Buyers

If you are looking at this section, then you are probably a Buyer that is willing to do some work to find that ideal property. This web site only has properties that are for sale directly by the owner. Many real estate professionals will not check out these properties for their clients. That means that if you are working with a real estate agent, you will likely miss out on many properties that are for sale unless you do your own searching or unless you have a very good real estate agent.

Many Buyers are leery of looking at property for sale directly by the owner because they are afraid of dealing with an owner by themselves. Our suggestion is that, unless you are very experienced, you use a professional (either a real estate agent or a lawyer) to help with a sale. The Seller may see this as poor advice but having a professional “protecting” the Buyer will substantially cut the chances of a lawsuit later if things do not go smoothly.

Contingencies:
Any offer you make should be contingent on being able to get financing, reviewing a Seller’s Property Disclosure, having a home inspection, checking the title report and on the property appraising for at least the sales price. Real estate transactions must be written in order to be enforceable. This means that you can negotiate verbally but the final agreement must be on paper. It also means that while you are verbally negotiating, the Seller could accept an offer from another Buyer. If you are really interested in the property, get it in writing right away.

The first contingency that you should be sure to have in your offer is that you are able to obtain financing. Before you start looking for property you should have already contacted lenders to find out what kind and how much financing you qualify for. If you have financing in place when you make your offer, it puts you in a better bargaining position, especially if there are other Buyers interested in the property. If you have a loan approval, you might feel that you don’t need a financing contingency. However, there are many things that could happen between the time you make your offer and when the sale is closed that would prevent you from being able to go through with the sale. As an example, what if you lost your job or had a serious accident. These kind of things do happen so why not make sure it is covered in the purchase agreement?

Disclosures:
Disclosure laws in many states require that the seller of a home is legally bound to disclose to you any known defects in the home being sold. You should have a contingency in your offer that requires the owner to give you a Property Disclosure Statement and gives you time to review it. You should be able to back out of the deal if there is something that concerns you in their report. Even if the report looks good, there may be defects that the Seller may not be aware of which makes the next contingency important.

Inspections:
A home inspection can be a life saver. The inspection could be done by you, by a competent friend or by a professional home inspector. This is not a place to be penny wise and pound foolish. A professional inspector will cost about $350, not including water or radon testing, but he may warn you of problems that could cost thousands of dollars to repair or make the house completely undesirable to you. If you have a friend very knowledgeable in the building industry, you might have them do the inspection. At the very least, you should go back through the property yourself with a fine tooth comb looking for signs of problems.

The standard home inspection covers the roof, the electrical system, the plumbing system, the heating and cooling systems, and the fireplace or wood stove. The inspector cannot find or be responsible for hidden problems but may see warning signs that might warrant a closer inspection by experts such as structural engineers or electricians. A good inspector will point out items that may not be up to current building codes. He can also point out things that could be done to improve the property such as putting a fan in the bathroom to cut down on damaging moisture.

Title Insurance:
In Montana a Seller is required to provide a Buyer with title insurance providing a warranty for the transfer of rights to the Buyer. In the report provided by the title insurance company, you might find out that a gas company has the right to put an oil pipeline across your property. You might consider that a very negative factor in your decision to buy the property. As with the other contingencies, you need to have time to review the data and decide if you want to proceed with the purchase.

The final obstacle – the appraisal. Assuming that you are not paying cash, your lender will probably require an appraisal to make sure that they are not lending too much money for the purchase. They will make a loan based on the lesser of the amount of the appraisal or the purchase price. If the appraisal is less than what you have offered, you need to be able to negotiate a lower price, have the ability to pay the extra amount out of your pocket or back out of the deal.

Credit Management:
The importance of keeping a good credit rating cannot be stressed enough. Some individuals are not ready to buy because they need to clean up their credit in order to qualify for a loan. If your credit is only bruised, you may qualify for a loan but it might cost you an extra $200 per month. A lender will look at your credit report and help you resolve problems that may be there. They can also give you suggestions as to how to improve your credit score.

