First Home/FSBO Advice Needed

8 Replies

Hello! I stumbled upon Bigger Pockets recently and have been listening to the podcast non-stop ever since! I just finished The Book on Rental Property Investing and now have a list of about 20 other books (thanks to all the podcast guests for the recommendations) to tackle. I can't get enough of it! My dream is to get into vacation rentals in Northern Minnesota, but my immediate goals are to purchase a primary residence and pay down my husband's loans from Chiropractic school. 

We are currently renting a condo in Minneapolis and have been presented with an opportunity to buy a FSBO condo in the same association we live in now. The condo was previously listed at 170K and the owner said she was talked down to 160K but then the buyer backed out. She took the condo off the market last winter and has not re-listed. She wants to sell without an agent now and is therefore willing to lower the price. I just verbally offered 140,000 and she is considering it (The condo was last appraised in Jan. 2017 for 149K so I'm thinking even 150K would work for us?). I am very new to this and would love some advice on the steps to buying a FSBO without a realtor. I have been pre-approved for a loan. Do I need an RE Attorney? Or would a title company be able to write up a purchase agreement and line up the inspection and appraisal? Any advice for a newbie would be much appreciated! Thanks!

@Hanna Borowski First and foremost congratulations on potentially coming to a deal with the seller. I've bought a property off market that was FSBO, and used a buyer's side agent (and paid the normal 2.5% commission on my end). Since this is your first purchase, it might make sense to suck up the cost and engage a buyer's agent to guide you through the purchasing process.

I believe a real estate attorney would be able to help set you up with a purchase agreement.  If you don't use a real estate agent, the set up of the inspection is on you.  The appraisal should be coordinated by the bank that is loaning the funds for the purchase.

I would strongly recommend using a buyer's agent, and they might also be able to verify that you are paying a fair price, and handle all of the nuances of the sale (purchase agreement, inspection, might be able to recommend a title company for the closing, etc).

In MN you don’t need an attorney, just pick a title company and they’ll do all the legwork. I wouldn’t even pay for an inspection, but if it would ease your mind, not hard to schedule that without an agent.

@Hanna Borowski a title company should be able to do all of it for you. Just make sure you know what you’re signing and have all of the proper documents together.

It’s not that it’s extremely complex, it’s just what you might miss because you don’t know. Being a condo there isn’t as much to worry about but I’d still get an inspection.

I would say the biggest concern with a condo association is to make sure that the association is in good financial standing.  Also, do they take care of their owners by fixing things in a quick manner?  Ask around and see if anyone has had issues getting repairs made by the association.  If that checks out, I'm with @Jordan Moorhead and @Dan Vleck , you're probably good to go.  Inspections are $300-$400.  I'd say sign up for one or have a contractor friend walk the place.  It's good insurance.  

It seems to me your biggest risk is buying into an insolvent association.  If that checks out, I'd say you're good to go.  

@Hanna Borowski I'm with @Josh Collins you big risk here is the HOA's financial health. A few things you must figure out. Does the association have enough reserves to cover major issues, like a new roof, windows, siding, boiler? You would know this if they have had a reserve study done and that study would indicate the amount they should have in reserves. You would also want to know if the HOA dues are being paid and if any owners are not paying. Lastly, you may have a feel for this living there, but you want to know the feel of the voting members of the HOA. For example is there a small but vocal contingent that wants to make a lot of costly changes? if so your dues would skyrocket. It's rare you would know this going into it but you live there so you can ask around.

You may ask what would I need to know these things?  The consequences of not having proper reserves can be catastrophic for the owners at the time the repairs are needed.  I have heard of 15K or larger assessments on each unit to make up the difference when repairs are needed and the reserves are not adequate.  You need to protect your self against this now.  

Hello Hanna  Yeah, back when I found BP the first thing I did was listening to mostly all f the main Podcast.  Back I became a free member (about 3 /2 years ago you got access to that).  I am 6 years old  and I was born and raised in Dallas, Texas.  Most of my experience in constrution managment for about 30 years.  I also held a real estate broker license in Texas for about 30 years but I never did that full time.

Part of that reason was from my father's commercial real estate experience at that time and my college degree gave me the ability to get it if you qualified for it and in Texas you go strait to a broker license.  With my business degree and it emphasized real estate, gave me enough points for one and did not have to take anything to get it.

Since I am currently bedridden, and I was when I found BP, and that allowed me to learn full time, 7 days a week.  You would want the owner provide the purchase agreement contract and have an experienced Attorney to review the contract when all negotiation is complete.  You should hire the Appraiser to make sure who they know who they are working for.  Just view there participation as a normal expense of your business.

There are many thins to say about beginning.  The more learning you do will help in building your confidence.  There are many things I could say.  Just be honest,  Be patient. Do not make any emotional decisions.  Always do an evaluation before making an offer. 

Are there any restrictions there on what you want to do including any city, state, or federal laws.  I would be tremendously careful in owning a single unit house for any renting.    With 3 or 4 unit houses you can be a "house hacker" you might get lucky and have your tenants cover your debt payment while you live in one of the units for at least  year.

Learn how to be creative with your financing.  The more creative you are, the better chance of success.  Shop around to get the best financing for you.  Take out an insurance policy the second after you become the owner.  The amount of coverage is not as important the quality of coverage.  Network with all of the people you meet or are around.

Join an association of a local real estate investing club or event as a place to learn and network with like-minded people. Be honest and tell them what you don't know. Meet several brokers and Agents and let them know what you are looking for and build y'alls relationship. They might call you when they have a deal before it is listed on the MLS.

When first starting just do what is normal or average for that area.  Managing your first property will teach you things you have to know.  Do not assume that anything will happen that you are responsible for.  Try to keep what you are involved in under your control and make sure its complete.  Use a BP calculator for evaluation, sharing your offers, and your offer submission to a lender.

Have a strong and understandable website.  Having videos will help you sell.  The better the deal is, the easier it will be to get a loan.  If you think I can help you with anything, contact me through BP.  I am on BP just about everyday.  Good luck to you!

Originally posted by @Hanna Borowski :

Thank you for taking the time to reply and give advice @David Barnett @Dan Vleck @Jordan Moorhead @Josh Collins  @Michael Lee  

@Tim Swierczek I will ask around in our association regarding association assessments and repairs and look into a reserve study as well. It sounds like a title company will suffice in Minnesota without an agent or lawyer. I appreciate all the tips!

 Hannah I am reading this differently than you are and do NOT think a title company will cut it for you.  They will run the transaction to the finish line once all of the conveyance documents are in place, but MN has statutory requirements for the sale of any CIC building that you need to adhere to on top of making sure you have a compliant and beneficial instrument of conveyance (purchase agreement).  An attorney can help you with the paperwork and will probably be less expensive than an agent for those particular discreet tasks.

A title company won't come into play until you have all of the documents you need in place already.  In other words they will make sure the right boxes are checked, but they won't help or advise you in creating any of those docs.  

@David Barnett what's up buddy? ;)

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