purchasing a home directly from owner

[toucano]

A given real estate transaction may end up being simple or complicated. Trouble is, you can never be 100% certain going into one which it will be. When emotions and money are involved, anything can happen. And if the mustard hits the fan, it is nice to have a GOOD and COMPETENT real estate professional to iron out problems like "What do you mean that chandelier needs to stay with the house? I installed it and I'm taking it!". Or before closing, "The house flooded. I thought YOU were responsible." Think that doesn't happen? Ha!

But the flip side is that a lazy and/or incompetent real estate person can be not only as worthless as mammary glands on a boar, but create problems where none existed.

If one is bound and determined to buy or sell without using a real estate person, I highly suggest before doing anything, talk to a good real estate attorney and seeing exactly what services they will provide and get a cost estimate.

FWIW, I have never met John R. But I have met John D. and my take after meeting him was that he was knowledgeable and conscientious. Regardless of if I was buying or selling, or even if he stood to make any money in a particular instance, I would trust him to give me good advice. Why? Because in the long run, a Realtor lives or dies by his reputation.

Edited by - toucano on 01/30/2007 18:33:53

[oink]

My experience with Hawaii Realtors has not been real good. That said, I would not recomend a buyer engage in a transaction without representation, unless it's a very experienced buyer. With Hawaii law providing for "Buyers Agents", that is what I would recomend. Do use one that has good references or has been proven trustworthy. An experienced Real Estate attorney can offer protection and piece of mind, but the attorney must be well experienced in Real Estate. Attorneys who are retained for representation in a Real Estate transaction, but who are not experienced Real Estate attorneys, have been known to totally screw up perfectly sound transactions due to their adversarial mentality. Just make sure you ask the seller to tell you everything about the property in writing...i.e. a seller's disclosure and make the disclosure part of the contract. In some cases, the disclosure is just that...a disclosure that carries no penalties if the seller forgot something or wasn't truthful. So have it made a part of the contract. Dependent on how you are purchasing the property, as-is or the seller is willing to make repairs, make sure you know how many days you have (as negotiated in the contract) to have any and all inspections. Use a reputable home inspector and termite inspector to do a thorough inspection (you do have the right to be present for the inspections) Depending on how you purchased the property, the seller will be responsible for repairs (if any found) OR if purchasing as-is...possibly to renegotiate the price dependent on what the inspectors find. You also want to have title and lien searches done, and pins, staking, or survey to find possible encroachments. Also make sure you check for assessments...whether city, county, subdivision, electric, road, etc. Assessments are something the seller should disclose if they are already recorded, but if you do your homework ahead of time you can use that information as a negotiating tool. Lava and flood zones may also affect your home insurance rates so be sure you've checked those out too. Be sure to visit your property at all hours, even night time, so you're not surprised by other neighborhood or environmental factors...i.e. frogs, barking dogs, road noise, loud or rowdy neighbors. As you can see representation has its advantages. A real estate attorney generally will assist you in the legal matters, but they may be unfamiliar with many other aspects of the home buying process.

S. FL Islander to be

[Jeffhale]

There's lots of pitfalls when owner selling to buyer direct, some of the time it saves both some cash. And some of the time if you do not know what contracts to use you can loose.

There are few situations a buyer should look out for; Owner contract and finance without trust deed and title work is one of the biggest.

In a few of these situations, you can find owners who are not actually interested in you paying the note off. Moreover, they offer a contract that is no different from paying rent. Their benefit is: you pay insurance, taxes, you pay for repairs/improvements, etc. payments about or near rental rates,. They make twice as much interest compared to banking rates. and if for any reason they want you out, or the property back, you can be evicted for something as small as paying one day late. The only way you can avoid this is by having title; trust deed, and using a escrow company. In the first way you get evicted like rent. In the second the owner must foreclose, which takes time and if auctioned with any monies higher than their expenses and note, you actually get a return. Rare but can happen.

These sellers to be wary of generally buy property from desperate people or something that is so run down what you promise to pay them is far more what they paid and or much higher than its actual worth. They also look for disadvantaged people who have little or no credit.

It is a win, win situation for the seller. Save the kicking them, or you out part, which can be emotionally draining.

Typical lead in is; a low down payment and monthly installments, no credit O.K.. Even when the seller advertises a somewhat large down payment you might find they will agree to a much lower one. There are several strategies these sellers create. It is a good sign you've got a seller who's more interested in seeing you loose when the down payment can be negotiated with a little smarts.. It’s a capitalistic world and he who make the cash wins, but my point is; if they got a property for such a low price or so, , with patience another like it will pop up, providing you know where to look and can wait. Checking public records helps learn how much, and when the property last changed hands

Payments like rent and owner has no expenses like a typical landlord is a nice way to offset landlord responsibilities/expences, get a down payment verses deposit, and elevated interest verses rent or standard interest rates that allow the balance to amortize evenly. .

