Seller Doesn't Want to Involve Realtors but I Need Advice. How?
January 26, 2015 10:11 AM Subscribe
My landlord wants to sell me the condo I rent. I want to buy. I'm working on my credit to get into buying shape. She doesn't want to involve realtors in order to save costs. Who should I be talking to then? Special snowflakes inside.
I have lived in this condo unit for a year and a half. My landlord has always been straightforward and fair with me.
In the past few months she has told me that she'd like to sell the condo and if I were interested, she'd give me a really great price. She is newly married and has intimated that she doesn't need to make money on the place but just wants out and to break even. As part of cutting costs she has asked that we not involve realtor agents.
The price she has quoted me in confidence is very attractive, in the ballpark of 140K.
I have a low but improving credit score. I have spent the last six months getting it from 530 to 575. Obviously that is still too low for a reasonable (or any) home loan. I make decent wages- about 56K a year.
I asked her if she would be willing to extend my lease (she was going to have me move in April in order to stage the property for selling) while I get my credit to a point where I can buy. She has agreed to possibly give me another 12 months to get into buying shape.
My main concern is qualifying for a loan. The downpayment is something I can borrow from my retirement account.
But here is my question: If we don't involve realtors, who should I be talking to about a plan to buy this place? I would imagine that a realtor or financial advisor would know about strategies and opportunities (types of loans perhaps) that I do not know about. But I don't want to get a realtor involved in this deal as per her request.
I have lived in this condo unit for a year and a half. My landlord has always been straightforward and fair with me.
In the past few months she has told me that she'd like to sell the condo and if I were interested, she'd give me a really great price. She is newly married and has intimated that she doesn't need to make money on the place but just wants out and to break even. As part of cutting costs she has asked that we not involve realtor agents.
The price she has quoted me in confidence is very attractive, in the ballpark of 140K.
I have a low but improving credit score. I have spent the last six months getting it from 530 to 575. Obviously that is still too low for a reasonable (or any) home loan. I make decent wages- about 56K a year.
I asked her if she would be willing to extend my lease (she was going to have me move in April in order to stage the property for selling) while I get my credit to a point where I can buy. She has agreed to possibly give me another 12 months to get into buying shape.
My main concern is qualifying for a loan. The downpayment is something I can borrow from my retirement account.
But here is my question: If we don't involve realtors, who should I be talking to about a plan to buy this place? I would imagine that a realtor or financial advisor would know about strategies and opportunities (types of loans perhaps) that I do not know about. But I don't want to get a realtor involved in this deal as per her request.
A realtor will be able to help you figure out if $140k is really a good price for you condo, by looking at just-sold comparables. You may be able to do this yourself - for example by looking at recently-sold units in your same building. But if units in your building don't sell that often, it is trickier for a layperson to figure out what is comparable.
Traditionally, a realtor is payed out of the seller's profit, but it doesn't have to be that way. Many realtors are willing to be payed a flat fee or a reduced percentage by the buyer. If you pay a realtor out of your own pocket, the seller should have no say in it.
posted by muddgirl at 10:23 AM on January 26, 2015 [2 favorites]
Traditionally, a realtor is payed out of the seller's profit, but it doesn't have to be that way. Many realtors are willing to be payed a flat fee or a reduced percentage by the buyer. If you pay a realtor out of your own pocket, the seller should have no say in it.
posted by muddgirl at 10:23 AM on January 26, 2015 [2 favorites]
Yep, real estate lawyer. Realtors are most helpful if you're looking for a property to buy. Real estate lawyers specialize in getting all the details on the contracts correct. If you've already got a property you want to buy and a seller who wants to sell it to you, you just need a lawyer to hammer out the details.
