Image via WikipediaIf you thought that you can’t buy a house without a Granada Hills real estate agent, you are highly mistaken.
Around 20 percent of the total house sales annually are direct purchases. Meaning, the deal involves the buyer and the owner, minus the real estate agent. Although it’s not hard, you would have to complete some steps and you will have to depend on some experts to ensure that you are complying with state and local laws. Here are the steps to follow to have an easy, more direct, and cost-effective deal with a home seller.
1. There are two key factors that you’d need to consider when making a purchase: Price and place. How much are you willing to spend? Where would you like to live?
These two factors go hand-in-hand and are inseparable. A midsized home in a district known for its high quality schools will probably be more expensive than a bigger new house on the outer side of town with overpopulated schools. A condo unit may seem a like a good deal – until you receive a notice from the homeowners association for your monthly fee. Transportation cost also counts. Is public transportation readily available in the area or do you need to take a car loan? Determining your household’s mortgage limit is also considered. You clearly do not want to take loans that in the end you can’t pay.
You can do a simple calculation of how much you are able to spend on a house by adding your down payment, normally 10 to 20 percent of the cost, to your mortgage. You can use our mortgage calculator to do this; you can add some other variables to see that by just changing something so small can have a huge impact on your mortgage limit and home purchase price.
2. Get Pre-Approved: Getting preapproved on your loan will assure your seller that you are capable of buying his/her property. And when that happens, your seller knows that the negotiation that he/she is making with you is “in good faith.” Conversely, the seller would back off on the negotiation table when he/she knows that you can’t afford his/her property. Prepare all the necessary things when you are conversing with your lender, your calculations in step 1 and some other supporting documents. You would also need some proof of income and your bank account statement for the past few months and show how you’re paying on your existing loans.
It’s also a wise move to check your established credit score. The higher it is, the more likely that the lender will trust you. Having a midrange or low credit score would mean that you will probably pay more on your mortgage, that is if you are lucky to get one at all. The lender would also check your computations and documentations to verify or adjust your maximum mortgage.
3. House Hunting: The fun starts during this time. Try visiting ForSaleByOwner.com and search for your ideal home. You can also expand your search by including HomeFinder.com and ForeClosureTimes.com.
4. Establish Direct Contact with the Owner: When you have found a home that you like, contact the owner via email or phone call to get more information on the house. Try to set up a showing with the owner, there’s no middle man so most probably the owner will guide you through the tour. You can use the questions on the listing sheet as a starting point. Ask as many questions as possible and focus on the facts he/she mentioned. Avoid distractions and focus on what he/she is saying. Based on everything that you have gathered, deduce whether it fits your budget, preferred location, style and function.
5. Get a Property Report of the Home: You can do this either before or after you have seen the home. This will allow you to compare its asking price from those of similar houses that were sold in the neighborhood. You can get such report via comparative market analysis (CMA) of real estate agents or a computer-generated one. The latter is like the real deal which will compare the home that you’ve got your eyes on to up to 20 other home sales nearby. Take note that property reports and CMAs did not include renovations -- so can expect that the estimated value will be affected somehow. CMAs also may or may not include foreclosures and distress sales, which can unnaturally lessen the average selling price in the surrounding area. However, appraisers consider these factors when he visits the house per request of the lender (as mentioned in step 8). CMAs let you see the probable value of the house and the appraiser will consider all the factors in his appraisal.
6. Seek Legal Help: Spending a few hundred dollars on real estate attorneys will equip you with all the legal advice and counsel you need as you go from offer to closing. Try to make use of local attorneys who are familiar with real estate business in your town – city ordinances as well as disclosure and tax laws. You can also rely on your attorney to walk you through the offer negotiation.
7. Make an Offer: Once you are finished with the above mentioned tasks, you are now ready to make an offer to the seller. Ask your attorney to make the necessary forms. This will make all of the technicalities of the paperwork an easy task. Make sure that your offer leaves room for negotiations and at the same time not too low to offend the seller.
Use the information you have gathered and the observations you have made regarding the condition and amenities of the house as the basis for your offer. If you believe that some of the amenities, like swimming pools and hot tubs, included in the house are of no value to you, you can deduct their perceived value from your original offer. Be sure to be objective when making these deductions and base them on function and structure and not on subjective factors. For example, it is reasonable to subtract $2,000 for the replacement of old refrigerators because every home needs a functioning refrigerator. On the other hand, it’s unfair to deduct $2,000 for replacing the curtains with the ones you prefer. The above case is a matter of taste, not functionality. Draw out your objective reasoning as an addition to your offer. This will allow your buyer to understand your reasoning.
Continue your negotiation with the seller until you have come into an agreement: the price of the house, scheduled closing of the transaction, and any seller concessions, which may be to pay some of the closing cost or to include personal properties.
8. Lock in Your Mortgage Rate: After reaching an agreement with the seller, the house is already “under contract.” You have to start working on multiple important tasks all at the same time.
· Let your lender check on your offer, this will strengthen the commitment for the mortgage. Although you are prequalified, take some time to have a look around one more time for better terms and lower mortgage rates. You can try to visit Bankrate.com for comparing your mortgage with current mortgage rates at major lending firms. You can also check out local banks and mortgage brokers for price comparison. Once you have established your mortgage with your lender and mortgage broker, it is “locked in” for 1 to 2 months – which is an enough time to do the rest of the paperwork and close the sale.
· Let the appraiser, who was assigned by your lender, to examine the terms of the contract and the house itself. This may pose a potential issue. That is if the appraiser noted that your offer is way above the prices of recent sales of similar properties in the neighborhood. If this happens you might want to renegotiate with the seller.
9. Get the Home Inspected: Hire a professional inspector who will check the house from top to bottom to see if there structural or mechanical problems in the house. It would cost you from $300 to $600 and usually takes two hours. By that time, you will have the report regarding the condition the home is in.
The inspector may or may not verify that the house is complying with local building codes. You can ask the inspector to confirm that the improvements, if any, were made legally and in compliance with local building code. If it’s not in accordance with the building code and you already bought the house, you are the ones who will handle all of the costs in bringing the house into code compliance.
You might want to re-negotiate the price after seeing the inspection report. For instance, if the inspector told you that the roof needs replacement, bring that issue to the seller to lower the price for compensation of the expenses that you would spend in making the replacement or the seller could offer an allowance at closing for repairs and replacements.
10. Close the Deal: Your attorney will be handling most of the task of closing the deal. He/she will also advise you if any special paperwork needs to be completed. They, your attorney and mortgage lender, will be assisting you in coordinating the financial aspect of the sale and provide payment to the seller. On the specified closing day, the seller will be signing the deed of the home. You will do all the necessary paperwork, and lastly and perhaps what you have been waiting for, obtaining the key to you new home.
This information is simplified, and many schools of thought say that you should definitely have professional help in such a potentially expensive undertaking. Lack of knowledge about a single aspect of the deal can cost you more than you would save. If you need help, there is always your Granada Hills Realtor just a phone call away.
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