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Message
Buying a FSBO House
Posted on 12/4/14 at 9:54 am
Posted on 12/4/14 at 9:54 am
We have been considering buying or building a new house. We have looked at a house that is FSBO. Every house I have ever been in, we either built it through a production builder or we used a real estate agent. I've never purchased an FSBO house.
To make it a little more interesting, this particular house is owned by the daughter of a very close friend of one of my parents. Therefore I really want to make sure everything is done nicely with no hard feelings (i.e. I don't want anyone to feel like they are getting screwed over).
I do think the house is priced too high, and I have a ballpark idea of what they really need to "net" from selling the house in order to pay off their mortgage and make a down payment on another place.
I have a few questions for anyone that has done this before.
1) How do you go about getting comps, to help determine what we should offer?
2) What's a good place to find offer forms, etc?
3) Who is responsible for setting up the closing, getting the documents prepared, etc?
4) As a buyer, should we hire our own attorney?
5) Any other good resources out there we should look at?
Thanks in advance.
To make it a little more interesting, this particular house is owned by the daughter of a very close friend of one of my parents. Therefore I really want to make sure everything is done nicely with no hard feelings (i.e. I don't want anyone to feel like they are getting screwed over).
I do think the house is priced too high, and I have a ballpark idea of what they really need to "net" from selling the house in order to pay off their mortgage and make a down payment on another place.
I have a few questions for anyone that has done this before.
1) How do you go about getting comps, to help determine what we should offer?
2) What's a good place to find offer forms, etc?
3) Who is responsible for setting up the closing, getting the documents prepared, etc?
4) As a buyer, should we hire our own attorney?
5) Any other good resources out there we should look at?
Thanks in advance.
2
Posted on 12/4/14 at 10:13 am to LSUFanHouston
I sold my last house without an agent, to a young couple who didn't have a buyer's agent. It all went very smoothly, no wrinkles. It helped that the buyers' parents had bought & sold & renovated many houses over the years; they helped the buyers have a realistic expectation of the possible condition issues in an older home (mine was 75+).
--comps: assuming that you're financing, your bank will require an appraisal, so you don't need to dig up the comps yourself. if you're paying cash, then the $350 you pay to a professional appraiser is well worth the dough. If you're looking for ballpark numbers to dial in the offer, Zillow and Trulia will help you get a fix on the immediate neighborhood's recent sales. (unless it's a super rural area) Depending on the area, the county/parish may have recent sales data online or published regularly.
--if the house is in TX, the TREC has a whole bunch of sample forms online. LINK
--again, if you're financing, the closing & document prep will be handled by the bank & its attorney. If you're paying cash, you get to determine all of these things. You need an attorney who handles real estate sales...call your bank and ask who handles their RE closings. Chances are, it's a local RE specialist practitioner who will be happy to handle a cash sale & will quote you a price on the doc prep & closing. This attorney works for you as the buyer; typically the buyer gets to pick the closing agent. You may want to call a couple diff attorneys and see what the price spread is. This is the time to look up your professional contacts & see if you can't wrangle a better deal on the closing. Competent RE closing atty will handle things like the FEMA flood determination, lead paint disclosures, etc.
One thing you didn't mention is a true & thorough inspection. You need to hire a GOOD, trustworthy home inspector and set him to work. Video inspection of plumbing, all systems, etc. All of this is vital, esp if you think the asking price is a bit high. Any deficiencies uncovered give you some legit negotiating points.
Good luck...it's not so hard if you have decent business sense and a trustworthy/competent closing attorney. In my case, a RE agent would have added zero value to the transaction, as I quickly found a buyer and needed no marketing assistance. I was happy to underprice my house a little since I saved the RE agent commission, and both seller & buyer walked away happy as a result.
--comps: assuming that you're financing, your bank will require an appraisal, so you don't need to dig up the comps yourself. if you're paying cash, then the $350 you pay to a professional appraiser is well worth the dough. If you're looking for ballpark numbers to dial in the offer, Zillow and Trulia will help you get a fix on the immediate neighborhood's recent sales. (unless it's a super rural area) Depending on the area, the county/parish may have recent sales data online or published regularly.
--if the house is in TX, the TREC has a whole bunch of sample forms online. LINK
--again, if you're financing, the closing & document prep will be handled by the bank & its attorney. If you're paying cash, you get to determine all of these things. You need an attorney who handles real estate sales...call your bank and ask who handles their RE closings. Chances are, it's a local RE specialist practitioner who will be happy to handle a cash sale & will quote you a price on the doc prep & closing. This attorney works for you as the buyer; typically the buyer gets to pick the closing agent. You may want to call a couple diff attorneys and see what the price spread is. This is the time to look up your professional contacts & see if you can't wrangle a better deal on the closing. Competent RE closing atty will handle things like the FEMA flood determination, lead paint disclosures, etc.
One thing you didn't mention is a true & thorough inspection. You need to hire a GOOD, trustworthy home inspector and set him to work. Video inspection of plumbing, all systems, etc. All of this is vital, esp if you think the asking price is a bit high. Any deficiencies uncovered give you some legit negotiating points.
Good luck...it's not so hard if you have decent business sense and a trustworthy/competent closing attorney. In my case, a RE agent would have added zero value to the transaction, as I quickly found a buyer and needed no marketing assistance. I was happy to underprice my house a little since I saved the RE agent commission, and both seller & buyer walked away happy as a result.
