Buying a home from a friend
April 26, 2021 2:40 PM Subscribe
Have you ever purchased (or sold) a house directly from a friend or someone you know? What was the experience like? Did it chance your relationship with the person? Would you do it again, or would you do anything differently?
I’ve been saving for a down payment on a home. A friend of mine mentioned that she and her husband are considering selling their home in the next couple of years, right around the time I might be ready to buy. Bonus—their house is in one of the areas I’m interested in. From what I know (I’ve only visited a few times briefly), if the house was independently on the market, it would be one that matches what I’m looking for.
Obviously this is all extremely hypothetical at this point, and I wouldn’t be committed to anything by pointing out our timelines might match. But, I’d like to wrap my head around whether it's something I'd be interested in, or if it is something to avoid. I’d hate to ruin a friendship or have one side or the other feel like they got taken advantage of.
So, I curious to hear from others who may have done this—either as the buyer or the seller! What was your experience like?
I’ve been saving for a down payment on a home. A friend of mine mentioned that she and her husband are considering selling their home in the next couple of years, right around the time I might be ready to buy. Bonus—their house is in one of the areas I’m interested in. From what I know (I’ve only visited a few times briefly), if the house was independently on the market, it would be one that matches what I’m looking for.
Obviously this is all extremely hypothetical at this point, and I wouldn’t be committed to anything by pointing out our timelines might match. But, I’d like to wrap my head around whether it's something I'd be interested in, or if it is something to avoid. I’d hate to ruin a friendship or have one side or the other feel like they got taken advantage of.
So, I curious to hear from others who may have done this—either as the buyer or the seller! What was your experience like?
This is doable but you need to take some basic steps to keep things arms-length and build in some protections.
1. Write an actual contract offer with contingencies based on inspection and a title report.
2. Insure the transaction. This will get you a preliminary title report/commitment that will inform you of recorded encumbrances and easements and other things like that before you close.
3. Go through escrow. This will make sure all the things found in #2 are taken care of and you’ll have a third party to deal with the uncomfortable parts like making sure they’ve paid any tax assessments or the like.
4. Get the inspection referenced in #1.
You do those things and you’ll be as well off as buying from a stranger.
posted by norm at 3:23 PM on April 26, 2021
1. Write an actual contract offer with contingencies based on inspection and a title report.
2. Insure the transaction. This will get you a preliminary title report/commitment that will inform you of recorded encumbrances and easements and other things like that before you close.
3. Go through escrow. This will make sure all the things found in #2 are taken care of and you’ll have a third party to deal with the uncomfortable parts like making sure they’ve paid any tax assessments or the like.
4. Get the inspection referenced in #1.
You do those things and you’ll be as well off as buying from a stranger.
posted by norm at 3:23 PM on April 26, 2021
Consider the upsides vs the potential downsides. I would never ever do this.
posted by turkeyphant at 4:14 PM on April 26, 2021 [2 favorites]
posted by turkeyphant at 4:14 PM on April 26, 2021 [2 favorites]
Are you willing to risk the friendship if you discover an expensive problem down the line that the inspector misses but that you think that it's likely your friend might have known about and failed to disclose? Collateral damage to friendships is one of the major reasons to avoid mixing business and friends.
It can be fine and save you both a significant amount of money but there's potential consequences, particularly when it's a huge amount of money involved.
posted by Candleman at 4:17 PM on April 26, 2021 [2 favorites]
It can be fine and save you both a significant amount of money but there's potential consequences, particularly when it's a huge amount of money involved.
posted by Candleman at 4:17 PM on April 26, 2021 [2 favorites]
We’ve sold two houses with the FSBO (For Sale By Owner) process, which covers necessary paperwork, insurance, etc by using a title company to handle the transfer. We did not sell to friends, and we sold during a hot real estate market. Yes, this can be done. What you don’t know is the actual market value of the house at the time you will be ready to buy. Let your friend know you are interested. It may be that they want the comfort of a realtor...some people are that risk-averse, or may be swayed that the house will go for more. Go in with your eyes open when you are ready-Er to buy and know that it’s one option among many.
Also, my mom was at my house when a lovely young family stopped to have a look. As much as I love young families, we were $30k above their maximum, and we were priced to sell. I had to gently explain to her that I had other interest and appointments, not to mention an ex that was more than a decade behind in child support payments. I did call the parents, let them down gently and mentioned some other areas nearby that were in the same school district but might not be on their radar because the zip code is for the next county. We sold within a month to a retired couple, but my mom kept talking about that sweet family for a long while after. I share this as a cautionary tale on managing expectations and possibly not knowing all the details behind being firm on an asking price.
posted by childofTethys at 4:47 PM on April 26, 2021 [1 favorite]
Also, my mom was at my house when a lovely young family stopped to have a look. As much as I love young families, we were $30k above their maximum, and we were priced to sell. I had to gently explain to her that I had other interest and appointments, not to mention an ex that was more than a decade behind in child support payments. I did call the parents, let them down gently and mentioned some other areas nearby that were in the same school district but might not be on their radar because the zip code is for the next county. We sold within a month to a retired couple, but my mom kept talking about that sweet family for a long while after. I share this as a cautionary tale on managing expectations and possibly not knowing all the details behind being firm on an asking price.
posted by childofTethys at 4:47 PM on April 26, 2021 [1 favorite]
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Realtors typically take 3-6% of the total sale price of the house as commission, so you'll both come out ahead by not using one.
It sounds like you're already considering this, but I'd strongly suggest that you not commit to this emotionally until you're drawing up paperwork. A few years is a long time horizon for you or your friends' personal circumstances to change. If you're serious about this, I'd consider having a conversation with your friends about timelines and expectations, and being okay with the result being "sorry, no promises."
posted by kdar at 3:18 PM on April 26, 2021 [1 favorite]