They do not want you to eventually barrow against it threw a bank because they will suffer capital gains taxes. Nobody wants to pay capital gains taxes if there is a way to avoid it.

I bought two, side by side houses from this type of seller once. My ignorant buying wasn’t so smart, I am stuck with two currently, bought this way and I’ll never get my money (investment) out of them even though I paid them off several years ago. . However. With the lesson learned I’ve bought and sold, ‘owner finance’ and it was sweet. I had one I’d paid $1,000 down payment, $100 month, owner financed with trust deed, a very low buying price, $7,000 total. I repaired it, rented it with $150 monthly profits, sold it five years later, paid my note off and received $48k profits, spread over ten years at $400 a month. Near the end of the term honestly, I kind of hoped they would fall threw.. However, I gave them title and had a trust deed, unlike the seller’s I am talking about. And my realtor only charged me $600 for handling this. Had another for 11 years bought for almost nothing and eventually sold it myself without realtor for $240K profit!

It is wise to know the market exceptionally well and insure you are not in a contract where you are susceptible to some of these terms. Typically called: ‘Contract to buy’ or “Contract for Deed”

On the other hand ‘Contract to buy’, ‘Contract for deed’ can be advantages to a buyer too. In other situations from a person who needs to get out of a property, you may be able to get a very low price and excellent interest terms. However, to be safe, getting title and or a trust deed by using an escrow company is the best way to go, for you and seller. If a seller can afford to carry a note, they can make a fine interest rate and offset capital gains taxes too.

But these are difficult to find whereas this seller who stands to gain to most is frequently available, advertising regularly often ‘selling’ one junk property over and over again. Many times these are the people who advertise “I buy houses fast for cash”. Even with a trust deed, if you paid to much for this property because you can not get credit or establish credit, and bought from this type of seller, knowing the terms were high; a financial institution will not lend you over 80 percent of the actual marketable/appraised value, you are stuck. Better to have rented.

On the big island you can find similar vacant land where this type of ‘sale’ is offered, there’s several in H.O.V.E. very easy to find, always over priced, small down payment elevated interest with long terms. E-bay is a good place to find these too.

If you can afford it, buying property at the lowest possible price, and turning it over for twice the amount, also financing it yourself can yield safe tax diversions/profits and high interest. However, if trying to get the best deal it is wiser to avoid this type of seller if you can. It is where a realtor who is a good buyer’s agent comes in very handy.

If you need to ask for advise, you’d best have a buyer’s agent, and or attorney who can act in your best interest or avoid getting yourself into something you may regret later. As I said, my ignorance was not bliss. And what’s worse, the two I bought, we get attached to our possessions yaw know, there was a time I could have just bowed out, treated the houses like rent, but Noo… I paid them off several years ago, today I regret this… Still not worth what I paid and I need to dump them..

For sale, two properties in the Midwest: one vacant lot, (city tore down house) and one two bedroom shack, Paid 22K in 1985 plus several years of interest at 10%, will sacrifice, $17K for both, in a market where there's hardly a house/shack availble for less than $30K today. May consider owner finance at $22k. ha.. The shack comes with non rent paying brother, you dispose..








Edited by - Jeffhale on 01/31/2007 05:22:52

[Brad W]

I've always found it comforting to satisfy the many requirements of the escrow company and lender.

[John S. Rabi]

"not cost you anything"???? Where do you think the money for the realtor comes from? It might be included in the price, but it's still coming from the buyer. And if the home is sold fsbo, the percentage won't be included.

I personally like have someone else do all the complicated paperwork, but it's hardly a bargain!

---

Stef, if someone is trying to sell FSBO (we call them "Unrepresented Seller" in a Buyers market, 99% of the time it means that house is overpriced and it will cost the unsuspecting buyers more. Have you ever thought of how the seller determined the asking price without being able to access sold data? Have you ever thought of how the buyer would know what to offer without being able to access the sold data and other comps? How about later surfaced problems? The seller is long gone, who is the buyer going to go after? The truth is that there are many unqualified real estate agents who should not even be in the business, but if you have a good one representing you your life will be much easier before, during and after the transaction. The same is about the attorneys. I was in court last week when a client represented by an attorney lost a case against a real estate agent!

Aloha,
John S. Rabi, ABR,CM,CRB,FHS,PB
http://www.JohnRabi.com
Typically Tropical Properties
75-5870 Walua Road, Suite 101
Kailua-Kona, HI 96740
(808)327-3185

Edited by - John S. Rabi on 01/31/2007 08:12:02

[Lee DeJongh]

Kate

I have been involved in about 10 real estate transactions. One was by owner,(me). In that case both of us had attorneys. All the others were through realtors. In the by ownwer sale we were both local, small town, knew the attorneys personally. It was ideal because of the level of trust.

But in the other transactions, there were often significant issues that the realtors were very helpful with. Things like a buried oil tank, demands for closing times, access to property prior to closing, closing costs, etc. I personally would not buy direct from owner without a good lawyer or realtor, especially in Hawaii.