Posted on 12/4/14 at 10:17 am to hungryone
Also forgot to mention another positive to getting a pro appraisal, even if you manage to agree on a price. The appraisal fixes a third party/market value for the house on a specific date. Should you end up needing to settle an estate fairly soon (G*d forbid), you have a solid basis for value. Or if something terrible happens (tree thru roof, partially burns down, etc), you also have a documented cost basis for estimating losses.
Posted on 12/4/14 at 10:29 am to hungryone
We would be financing the house - we have a mortgage broker. Because of that the appraisal and inspection will obviously occur. My thought was, I know the appraisal will fix the value, but I need some guidance in knowing what to offer.
The house is in St Bernard Parish and was rebuilt a couple of years ago - the couple that currently owns it bought it gutted 2 years ago and hired a contractor to rebuild it (not uncommon down here Post-Katrina but yet another reason why I'm going to have a very, very thorough inspection). I'm a big "trust but verify" guy.
I like to think I'm reasonably smart (I am a CPA) but I also know that I don't know everything and don't mind paying for advice to fill in the gaps. However, I don't think I really want to go the buyer agent route.
Good to know that the mortgage company will handle a lot of the form stuff. In the past I never quite knew who handled what between the agent, the closing company, etc.
The house is in St Bernard Parish and was rebuilt a couple of years ago - the couple that currently owns it bought it gutted 2 years ago and hired a contractor to rebuild it (not uncommon down here Post-Katrina but yet another reason why I'm going to have a very, very thorough inspection). I'm a big "trust but verify" guy.
I like to think I'm reasonably smart (I am a CPA) but I also know that I don't know everything and don't mind paying for advice to fill in the gaps. However, I don't think I really want to go the buyer agent route.
Good to know that the mortgage company will handle a lot of the form stuff. In the past I never quite knew who handled what between the agent, the closing company, etc.
Posted on 12/4/14 at 10:33 am to LSUFanHouston
quote:
In the past I never quite knew who handled what between the agent, the closing company, etc.
Generally, agents do marketing...they find the buyer & prepare the purchase offer....and that's about it. The paperwork heavy lifting is done by whoever handles the closing (bank's RE atty).
Buying a flooded/rebuilt house is indeed an inspection intensive matter....but before you seriously consider this house, you'd better go get a flood insurance quote & a homeowners quote. If you've been out of the local market for a while, both of those items can be STUPIDLY expensive these days. In certain risk areas, insurance costs have frozen the market.
Posted on 12/4/14 at 11:03 am to LSUFanHouston
Like most have said, make the purchase contingent on inspection and appraisal. Hire a licensed home inspector and lender will appraise the home. If they don't want to sell home for what it's worth should appraisal fall short, then that's on them. You have nothing to feel bad about wanting to pay fair market value for a home.
Posted on 12/4/14 at 11:16 am to hungryone
quote:
Generally, agents do marketing...they find the buyer & prepare the purchase offer....and that's about it. The paperwork heavy lifting is done by whoever handles the closing (bank's RE atty).
First thing I do is get my clients preapproved through 2-3 lenders. I get daily updates of rates so I always know where best money is that day from a lender I've sent millions of dollars in business to. Also submit preapproval letter with offer so seller knows we have funds to close.
Most of my clients have their own profession, so I line up vendors (inspectors/appraisers/closing attorney) and meet vendors at property if necessary. Based on those findings we determine what needs to be addressed to drop contingencies and move forward to closing.
Everything a RE needs to do can usually be done in 3-4 hours, barring some weird circumstance. No way what I do can be done in a tenth of that time best case scenario ever.
So I respectfully disagree
Posted on 12/4/14 at 11:25 am to ItNeverRains
quote:
If they don't want to sell home for what it's worth should appraisal fall short, then that's on them. You have nothing to feel bad about wanting to pay fair market value for a home.
So are you suggesting I just go in at the offer price and then deal with the appriaisal if it comes in for less?
It's priced at $93/sq ft. Pretty big neighborhood (Lexington). It's been "on market" for 3 months, no reduction in price. I know they are not in a position where they have to move. List prices in that neighborhood range from 66 per sq ft to 114 per sq ft. All over the place. What I can't tell is the actual sell prices.
And unless it's a recently purchased house, trying to use the data from the tax assessor is pretty useless, as pretty much all houses here are under valued on the tax rolls, thanks to people going and "having coffee" with the assessor.
Posted on 12/4/14 at 11:38 am to ItNeverRains
quote:
ItNeverRains
If I did do a buyers agent, do I pay them outside of closing? They make I guess 3 percent of the sales price?
Posted on 12/4/14 at 1:21 pm to LSUFanHouston
Call some appraisers, most will look at comps in the area and give you a general value based on the listing info for $100 or less.
If the value is lower than or equal to your intended offer, readjust for negotiating.
If the value is lower than or equal to your intended offer, readjust for negotiating.
Posted on 12/4/14 at 1:33 pm to LSUFanHouston
quote:
If I did do a buyers agent, do I pay them outside of closing? They make I guess 3 percent of the sales price?
If all I had to do was pull comps, write offer, and be the scapegoat should they get pissed at your offer and you want to blame it on me, I'd do it for 1%.
Now if you want me to line up lenders, inspectors, closing attorneys, I'd probably ask 1.5%.
Posted on 12/4/14 at 2:22 pm to LSUFanHouston
I'm currently in the process of buying a FSBO home. It's been relatively easy. Found a mortgage broker, closing company, home inspector, insurance. Now just waiting on everybody to do their work.
On the first FSBO house I was looking at, I did get an agent involved, but the seller has to pay the agent and her commission would have been 2.5%.
On the first FSBO house I was looking at, I did get an agent involved, but the seller has to pay the agent and her commission would have been 2.5%.
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