Homes offered without a real estate agent can be offered for less because the seller doesn't have to pay a commission. Also, many Sellers are not tuned into the current market prices and can easily under price the house.Are there any advantages/disadvantages to buying a home that is for sale by owner or by a real estate group?
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There is not much difference, except the person that hires a real estate agent has decided to allow a professional handle the transaction and is willing to pay the proffessional to handle the real estate transaction. The seller has also agreed to pay this person a certain percentage of the sales price which can range anywhere between 2-6% normally. So when all the dust is settled the seller has to pay the real estate broker what ever is agreed on.
Now the person that is selling their own house has decided they do not want to share any part of the sales with a real estate broker.
There are several reasons for this
#1 There is little equity in the house, therefore the seller will only realize a really small amout of the equity build up.
#2 They don't trust real estate brokers for some reasons.
#3 They have had a very bad experience with a real estate broker.
You might be able to get a few buyers consessions with a house being sold by it's owner.
Now how does this affect you in the purchase of a house, none really, because a buyer don't normally hire a broker to buy a house. They normally use the selling broker as the go between even though the real estate broker really work for the seller.
Now over the past few years there have been an animal called a buyer's agent. This person seek people that want to purchase a house, sign them to a contract and charge them a fee for showing houses they have listed or other real estate brokers have listed, to include a few for sale by owners.
Now the thing about this animal they charge you a fee and in some of the contracts you have to pay them even if you find a house on your own. because their contract normally call for a fee of between 2-4% of the sale price of the house you are purchasing.
So that means that in addition to paying the purchase price of the house you also have to pay your real estate broker. So what this means to you if you sign a contract to purchase a home and between you and the real estate broker you find a house to purchase and you in fact purchase that house you are obligated to pay this broker.
Let's use an example. Let's say you find a house that you purchase for $500,000 and you signed a contract with this buyers agent, in addition to the $500,000 purchase price,if your contract called for you to pay your agent 2% of the sales price you would have to come up with an additional $10,000, so in essence you are paying $510,000 and you still have to pay closing cost of approximately 2-3%.
This $10,000 is not tax deductable under most cases, so you are just out of this cost. Check with your tax consultant to see if there is a way you can deduct this expense.
Most of these buyer's agents when contacting a home owner trying to sell thier own house, will ask the homeowner if they will pay a commision also. Now, why would I do that? If I wanted an agent I would hire one, there must be a reason for me not hiring one. That is a decision the home owner has to make for themselves.
In buying a house through a broker or dealing with the home owner calls for you to use common sense and making decisions based on sound business decisions and your financial situation at the time.
If you allow a broker to sell you a house you are not pleased with, cost more than you planned or is not in the neighborhood you want to live then you should not be making this decision, you are allowing someone else to make the decision for you.
So if you can afford the property, it is in the neighborhood you desire then who sells it to you is does not make any difference.
The first thing you should do is get pre-approved to purchase a house. You will need a mortgage broker.
In order to find out the type of loan programs you are qualified for you will have to fill out a loan application, with a mortgage broker, which you can find one in your local telephone book.
He will fill out this application, which takes awhile so grab your favorite beverage and sit down. Once you have completed the application, he will run your credit report which will have your credit scores. These credit scores will determine your interest rate.
The amount of your monthly debt payments you are required to pay as per your credit report and the amount of mortgage you can take on based on your income will determine the amount of house you will be able to purchase.
When you speak with the mortgage broker you will need the following documents to complete the loan application, there will be others, but this will get you started.
#1 One month of pay stubs for each person that will be on the mortgage.
#2 Six months bank statements from each bank in which you bank as well as statements from any 401K from you place of employment.
#3 Two years of federal income tax along with the W-2 that match.
Once he has all that he need to do he can then issue you a pre-approval letter so you can purchase a home. In this pre-approval letter will be the amount of house you are qualified to purchased.
Once he gives you this pre-approval you may now find a real estate agent to find yourself a home or he might have a referral.
Now make sure before you get your pre-approval you and your mortgage broker go over all your options as to the mortgage programs you qualify for, the interest rate, monthly payments.
If you are getting a FHA, fixed rate, two loans to eliminate PMI like an 80/20 or one loan, if you are qualified for and approved for a 100% loan.
You should select the loan that best suit your financial condition at the time. That could be an adjustable rate loan. It could be a fixed rate loan for 5 or 10 years and then adjust. Some adjustable rate mortgages only adjust once.
Make sure your mortgage broker explain all your options so you may make an intelligent decision.
What might be good for one person might not be good for you, in other words just because your friends and all your real estate buddies are telling you about the great fixed rate they got, your financial situation might call for something else.
So select the best option for you and your financial situation.
You should also get a Good Faith Estimate (GFE) which will indicate the cost you will have to pay for getting this loan. It will also indicate the amount of your down payment.
Once you have found a home the real estate agent will then prepare a contract for you and the seller to sign.
Your mortgage broker will now order an appraisal to show proof of the property value.
The mortgage broker might ask for additional information or documentation, don't get all up tight this is normal, just supply the information or find the documents needed.
After the appraisal has been completed you will be called by your mortgage broker to sign your loan docs so you can take possession of your new home.
Before signing any loan docs make sure they say exactly what you and your mortgage broker went over when you decided on what mortgage program was best for you.
I this has been of some use to you, good luck
';FIGHT ON';
There are few downsides to buying a property listed by a real estate broker. They are educated in the process and aware of their legal responsibilities. Aditionally, they can rely on experience to help them come up with creative solutions to issues that may arrise.
The only caution I can provide is that you shouldn't allow the listing agent to assist you; instead you should hire a buyer's agent so that someone is representing your needs.
The big issues with buying from an unrepresented seller (for sale by owner) are legal ones. If you don't have a buyer's agent or real estate attorney working for you, it would be difficult for you to know that the seller is meeting all of their legal obligations.
Many buyers are hesitant. You are engaging in one of the biggest event of your life. To do it without representation can be scary. It not difficult to buy a home but there are things that cause you problems if you don't know what you are doing. Real estate agents will take you thorough the process and make sure it is done correctly. This is what they are trained and licensed to do.
As a buyer using a real estate agent won't cost you and can save you from making mistakes that you will literally have to live with.
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