How to Purchase a Home for Sale by Owner

Several Tips on Buying A House Directly from the Home Owner

Jun 18, 2009

Buying a home without the assistance of a realtor has many benefits. But dealing directly with a home owner requires the buyer to invest time and money to be successful.

While there are many advantages to buying a house directly from a home owner without the assistance of a realtor, the buyer should enter into any such transaction with a mixture of knowledge and caution. The following article offers general tips and advice to buyers considering a home for sale by owner.

Don't Jump into A Sale from a Home Owner Blindly

It is important that buyers are aware of the documents and other legal processes that are necessary to buy a home from the seller. Buyers should also be in touch with the current trends in the real estate market and as well as local requirements and customs, such as whether the buyer or the seller is responsible for conducting certain transactions (inspections, for example) and paying fees (including transfer taxes, escrow fees, and title fees). Every state has its own disclosure statements, sales contracts, and companies authorized to offer title insurance, and the buyer should make it a point to be familiar with them.

Choose Hired Professionals Carefully

Even without the involvement of a real estate agent, there will be several other professionals offering their services. This includes: real estate lawyers, various kinds of home and property inspectors, and home appraisers. Buyers should be sure to check out the credentials and reputations of anyone that they will be working with. It can save a lot of headaches later on.

Bid and Negotiate Wisely with the Home Owner

With negotiations, a buyer can always raise the offer. But once a bid has been made, it is basically impossible to reduce it. Any other offers the homeowner is receiving is probably lower than the asking price. so over biding can be disastrous.

Buyers should also keep in mind that home owners can be especially sensitive sellers, because they have personally invested time, money, and emotional attachment into their homes. Critique of the house can be taken personally and jeopardize the sale.

Buyers Can Make Creative Offers Where Appropriate

The buyer has more bargaining flexibility. Without the involvement of a real estate agent a buyer has the freedom to get more creative with an offer. This includes any non-fiscal offers such as bartering (with services or supplies) and house swapping (a transaction where two parties exchange properties).

Make Sure the Purchasing Contract is Clear and Accurate

Without the aid of a real estate agent, buyers have two main options when writing the purchasing contract. Either the buyer can look for real estate purchase contracts online to buy, or call a qualified a real estate lawyer to handle the transaction. Many lawyers will charge about $500 for this service.

1. Contingencies. These give the buyer a penalty-free way out of the transaction. Examples of contingencies include: physical defects that the seller will not fix, the buyer's loan is not approved, the CC&Rs are unacceptable, the appraisal is lower than expected, or the title to the property is unclear.

2. Cost and transactions agreement. An agreement over who will cover the costs of certain fees and conduct various inspections.

3. Possession date and detail. Buyers should be sure to specify when they will gain possession of the property and be handed the keys. In some parts of the country, it is acceptable to expect possession on the day of closing. In other areas, possession is given the day after closing to give the seller time to move.

Be Careful with the Earnest Money Deposit

Buyers should not give their earnest money deposit directly to the seller. Instead, the money should be held by a neutral third party such as a lawyer or a bank until the terms of both buyer and seller and have been finalized.

Get a Title Insurance Policy

It is in the best interest of the buyer to avoid skimping in this area. Title insurance is generally inexpensive and can end up saving the buyer a lot of money if the title is either unclear or contains disputed easements (the right given to another person or entity to trespass upon land that person or entity does not own).

In short, buyers should make sure to cover their bases before entering into a for sale by owner home purchase. Though it may require a significant investment of time and money from the buyer, it is well worth the effort.

The copyright of the article How to Purchase a Home for Sale by Owner in Buying/Selling a Home is owned by Susan Brown. Permission to republish How to Purchase a Home for Sale by Owner in print or online must be granted by the author in writing.