what would be the best way to approach him so I don't loose the good deal on this house? Since I'll have costs with selling my house, if I can just do the sale with this owner then that would be simpler. I wasn't going to say anything to my realtor friend about this house just yet.

Thanks !!!

[Sierrajack]

First of all, I'd hire a home inspector - without question. Secondly, you need to go to an escrow company to handle the funds and the transaction.
Yes, it will cost you some money for these services but, better safe than sorry. You don't need a realtor - just that third party to close and do the legal matters. Don't forget, you will have capitol gains and of course, taxes to pay. Trust no one when it comes to buying a house.
Tell your seller what your intentions are and that you are serious but this is business and if he's honest, he'll go along with it. You have no idea if there are liens or other emcumbrances, easement rights, mechanical, electrical, plumbing issues and what ever may be lurking in the backround. After all, it's your money and this is business.
The market for selling is very weak right now and it may take time to sell your house so I'd procede with that in mind. The house you're looking at isn't the last one out there so don't "jump". Remember to always protect your interests and treat anything strictly business!!
You can make any potential purchase contingient upon the sale of your home too. Make that point up front, you don't want to wind up with 2 homes.

[rbeemer]

Julie,

I woould go ahead and ask your realitor friend your questions because they should know the laws for your state. I always think as earnest money as a non refundable deposit. It just shows you are really interested, as far as him selling it, laws in different states do things differently.

Besides if you are going to list your house with your friend they should be more than happy to explain it to you because you may want the same provisions on your house and need to know the legality of it.

[IndyCubby]

Julie,

I'm doing something similar right now. I'm selling my house to one of my neighbors and buying another one across the street. I did hire a realtor I have worked with before to take care of the paperwork and "technically" list my house so the sale would show up in the MLS system. The house I am buying is not listed, but he is taking care of the paperwork for that purchase as part of the fee I am paying for the listing of my current home.

You might ask your realtor friend if they would be willing to work some kind of a deal like this for you as part of your listing on your current home. The purchase process is complicated and it is just easier to have someone who knows what they're doing take care of it....they will schedule closing, write up the contracts, relay all the stuff to a title company, etc. If a realtor does it, you can make sure all the right language is used in the purchase agreement and it is done legally and to your benefit.

As for earnest money, I would think that $1000 is high for a purchase price of $55K. I would think more along the lines of $500 or less.

[oklahomajewel]

Thanks for quick replies! Chris, I knew you were in the housing situation right now , so it's nice to see your post !

The realtor is a childhood friend of mine, and knows the reasons I'm selling. I will mention it to her , kind of like "if I find a house that's FSBO, and how would I do the earnest money and a contingency on mine selling..... " and see what she says. I am smart enough to know to get a building inspection, termite inspection... I've already looked it up on the oklahoma county assessor website and know the taxes are current.

I'll be careful and would feel more confident having a title company do the 'closing' too .

[Steve_Cox]

Julie,

If the guy is selling below market value, it might be reasonable to assume there is a reason that he is doing the FSBO. It would be in your best interest to have an attorney that does real estate handle the transaction. In the long run it doesn't cost more. They can do the title search to make sure it is clear (the most important thing) also the closing and escrow can be done through them. Usually the cost is everything for one fee. Realtors, even friend realtors often get 7% of the total sale cost, then you get to pay the closer, and the escrow expenses on the new house etc, etc... Just my opinion, I bought and sold a bunch of houses and think Realtors are one of the worst ways to give away your hard earned bucks. Even my Realtor friends don't use a Realtor when they buy property

[Brian McAllister]

I'll be careful and would feel more confident having a title company do the 'closing' too .

I would have them hold the earnest money, too.

[Podunkfla]

Julie,

If the guy is selling below market value, it might be reasonable to assume there is a reason that he is doing the FSBO. It would be in your best interest to have an attorney that does real estate handle the transaction. In the long run it doesn't cost more. They can do the title search to make sure it is clear (the most important thing) also the closing and escrow can be done through them. Usually the cost is everything for one fee. Realtors, even friend realtors often get 7% of the total sale cost, then you get to pay the closer, and the escrow expenses on the new house etc, etc... Just my opinion, I bought and sold a bunch of houses and think Realtors are one of the worst ways to give away your hard earned bucks. Even my Realtor friends don't use a Realtor when they buy property

Julie... I agree with Steve 100%. The title company I use is owned by an attorney who specializes in real estate. He has sure made my life easier over the last 30 years... and saved me a bunch in RE commissions. The flat fees are reasonable and he has straightened out a couple of real messes I got into. It's the best way to do real estate transactions, in my view for sure.

[pgwilli]

I sold my first house, FSBO.
There was a company that fielded the offers, made sure the buyers were qualified, wrote the offers for the people who didn't know how and got the transaction - earnest money, title insurance etc into escrow for a flat fee.
The house wasn't listed and I had to show it myself.

Actually, I sold it pretty quickly because I could afford to lower the price because of the commisions I wasn't paying.

No one ever accused be of being a smart business man

[pgwilli]

Come to think about it...
My second house was an assumption....no commisions there either.
I wrote the offer, contacted the sellers lender, filled out the paper work to assume their mortgage and wrote a check to the seller for their equity.
The escow company did everything.

I felt pretty smart about that deal