The lawyer you hire will be on your side, and they'll be well-versed in property law, and they'll have a set fee (a realtor who usually takes a percentage), so they'll be working with your best interest in mind.
posted by erst at 10:24 AM on January 26, 2015 [1 favorite]
The lawyer you hire will be on your side, and they'll be well-versed in property law, and they'll have a set fee (a realtor who usually takes a percentage), so they'll be working with your best interest in mind.
posted by erst at 10:24 AM on January 26, 2015 [1 favorite]
Your bank likely offers financial advising services. They might try to sell you their mortgage options, but they should be able to provide you baseline information about what your options are in this situation. A mortgage broker could also help. Neither of these people is likely to charge you money directly.
They won't be able to tell you if the condo is actually worth $140K but you may be able to figure that out by looking at what other units in your building/area sell for or by having it appraised.
posted by jacquilynne at 10:33 AM on January 26, 2015 [2 favorites]
They won't be able to tell you if the condo is actually worth $140K but you may be able to figure that out by looking at what other units in your building/area sell for or by having it appraised.
posted by jacquilynne at 10:33 AM on January 26, 2015 [2 favorites]
Also, google "homebuying classes" + your area (and, if it applies to you "first time home-buyer" + your area). The (usually free) classes will walk you through the process, and, if you are a first time home buyer, there may be special loans or rates that are eligible for.
posted by amarynth at 10:33 AM on January 26, 2015 [3 favorites]
posted by amarynth at 10:33 AM on January 26, 2015 [3 favorites]
(I should have added to my last answer: It's possible that you do not need or want a realtor, but I don't think that you should exclude the services of a realtor just because the seller doesn't want to pay for one).
posted by muddgirl at 10:35 AM on January 26, 2015
posted by muddgirl at 10:35 AM on January 26, 2015
Mortgage broker.
The mortgage broker will know about different types of loans and what is the best fit for you. You don't pay them directly, they get paid by the lender for finding buyers.
The lender that the mortgage broker places you with will order an appraisal (at your expense) to make sure you're not paying more than market value for it, but you can also run comps yourself, from nearby condos of similar size, age, finish, and amenities.
Depending upon where you live, you'll either need an escrow company or a real estate lawyer to work on the actual details of the sale (this varies by jurisdiction; if you share where you are you may be able to get recommendations).
posted by rabbitrabbit at 10:37 AM on January 26, 2015 [2 favorites]
The mortgage broker will know about different types of loans and what is the best fit for you. You don't pay them directly, they get paid by the lender for finding buyers.
The lender that the mortgage broker places you with will order an appraisal (at your expense) to make sure you're not paying more than market value for it, but you can also run comps yourself, from nearby condos of similar size, age, finish, and amenities.
Depending upon where you live, you'll either need an escrow company or a real estate lawyer to work on the actual details of the sale (this varies by jurisdiction; if you share where you are you may be able to get recommendations).
posted by rabbitrabbit at 10:37 AM on January 26, 2015 [2 favorites]
Also check into your landlord carrying the loan. Then she gets money coming in each month and makes a bit of interest too and you don't have to deal with the bank. A lawyer who specializes in real estate can help you with that and can probably recommend a mortgage broker too, if you go that way. Definitely use a mortgage broker, they deal with the bank for you and make things go smoothly. Dealing directly with a bank is awful, for some reason they feel obligated to be total asshats.
posted by BoscosMom at 10:39 AM on January 26, 2015
posted by BoscosMom at 10:39 AM on January 26, 2015
A real estate lawyer is absolutely essential. You can dispense with the real estate agent - who can mainly help you find a property and understand pricing - but you need to have someone watching out that the deal is fair and does not have trap doors - the real estate lawyer can do this.
