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How to Buy a House Directly from the Homeowner

written by: theMallorys•edited by: Donna Cosmato•updated: 7/16/2010

You can save a great deal of money if you know how to buy a house from a home owner directly. Learn about the legal and financial aspects of buying directly from an owner.

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    1150489 74226404 It’s to your advantage and the seller’s to know how to buy a house from a home owner without an agent. The commission fees that real estate agents charge may be worth their services, but it often gets in the way of working out a deal that benefits you and the seller. You can often negotiate a much better price and terms when you buy from a homeowner directly.

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    Where to Find For Sale by Owner Homes

    If you take a drive around the neighborhood where you want to buy, you may come across some “for sale by owner" signs. It’s often the best way to find the home you’re looking for. In addition to yard signs, some use websites that specialize in listing homes sold directly by owners, such as:

    Local newspapers will often have ads by sellers, and it’s a good idea to check the paper regularly to research prices and to view prospective properties.

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    Financial Aspects of Buying from the Home Owner Directly

    Learning how to buy a house from a home owner involves understanding the financial aspects of the sale. It’s important to compile financial data, and complete the appropriate forms in order to get the best deal possible. Take these steps when buying from a home owner directly:

    • Check what the final prices were of at least 10 homes that sold recently in the same area, using websites like Home Gain or Yahoo! Real Estate
    • Ask for copies of all disclosure statements required by state laws that list the known negative conditions of the property. If the seller is not aware of any, you can contact a local chapter of a realtor association or check their website for the list of disclosure statements required.
    • Find out as much information about the property as you can, which means asking the seller a lot of questions.
    • Pay for a home inspection, and don’t rely solely on disclosure statements. You don’t want major repairs to creep up on you after the purchase.
    • The seller may not answer the question, but you should still ask them what the outstanding balance of the mortgage is on the property, if any. You can use that information to help you formulate your offer.
    • Know the house tax value before you make an offer. Call the county clerk or other department that handles property tax assessment to find out the tax value of the home you want to buy. It’s not the market value, but if you offer below that, the seller may not be interested in your offer.

    Expect the seller to make a counter-offer, so don’t make your first offer too high. Keep it close to the house tax value if it’s reasonable.

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    Legal Aspects of Buying from the Home Owner Directly

    Any discussion on how to buy a house from a homeowner must include the legal aspects of the deal. The legalities are even more important than the financial aspects, because you can lose property rights or the property entirely if you don’t pay careful attention. Keep the following in mind:

    • It’s a good idea to hire real estate lawyer to represent you in the sale if you can afford it. You have to be savvy in the situation and determine whether it’s better to have your lawyer consult with you privately and guide you through the process, or allow them to be the “go-to" person for closing the deal. You don’t want your lawyer to get in the way of the deal with a seller who is not represented, but at the same time, you could use the counsel.
    • Research the property title, or better yet, let your attorney do it. A cloudy title will cost you legal fees and hassles in the future, and you may have to give up the property if the seller was never the true owner.
    • The seller will offer you a purchase agreement to review and sign. Make sure you understand the language of the contract, and research the clauses that should be included that are not. Ask your attorney for help. It’s worth paying the fees for such a large investment.

    You should budget for attorney fees as a part of the sale. You’ll be glad you had a trusted real estate lawyer on your side.

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    Once you learn how to buy a house from a home owner without an agent, you can decide whether it’s in your best interest to hire a buyer’s agent instead. You might decide to use a real estate agent, or you may gain the confidence to close the deal on your own.

    Image Credit: Svilen Milev