Found off market seller, how to proceed?

Question

My friends neighbor told me she would like to sell her house off market in the Raleigh area to avoid realtor fees. She seems to he okay with selling it below market value because there are some needed repairs (siding, deck, paint, carpet, seemingly easy stuff).

This house would probably go for $320-$350k totally renovated but I’d like to buy it as a primary residence an house hack.

I told her I can’t really afford $300k and she said she “wouldnt expect anything close to that” so I’m hoping she may want to sell for closer to $250k.

I’m just wondering what is the best way to proceed without an agent?

I know obviously to still get an inspection. Then can I just get a lawyer to create a contract for us?

She needs the money to buy another house. I was thinking about proposing seller financing but not sure if it would work in this situation.

What kind of terms would you try to negotiate? Sorry if I’m missing any info pertinent to the deal!

Steve Vaughan · Answer

Most homeowners are not good candidates for seller financing.   She needs to buy again and people fear what they don't fully understand. Table that idea for now.

To your original question, I always buy solo.  It's simple but you need to be thorough and know contingency deadlines and disclosures required in your state.   Ask the title co you plan to have handle your transaction for you.

Buddy Holmes · Answer

@Nathaniel J Mott

You need to find out what the seller needs out of the deal.  Sounds like this may be a lady who wants to donwsize and get out of repairs and maintanence.  She maybe looking at a condo or a retirement home or a place like the Villages.

She may need a fixed sum which she would require out of your offer.  She needs and income stream as well, but she may not have considered that as an addition to what ever she is living on now.  The Seller financing would give her a fixed income stream she could count on but you need to SELL her on that.   So have a conversation. I am sure you want this to be a good deal for both parties so learn what she needs and see if you can offer a win-win contract.  Once you have the basics of your off your RE lawyer can write you a contract if you can't find a copy of the local MLS version.

Cheers, Buddy

Nathaniel J Mott · Answer

@Buddy Holmes awesome response thank you! I’ve been texting her but made plans to have a conversation a TV 4pm today. I definite want it to be a win win for both parties. I would feel comfortable putting down $40k so maybe that would be enough depending on her situation. I’ll post again with more info after the call!

Tim McGarvey · Answer

@Nathaniel J Mott you should be able to use a standard purchase contract (either Realtor or custom) to execute the basic terms of the deal (purchase price, EMD, DD amount, DD period), then execute an addendum to that contract to iron out the specific terms of the seller financing. At least that's how I would handle so I could move forward with inspection, contractors, having attorney run title, etc. If you see yourself doing seller financing deals in the future, I'd call around to see what attorney's do/don't like to do them and if they can create a contract/addendum for you.

Lydia S. · Answer

@Nathaniel J Mott

If you’re ever fortunate enough to get a seller financing deal with 0% interest, good for you!  It is often at least the interest rate  seen elsewhere in the market, sometimes more in order to entice someone to entertain seller financing over an immediate sale.

Nathaniel J Mott · Answer

It seems like overpaying with seller financing is still a better deal than underpaying with a conventional loan. For example.

$100k house at 4% interest = $172k over a 30 year period.

$120k house at 0% interest = $120k over 30 year period.

Am I missing something or is the above correct?

I talked to her yesterday. She plans to sell the house, retire, and travel the world for a while before buying another house. This one probably is not a good option for seller financing because she still has a mortgage on her house and will need cash to buy another in the future.

I’m in NC and which is an attorney state (no title companies) but does anyone know if you can use the standard realtor purchase and sale contract when the seller is financing the deal instead of a bank, or would an attorney have to create a new contract?

If she wants to sell I’ll still likely buy this one with a conventional loan using a realtor but interested in seller financing for future deals.

Steve K. · Answer

@Nathaniel J Mott based on the questions you’re asking, I’d recommend bringing a competent realtor in to help. You can also work with an attorney to review contracts, and title company to handle the paperwork, but neither will have the expertise that a realtor would in order to advise you properly on how to write the contract and see the deal through, and especially as it relates to determining fair market value of the property based on its current condition. Before I was licensed, I sourced a lot of my own off market deals and I had a trusted realtor friend handle the transactions for 2% total fee. Well worth the money as she often caught me from either overpaying or getting into a situation that may have ended in a lawsuit if she hadn’t been involved. The biggest mistakes I see people making when “going it alone” are not valuing the property correctly (very very common for the seller to think their property is worth more than an investor will need to pay, and for a buyer to think they’re getting a good deal just because it’s off market when they don’t really know how to determine fair market value), not determining ARV correctly, not budgeting for repairs correctly (find a great contractor or two to help with this part), and missing important parts of the process like double checking title work, meeting deadlines, working through inspections, disclosures, pushing paperwork and getting signatures, closing etc. If you’ve done 100 deals and already know everything, you’ll be familiar with all of this but if you aren’t then hiring a realtor to help for a reduced fee will be money well spent.

Adam Schneider · Answer

@Nathaniel J Mott Why not just take out a loan on this one? Since it's your first one, you might want to find an agent to both comp the deal and handle the 2-T (standard NC purchase and sale agreement), etc.

Caleb Brown · Answer

I'd first view it. Be thorough. From there you can offer. You could either go through an attorney or title company for the contract. Another option is to pay a realtor to handle the paperwork or represent you but you cover the commission. Discuss all the terms; due diligence, price, closing, earnest money, financing, contingencies, etc. If you are not super experienced get help. I see legal issues if it's your first time especially in these situations(mainly due to no disclosures or not correctly filled out)

Found off market seller, how to proceed?

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