With respect to mortgage brokers, I don't think it hurts to talk to one to see what they have to offer, but you should also check with big national lenders like Pentagon Federal to make sure that you can't do better with them. I have had two mortgages with PenFed and they were both better than what mortgage brokers were offering. Mortgage brokers are essentially working on commission, so you can't always be sure they are doing what's best for you versus giving you what pays the best commission this week.
posted by Mid at 10:43 AM on January 26, 2015
With respect to mortgage brokers, I don't think it hurts to talk to one to see what they have to offer, but you should also check with big national lenders like Pentagon Federal to make sure that you can't do better with them. I have had two mortgages with PenFed and they were both better than what mortgage brokers were offering. Mortgage brokers are essentially working on commission, so you can't always be sure they are doing what's best for you versus giving you what pays the best commission this week.
posted by Mid at 10:43 AM on January 26, 2015
On re-reading the question: in my experience, real estate agents don't help you find a mortgage.
posted by Mid at 10:45 AM on January 26, 2015
posted by Mid at 10:45 AM on January 26, 2015
A good reference is using Redfin and the Sale Records tab in the filters. You can search by condo and your vicinity. I've found Redfin to be much better with tax information and HOA fees. Remember you will need to figure both of those amounts in to your calculation.
Also you can look up your property records with your county. In a situation like this it's best to get as much information as you can.
posted by readery at 10:45 AM on January 26, 2015
Also you can look up your property records with your county. In a situation like this it's best to get as much information as you can.
posted by readery at 10:45 AM on January 26, 2015
A real estate attorney is a good idea. You could even have him or her draw up a contract for a lease-option. In most lease-options, you agree on the purchase price up front. And then you continue to rent the property for a couple of years. Sometimes, part of your rent goes towards the down payment. Best case scenario for you would be the value of the property goes up but you still have the option in place to purchase it for less -- instant equity.
posted by Ostara at 10:51 AM on January 26, 2015
posted by Ostara at 10:51 AM on January 26, 2015
Just a tip: if this is really a condo (with an association board, monthy assessments, common areas, a reserve fund, etc), you'll need to make sure you get a copy of the condo's by-laws and financial report and have your lawyer review them with you. Your state's condominium laws allow you to access these things.
A lot of condo buyers get blindsided by things like association fees and one-time emergency assessments that can seriously hurt a new owner's finances.
posted by JoeZydeco at 11:01 AM on January 26, 2015 [1 favorite]
A lot of condo buyers get blindsided by things like association fees and one-time emergency assessments that can seriously hurt a new owner's finances.
posted by JoeZydeco at 11:01 AM on January 26, 2015 [1 favorite]
You don't need a realtor, you need a real estate lawyer. They're different and your seller shouldn't balk at you hiring a lawyer.
posted by quince at 11:24 AM on January 26, 2015
posted by quince at 11:24 AM on January 26, 2015
You do not need a Realtor, but if you don't have one you should be seeking at least a 3% discount off of comparable condos' selling price. If you and the owner can agree on what this comparable price is, no Realtors is potentially win-win.
Do get a lawyer though, to whom you'll pay a flat fee.
The mortgage is completely independent of whether or not you get a realtor. Contact brokers in your area directly, check Zillow mortgage, walk into banks near your home, and see who has the best interest rate/closing cost combos. Any broker/lender will be happy to talk to you now, look over your credit, assets, and income, and advise you on what you need to do to qualify for a loan in a few months. This is one way in which they bring themselves business.
posted by deadweightloss at 11:49 AM on January 26, 2015
Do get a lawyer though, to whom you'll pay a flat fee.
The mortgage is completely independent of whether or not you get a realtor. Contact brokers in your area directly, check Zillow mortgage, walk into banks near your home, and see who has the best interest rate/closing cost combos. Any broker/lender will be happy to talk to you now, look over your credit, assets, and income, and advise you on what you need to do to qualify for a loan in a few months. This is one way in which they bring themselves business.
posted by deadweightloss at 11:49 AM on January 26, 2015
It really depends on where you are. In Florida, you don't need an attorney to do a real estate deal, in Georgia you do. So find out what you need in your area.
In Florida, you can do this with a closing company. I had a friend who owned such a place, and she dealt with the paperwork for me. It worked out really well.
