Chapter 2: Real Estate Home Buying Basics (Continued)


For Sale By Owners
 
The term for an owner who is selling the house on their own without listing it with a real estate agent is: FSBO (For Sale By Owner). As you talk to these owners, learn to be a good listener. Right now it is not about you, it is about them. Keep your mouth shut about what you want and try to find out everything you can about the seller. Why are they selling without a real estate agent? What is their motivation for selling? Often money is not their motivation. Perhaps they are selling for health reasons or because they have to relocate.


Sometimes the seller just doesn't’t want to pay the commission to the real estate agent.  Maybe they are, or were at one time, a real estate agent. Maybe they don’t have enough  equity in a house to pay an agent. Whatever the reason, ask why they are selling on their own.
What you want to look for is someone who is very motivated to sell and who has a problem you can help with. For instance, Josh and Karen are motivated sellers. Josh has been transferred to another city and Karen is staying in the old house until it sells. Unfortunately, they don’t have enough equity built up in the house to pay a real estate agent, since they only bought it two years ago. Josh has found a new house, but they can’t afford to pay two mortgage payments for very long. These are good motivated sellers. We will get into how you can help them, and yourself, later.)


Contracts and Lawyers

If you are not working through a real estate agent, you will need to know where to go for help.  One of the first people to look for is a good real estate lawyer. I have included some sample contracts at the end of this book, but I recommend that you always have your lawyer look over any contracts you use.  Depending on the state, real estate sales contracts found in books or office supply stores may not be sufficient for what you need.  An incomplete or misunderstood form can get you into a lot of trouble.  A competent attorney can be well worth the price paid.

Often a settlement lawyer will hire a title insurance firm to make sure a title search is done. If not, you will need to do this.


Escrow Agents, Title Searching and Insurance

You will want to have a good full service title insurance and escrow company helping you with the closing settlement. It is important that the title of the property you are buying be checked for any problems such as liens, past due taxes, or other surprises such as co-owners.

An escrow agent will conduct the title search for you, as well as offer title insurance. Owner’s title insurance is a one-time fee that protects you against any surprises that may show up down the road after the initial title search has been done.


Appraisers

Often FSBO’s selling a home do not use a real estate agent because they want to get more money out of their home than the real estate agent thought they should list it for. The real estate agent is probably right. Agents are skilled at setting a good price a house will sell for in that market. Called a “comp” or comparative value, it is a price based on what other houses are selling for in that area. Many FSBO’s are selling on their own because they didn't’t like the real estate agent’s “comp” price.

Some real estate agents will list a home anyway, for the price that the owner wants, even though it is too high. Then, six months later, when the house didn't’t sell, the owner goes off on their own as a FSBO, thinking that the agent did not do anything for them.

If you are serious about buying a FSBO home and you want to find out how much the house is worth, consider having an appraisal done by a certified real estate appraisal firm. If the owner won’t pay for it, you may have to pay for it yourself. Then you will know exactly what the house is worth and if the owner wants too much for it. It will give you more bargaining power. And you can make an offer on the house contingent to what happens with the appraisal.

Remember, it might be worth paying a little bit extra for a home if you can get the terms you want from the owner, such as having the owner finance the house or using sweat equity for a down payment. Maybe this is one way you can give the owner what they want or need and help yourself too.

 
Home Inspectors

A home inspector can give you a comprehensive analysis of the house’s major systems and components. They are independent third parties so they are neutral in the buying process. If you have any questions about the condition of the home or what the seller is telling you about the house, it might be very well worth the cost to get the house inspected-- if nothing else, for your peace of mind.

When hiring home inspectors, look for licensed professionals. In many states home inspectors don’t have to be licensed. A Licensed Professional Engineer (PE) is an engineer, not just an inspector.  If you uncover a problem and you don’t have a PE, you will just have to go out and hire one anyway. It might be a wise decision to start with a Professional Engineer if you suspect problems with the house.


This has been an excerpt of the book by Alex Dey called Buying a Home When You Have Bad Credit.



Buying a Home When You Have Bad Credit is written by Alexis Dey, Copyright © 2005-2006 Mohave Publishing. All rights reserved. This book is protected by international copyright law. You may not otherwise resell, reproduce, distribute, publicly perform, publicly display, or create derivative works of this material, unless authorized by Mohave Publishing.  http://I-Can-Buy.com