One of the factors that a lender looks at is the amount of debt a client is carrying. A lender generally wants the monthly payments that goes towards paying debts (including housing) to be less than half of a client’s monthly income. As you prepare for purchasing a home, do not go out and buy a new car or snowmobile or television on credit. Wait until after you purchase the house.

Having trouble saving for a down payment? There are many programs available to help with grants or low interest second mortgages. Ask your lender what programs you qualify for. Your lender should ask you if there is anyone else that might be able to help with the down payment such as relatives or the company that you work for.

If your current financial situation is such that you do not qualify for a loan (such as a recent bankruptcy) but the circumstance is improving, you might be able to find a property on which you can do a lease/purchase where you rent the property and have an option to purchase it when you are in a better financial position. Many real estate professionals do not want to bring up this possibility because usually they will not get any money until the option is exercised which might be a couple of years down the road.

Negotiations:
As mentioned earlier, your offer must be in writing in order to be valid. You can negotiate verbally, but if the Seller gets another offer even after you have verbally agreed to terms, they can accept the other offer. Even a written offer can be retracted if it has not yet been signed by both properties. If you were to write an offer for $100,000 and the Seller counters at $110,000 and you are deciding whether or not to accept the counter offer when the Seller gets another offer that they want to accept, they can contact you and pull their counter offer if you have not yet signed it and returned it to them.

The contingencies that are written into the offer allow you to negotiate to solve problems that are discovered on closer inspection of the property. It is not wise to nitpick about little items. If you like the property, don’t take a chance on losing it because it has a leaky faucet. The same applies if you are a few thousand dollars apart on price. Look at what the increased monthly cost is going to be – not much. Replacing a failing roof, painting the exterior, upgrading the electrical service – these are the kinds of things that should be negotiated.

If you are working with a real estate professional, you should request that the Seller pay the commission that you owe to your agent. Many will offer to do this in their ads. If you pay the commission instead of the Seller, the commission is not considered part of the sales price of the house for some kinds of loans. If the Seller will not pay your agent, then you might want to raise your offer by the amount you are paying your agent and then the Seller would have no objection for paying a commission.

Don’t forget to ask for anything that you would like to stay: window treatments, refrigerator, stove, washer, dryer, riding lawn mower, snow blower, grand piano, etc. Some items the Seller would just as soon not move. Depending on how far away they are moving, it may cost almost as much to move something as to buy a new or used one after moving.

Closing:
The primary factor in determining when a closing can occur is the lender. They have the most checking and paperwork to do. Even if you are pre-approved for a loan, the lender must wait for the appraisal before they can finalize the loan. Before you propose a closing date in an offer, be sure your lender can meet the time schedule.

Once an offer has been accepted, you must pay close attention to the contingency dates. If you do not bring an objection to the Seller’s attention by the contingency date on the sales contract, then you cannot back out of the sale based on something that you should have found out by following up on the contingency. As an example, lets say that you had the standard property inspection contingency but did not get an inspection before the contingency date expired and then you find out that there is bad wiring and substandard electrical service. You cannot back out of the deal or get the Seller to make repairs. You are legally bound to go through with the purchase and fix the problem at your expense.

By the closing date you need to have lined up insurance for the property (your lender will demand it). You need to have contacted all utility companies to have service transferred into your name. This includes gas, electric, water, sewer, garbage, cable, phone, internet, newspapers, water softener lease, etc. At closing you should get manuals for appliances, garage door openers, keys to all of the locks and any other paperwork that the owner might have for the house such as floor plans.

You should consider changing all of the locks after you move in. You can get new locks or remove the existing locks, take them to a locksmith, and they can reconfigure the lock to use a different key. It might be possible to have all locks set to the same key.

Conclusion:
You should not avoid FSBO properties. If you are not comfortable contacting them on your own, then be sure to use a real estate agent that will look at these properties for you or with you. Many of the FSBO properties will wind up being listed by a real estate agent but the price will probably be higher and the really good deals will be gone.

YOU CAN DO IT!

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