Before you agree to the price, find out the following:
1. What have other units in your building sold for in the past year or so? You want at least 5 comps (comparable listings). These are public records and you can search them pretty easily. Go to Realtor.com and see what other units in the building are listed for, check out the pictures, see if there are any upgrades. Would you want to buy your unit if the one next door has a new bathroom and carpeting?
2. No mortgage company is going to let you pay more for a property than it's worth. Not with their money. So at some point there's going to need to be a valuation. It's pretty inexpensive to get these, especially in a condo, would it be worth $250 to you? It comes with comps and an analysis.
3. Ditto an inspection, an inspection is $500 give or take, and it's on the buyer to pay for it. Again, it would be worth the money to determine that the unit is sound and that there is nothing expensive that's just about to break.
4. If you're balking at paying .005% of the purchase price to see if the home is fairly priced and no huge expenses are in the offing, you're not ready to be a homeowner.
5. In addition to the mortgage, how much will the HOA fees be? That number may not remain the same over time. When I lived in Florida, our HOA fees went up 50% due to issues with finding insurance for the building after Hurricane Andrew. The building's insurer left the market (Allstate) and we had to scramble to find ANYONE to cover the building.
6. Assessments. Find out from the HOA if there's a pending assessment. If I knew I wanted to sell, and I also knew that I was about to be assessed $5k for a new roof for the building, you best believe I'd be hunting around for someone to buy the joint, the sooner, the better.
7. Condo Board. In some places you have to qualify to buy the condo. You might need to have a certain amount of money in the bank, or make a certain amount of money annually. Condo boards don't want folks who are on the ragged edge financially occupying units. Also, to be able to get mortgages, they might be able to have only a certain percentage of units as rentals. So if you need to get out in a down market, renting out until the market recovers may not be an option. Get a copy of the bylaws, the most recent budget and start attending condo board meetings so you know whats going on. The smaller the building the more important this is.
8. If you have to borrow for the down payment, closing costs, etc, you don't have enough money to buy this property.
9. Talk to your bank/credit union about what kind of mortgage you can qualify for.
10. HUD offers classes and counseling for first time buyers. Find some and take them.
Step back. Were you interested in buying before you landlord told you she was selling? Was $140,000 what you wanted to spend on a condo? Do you know what $140,000 can buy you elsewhere? Is $140,000 such a paltry sum for you that you'd just write a check while doing zero due-diligence about it?
Pump the breaks. It sucks to move, I get it, but IMHO your finances aren't right for this, the timing isn't right for this, and you don't know enough about it to assess if this deal is in fact a deal.
I was a homeowner with a good job and some savings. Then I bought the money pit, then I got laid off, then I had to replace the sewer pipe. I paid $35k to get out of that house. I've never been happier since we started being renters again. It may not happen to you, but if you're one paycheck away from disaster DON'T BUY A HOME!
Also, condo's don't typically appreciate in value, so it's not even a meh investment.
Think, think, think about this logically.
posted by Ruthless Bunny at 11:54 AM on January 26, 2015 [6 favorites]
In Florida, you can do this with a closing company. I had a friend who owned such a place, and she dealt with the paperwork for me. It worked out really well.
Before you agree to the price, find out the following:
1. What have other units in your building sold for in the past year or so? You want at least 5 comps (comparable listings). These are public records and you can search them pretty easily. Go to Realtor.com and see what other units in the building are listed for, check out the pictures, see if there are any upgrades. Would you want to buy your unit if the one next door has a new bathroom and carpeting?
2. No mortgage company is going to let you pay more for a property than it's worth. Not with their money. So at some point there's going to need to be a valuation. It's pretty inexpensive to get these, especially in a condo, would it be worth $250 to you? It comes with comps and an analysis.
3. Ditto an inspection, an inspection is $500 give or take, and it's on the buyer to pay for it. Again, it would be worth the money to determine that the unit is sound and that there is nothing expensive that's just about to break.
