How buy a FSBO??

Question

Hi all.My wife and I have managed to buy a few investment properties but they all have been through a realtor. Our dilemna now is that we have found a magnificent deal but it is a For Sale By Owner. Since we haven't purchased this way before, maybe some of you seasoned veterans can tell/explain the steps required for a successful offer/closing. your help would be greatly appreciated.
Thanks a bunch and happy Investing!!

Diana Dorantes · Answer

@Fred Ramos Hi , I’m happy I stumbled across this post.  I have purchased 1/2 a dozen rentals but found a FSBO, called them and it worked! I haggled a bit but feel we got a great deal.  Just signed the contract, we are letting our attorneys do title search and such.  Have you done any more.  Any recommendations would be appreciated.

Diana Dorantes

Jon Holdman · Answer

Add it as an addendum or as extra items.  If this is like most state contracts, it will have a big blank to add any special provisions.

Also, get an estopple letter from each tenant reiterating the terms of the lease.  Search here on that term for older threads about dealing with inherited tenants.  The letter is to avoid any misunderstanding where the seller and tenant may have a verbal agreement that differs from the written lease.

Fred Ramos · Answer

Thank you Jon. Turns out that after freaking out about, I need to pay a little more attention to each paragraph in the contract. All of the turn over money is already covered. I kinda turned red when I found it.  Anyway, hopefully everything else goes according to plan. Tomorrow I'll be presenting the contract to the banker and escrow company. one thing i'll say though is that this being our first time writing a contract directly with an individual, it has been pretty exciting even though my nerves are shot.  I'll keep you posted as things move along. Also let me add that I've read a few of your posts and am thoroughly impressed with your knowledge. I've learned alot. keep it coming!

Fred Ramos · Answer

Well, we put the property under contract. we decided to go with a bank instead of owner financing. this way, we were also able to negotiate on the price. Now that we have a signed contract though, I'm afraid we may have made a mistake which maybe some of you might be able to lead us in the right direction. The last multi we purchased was empty so we didn't have to worry about rents or security deposits being passed on to us. this multi (4) is fully rented and the owner told us that indeed deposits were collected and that they will forward all existing leases showing the deposit and rent amounts and that they would transfer said monies to us at closing. My concern is that this is NOT mentioned anywhere in the contract. I think we can still get this fixed but how would we go about it and where should it go in the contract?
Thanks for your help.

Mark Betche · Answer

I would not fear buying FSBO. While writing up your contract, just make sure you include any contingencies like inspections etc. Always buy title insurance.

It's not necessary for agents and lawyers to get their hands in the pie.

Fred Ramos · Answer

Thank you all for your valuable input. I managed to find my states real estate sales contract and having already having bought a couple of properties had a copy to compare it to. turns out it is the exact same form word for word.  I do plan on using an attorney though but it will just be to do the title search as i will be purchasing title insurance to go along with it. I'm also going to post another question in this forum pertaining to another question I have pertaining to this deal. it will be about owner financing so perhaps any of you who may be interested could look it up and give me your opinions on it. again, thanks for your valuable time and input. it is greatly appreciated.

Brandon Schlichter · Answer

I guess I'm going to go against what the others have said.....

I would really sugguest that you get SOMEONE involved in real estate to advise you, whether it be an attorney or a real estate agent. The problem with FSBOs and unrepresented buyer is that both parties don't have expectations for the contract, and should there be a problem during inspections, title work ,ect you may get screwed.

There's plenty of things you have to consider what's going on with the property , who is paying due taxes, who is covering inspections, what are the expectations of the seller in regards to the transaction.

Real estate as said by many is local, and markets differ in expectations of the parties involved. I've reviewed many contracts from other Realtor boards, FSBOs ,ect and you really do get what you pay for, wrongly adjusted taxes or HUD-1 fees will quickly make up any savings that you got trying to avoid an attorney or real estate agent.

In my little over 2 years in real estate, I've caught something around $10,000 in mistakes by the title company or the selling party. This might not seem like alot , but the average sale in my area is only about $120,000.

Jon Holdman · Answer

Agree, starting with your state Realtor's contract is an option, and lots cheaper than having an attorney create one.  If they're not in foreclosure, it shouldn't be too critical.  You could always look at old contracts and just extract the meaningful bits into a document.  Since there are no realtors involved, you don't need the clauses that protect them.

Having a lawyer do it would be safest.

Talk to folks at your REIA.  Someone probably has one you could use.

Fred Ramos · Answer

Where do we get a contract? would you advise having an attorney write one up?

Chris OToole · Answer

You can search around for the form on the internet. Here in TX they post it on the internet for free. You shoudnt have to pay for it. Look at your past contracts and see if there is a form number on them and google that??? Good Luck