Buying a home that’s for sale by owner can be as easy as buying a home listed through a real estate agent and more rewarding. Buying a home that is for sale by owner can save you about 6% of the total house cost if neither side chooses to go for a real estate agent. This 6% may not be enough to make a difference for some people but it can help you make home loan payments from a mortgage lender more affordable for some people and can be the difference between buying a house and watching someone else buy the home you want.
An average real estate agent asks for 5-7% as commission. This can cost you a ton of money while buying a home. When you minus the agent on both the sides, it will ensure that you save a significant amount of money while making the transaction.
Here are a few tips to buy a home that is for sale by owner:
Comprehensive Loss Underwriting Exchange or a CLUE report is the report that shows any insurance claims made over the last five years. This report is very important and lets you figure out if there have been any major repairs in the house in that time frame. Ask for the owner’s permission for a CLUE report. A Comprehensive Loss Underwriting Exchange report lists any losses, whether a claim was denied or any amounts paid for claims.
A purchase agreement is one of the first legal document that you’ll need once the seller agrees to your proposed price. A purchase agreement is a written document drafted by a real estate agent between the seller and the buyer that outlines the terms of your sale. Usually, it’s the estate agent that drafts it but in this case, the buyer can take care of it. If you and the seller both have opted not to hire a real estate agent then hire a real estate attorney to create the documents and provide any legal advice you may need. A purchase agreement contains the pricing at which you are buying the house, contingencies such as home inspection and financing, states the time you are willing to take over the house, and title policies, etc.
Determine who pays what
Sellers who opt ‘for sale by owner’ typically pay the total real estate commissions of the buyer’s agent, his/her own real estate attorney if they hired one, and the property taxes levied on the property sold. If he hasn’t yet paid the annual property taxes, the seller can credit the remaining taxes to the buyer equivalent to the number of days the seller owned the home that year. This credit reduces the amount of money that the buyer needs at closing. If the seller is in a hurry to sell the home, he/she might be willing to take on more of the closing costs. This usually happens in a buyer’s market. On the other hand, the buyer usually pays for the mortgage fees including its application, origination points, discount points, mortgage insurance, credit report, and mortgage broker’s fee. An origination point compensates the lender or mortgage broker for their work; a discount point lowers the interest rate. You can always amortize some of the closing fees in the interest rate of your monthly mortgage payment. This will increase your monthly mortgage payment but decrease the amount of money you need to bring at the closing table
Buyers are usually responsible to pay off the closing costs but depending on the type of loan you are taking from the lender and the specifics of the housing market you are in; you might be able to get the seller pay off some of the closing expenses. Prior to the closing process, your lender should give you an estimate of your loan and the anticipated costs. When you get this estimated amount of money that you have to pay, go through each and every fee to make sure that you are not being charged an unreasonable amount of money.