4. If you're balking at paying .005% of the purchase price to see if the home is fairly priced and no huge expenses are in the offing, you're not ready to be a homeowner.
5. In addition to the mortgage, how much will the HOA fees be? That number may not remain the same over time. When I lived in Florida, our HOA fees went up 50% due to issues with finding insurance for the building after Hurricane Andrew. The building's insurer left the market (Allstate) and we had to scramble to find ANYONE to cover the building.
6. Assessments. Find out from the HOA if there's a pending assessment. If I knew I wanted to sell, and I also knew that I was about to be assessed $5k for a new roof for the building, you best believe I'd be hunting around for someone to buy the joint, the sooner, the better.
7. Condo Board. In some places you have to qualify to buy the condo. You might need to have a certain amount of money in the bank, or make a certain amount of money annually. Condo boards don't want folks who are on the ragged edge financially occupying units. Also, to be able to get mortgages, they might be able to have only a certain percentage of units as rentals. So if you need to get out in a down market, renting out until the market recovers may not be an option. Get a copy of the bylaws, the most recent budget and start attending condo board meetings so you know whats going on. The smaller the building the more important this is.
8. If you have to borrow for the down payment, closing costs, etc, you don't have enough money to buy this property.
9. Talk to your bank/credit union about what kind of mortgage you can qualify for.
10. HUD offers classes and counseling for first time buyers. Find some and take them.
Step back. Were you interested in buying before you landlord told you she was selling? Was $140,000 what you wanted to spend on a condo? Do you know what $140,000 can buy you elsewhere? Is $140,000 such a paltry sum for you that you'd just write a check while doing zero due-diligence about it?
Pump the breaks. It sucks to move, I get it, but IMHO your finances aren't right for this, the timing isn't right for this, and you don't know enough about it to assess if this deal is in fact a deal.
I was a homeowner with a good job and some savings. Then I bought the money pit, then I got laid off, then I had to replace the sewer pipe. I paid $35k to get out of that house. I've never been happier since we started being renters again. It may not happen to you, but if you're one paycheck away from disaster DON'T BUY A HOME!
Also, condo's don't typically appreciate in value, so it's not even a meh investment.
Think, think, think about this logically.
posted by Ruthless Bunny at 11:54 AM on January 26, 2015 [6 favorites]
Nope you don't need a real estate agent. Have an attorney look over everything before you finalize the contract. The lender has built in requirements that protect their interests (appraisal, title insurance, etc.) which actually protect some of your interests as well.
I have spent the last six months getting it from 530 to 575. Obviously that is still too low for a reasonable (or any) home loan.
...
My main concern is qualifying for a loan.
Your credit score is right on the cusp of qualifying for an FHA loan. But don't be afraid! The lender gets a different score than you get. In my case, their score was a good 15 points higher than my FICO score. My score was higher than yours, but I thought I wouldn't get a good rate either. I ended up with 3.5% through FHA.
You don't have to have all the details of the sale negotiated before applying for the loan, so you may as well get the ball rolling. Unless you have an inordinate amount of debt or other credit issues, I don't think you should have a problem qualifying.
Keep in mind that you can certainly negotiate with the seller as to who pays what closing costs. If you go FHA, they have limits on the amount the seller can pay (but those limits are generous). FHA also requires the buyer to pay 3.5% down, which can be asset-swapped (such as borrowing from your own retirement account, or selling assets to raise it) or gifted from family.
I just bought the home I have been renting for three years. Doing it without a real estate agent allowed the seller and me to agree to a lower price than he would have needed to cover the 6% agent fee. We came to fair terms for both of us, and signed a state-specific buy-sell contract purchased from US Legal Forms. It all went incredibly smoothly. This is the 7th home I've purchased in my life, and it went more smoothly than any other purchase.
(The one bad thing about FHA loans you should be prepared for is mandatory Mortgage Insurance Premium, which will probably add about $150 a month to your payment. If you can put down enough to get a conventional, non-FHA loan, it might be worth it.)
Good luck!
posted by The Deej at 12:37 PM on January 26, 2015
I have spent the last six months getting it from 530 to 575. Obviously that is still too low for a reasonable (or any) home loan.
...
My main concern is qualifying for a loan.
Your credit score is right on the cusp of qualifying for an FHA loan. But don't be afraid! The lender gets a different score than you get. In my case, their score was a good 15 points higher than my FICO score. My score was higher than yours, but I thought I wouldn't get a good rate either. I ended up with 3.5% through FHA.
You don't have to have all the details of the sale negotiated before applying for the loan, so you may as well get the ball rolling. Unless you have an inordinate amount of debt or other credit issues, I don't think you should have a problem qualifying.
Keep in mind that you can certainly negotiate with the seller as to who pays what closing costs. If you go FHA, they have limits on the amount the seller can pay (but those limits are generous). FHA also requires the buyer to pay 3.5% down, which can be asset-swapped (such as borrowing from your own retirement account, or selling assets to raise it) or gifted from family.
I just bought the home I have been renting for three years. Doing it without a real estate agent allowed the seller and me to agree to a lower price than he would have needed to cover the 6% agent fee. We came to fair terms for both of us, and signed a state-specific buy-sell contract purchased from US Legal Forms. It all went incredibly smoothly. This is the 7th home I've purchased in my life, and it went more smoothly than any other purchase.
(The one bad thing about FHA loans you should be prepared for is mandatory Mortgage Insurance Premium, which will probably add about $150 a month to your payment. If you can put down enough to get a conventional, non-FHA loan, it might be worth it.)
Good luck!
posted by The Deej at 12:37 PM on January 26, 2015
NEVER BUY REAL ESTATE WITHOUT A LAWYER.
You don't need a realtor - you've already found the property.
posted by IAmBroom at 1:53 PM on January 26, 2015
You don't need a realtor - you've already found the property.
posted by IAmBroom at 1:53 PM on January 26, 2015
NEVER BUY REAL ESTATE WITHOUT A LAWYER.
This is patently not true in Oregon. Whether you need a lawyer is hugely dependent on your state. Here in Oregon the title and escrow company will do the title search and lien stuff for you. I honestly have no idea what a lawyer would do in our state.
posted by fiercekitten at 7:07 PM on January 26, 2015
This is patently not true in Oregon. Whether you need a lawyer is hugely dependent on your state. Here in Oregon the title and escrow company will do the title search and lien stuff for you. I honestly have no idea what a lawyer would do in our state.
posted by fiercekitten at 7:07 PM on January 26, 2015
She doesn't want to involve realtors in order to save costs.
Keep in mind here that the costs that are being saved are hers. I agree with those up-thread who say you don't need a realtor and also those who say to hire a real estate lawyer.
Oregon the title and escrow company will do the title search and lien stuff for you.
Those are not even close to the only places where risk exists in the purchase of property. If you don't know what all of the other ones are, you ought to hire experienced counsel to tell you what they are and make sure you don't step in them.
posted by toomuchpete at 9:49 PM on January 26, 2015 [1 favorite]
Keep in mind here that the costs that are being saved are hers. I agree with those up-thread who say you don't need a realtor and also those who say to hire a real estate lawyer.
Oregon the title and escrow company will do the title search and lien stuff for you.
Those are not even close to the only places where risk exists in the purchase of property. If you don't know what all of the other ones are, you ought to hire experienced counsel to tell you what they are and make sure you don't step in them.
posted by toomuchpete at 9:49 PM on January 26, 2015 [1 favorite]
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Also, even if your credit breaks 600 you'll probably want to involve a mortgage broker as well.
posted by zdravo at 10:17 AM on January 26, 2015 [14 favorites]