I need some advice for a first time home buyer. We decided a couple weeks ago that we could seriously think about buying a home. A few days later, in a completely random conversation, our landlord mentioned that they would be willing to sell the house to us if we wanted it–that they weren’t going to put it on the market, but that if we wanted it, they’d sell to us. We’d already spoken to a lender to get an idea of what we could afford and all of that, but haven’t been pre-approved yet, going to turn in the paperwork today. In a later conversation the landlord said the house had been appraised last year at $120,000, and I told him that we probably couldn’t pay more than $110,000. They called today and said they’d accept that offer, and could we get together maybe Friday to write up a contract.
This is by no means a spectacular house, just a neat little two-story, three bedroom house built in 1940 that has some funky quirks that I really like. It’s got a lovely huge yard, uncommon for the area. The properties in our neighborhood tend to be much lower value, single story, two bedroom places that could use some serious TLC. Most of the properties in the area in our price range are advertised as, uh, bring your hammer and nails. Or whatever. I know it’s not a great idea to buy the nicest house in the neighborhood, but we don’t have a ton of cash on hand to buy a low-value house and renovate, so we’d like to go ahead and put our money into a house that we don’t have to do too much to, even if the profit margin in the end is negligable. Even if we lost some, it’s still less than we’d be putting out in rent over the next five or six years.
There are a couple cosmetic things that need doing, the house really needs a new coat of paint, I’d like to tear out the carpet and put some hardwood or pergo flooring, one of the rooms is a god-awful pink color. Those are all things I’m okay with doing myself, I’d like the opportunity to work on a house that’s mine. The one serious concern I have is the bathroom. The one bathroom has a bathtub with a showerhead rigged onto it. No one bothered to tile, they just put this vinyl, linoleum type stuff up. Which is great and all, but the wall behind the showerhead is… squishy. I peeled off a tiny bit of the laminate stuff and it’s black and furry under there. Now, if I just need to rip out the sheetrock and put in some tile, no big deal, but if there’s black mold in the studs and the subfloor needs replacing, that’s a huge problem. I don’t want to get stuck with a bathroom that needs $10k worth of renovation. (Minor aside, where are we supposed to pee and bathe while this wall gets fixed?)
So, I’m told that an inspector can’t inspect anything he can’t see without moving stuff. So how do I find out what the damage is if he can’t dig into the wall and take a look at the studs? Who do I call to get an estimate for what it’s going to cost to repair it?
We’re not going through a realtor or anything, just sitting down between the four of us to work out a contract. How do I avoid getting screwed? We don’t have an attorney at our dosposal to sit there with us and go over things. What kinds of things should I look out for? What’s reasonable to demand?
MixieArmadillo since you know about the problem with the bathroom, you should mention it. I don’t know what kind of financing you’re going for but I can’t think of any lender that wouldn’t want what sounds like a major repair to be fixed before closing on the house. Black, furry stuff behind the wall just cannot be good.
How well do you know the landlord? Do you trust him?
My first reaction is that it is never wise to enter a contract like this without a lawyer. That being said you can demand anything you want. The landlord may not do it but some things may be worth a try. Do you know a contractor that you trust. You could suggest you split the cost of having someone look at what it will take to get the bathroom right.
Like swampbear said the bank is more than likely going to demand it to be fixed. You could split the cost however you see fit.
BTW I would not by a house without a title opinion and insurance so a lawyer would be necessary for me.
First of all, buying a house is a wise investment. Tax break alone ought to be able to help in fixing up some of the things you are talking about.
Plus, almost everywhere in the US the housing prices are skyrocketing…that bubble might burst sometime, but unless there is a major financial disaster, you are still going to walk away with some equity, should you decide to sell in a few years and move up to a larger or new home.
I would get a real estate agent. I know, you think you are doing this on spit and a handshake, but you know, a real estate agent is free to you (seller pays) and a good agent will see any “funny stuff” on the contract, in inspector report - also, a good real estate agent can make sure you are getting the best deal. (No, I am not a real estate agent, but the one I had when I bought my house saved me money and answered a lot of questions I would have had to learn the hard way years later.)
And as far as the worry of being the best house? Watch what happens. You will be surprised how quickly things change. One house fixed up (yours) increases surrounding property values - suddenly another house is spruced up for quick sale and the values sneak up some more - then another house and so on. Don’t be surprised if in a couple of years, your house is worth double what you paid for it and your neighborhood suddenly becomes desirable hot property!
At any rate - from what you have said so far, it sounds like a very wise investment at a decent price! Congrats!
Thanks! It’s all terribly exciting.
Our financing is going to be through a state program for first time homebuyers that offers a freaky-low interest rate for starving college students and the like. Our bank will want it to be fixed before closing. I did discuss it today with our landlord, they suggested we have it inspected and appraised and depending on the estimated cost of repairs we can go from there in deciding how to handle it.
Grant–we aren’t what you’d call really close friends or anything, but they’ve been great landlords and seem to be happy with us as tenants. I think they like the idea of selling the house to us because they bought the house five years ago as dewey-eyed youngters in their first home, kinda like us. They’re sort of emotionally attached to the house, and like the fact that we really like the house. I trust them in that they’re just a couple who didn’t want to sell the first house they bought as a couple to anyone, they didn’t want to put it on the market but offered it to us because they like us. I’m pretty sure they’re not what you’d call shrewd real estate investors. I don’t think they’d purposely try to screw us over or anything, I just don’t want to be taken advantage of, or sign something I shouldn’t. I don’t expect them to do anything really shady, but I don’t have any illusions about every side wanting to come off best in the deal
Um, how much does a lawyer cost for something like this? Looking over a contract and giving advice?
I second this. I live in a coming-back-from-ghetto neighborhood – my house and all the rest on the block were all built in the early 1940’s. In fact, from your description of the neighborhood, I had to check your location a couple times. Sounds like you could live on my block! I bought the house across the street from the one I was renting. The previous owners had an old home restoration business. My house was completely updated and renovated. Thus, I paid more for my house than any other house in the neighborhood in the last few years. (This is public information on my county’s web site.) I had the same worries.
I just got some piece of paper in the mail declaring that I’ve made 6% on my house – in one year. Without lifting a finger. (Well, I planted some pretty flowers!) A house down the street went for 30% more than I paid for mine, with comparable square footage, features and location.
My only advice is to look around the neighborhood. If you see what I saw when I looked you’ll have nothing to worry about: on every single block, there’s someone who’s upgrading to central A/C, building a screened in porch, replacing their roof, painting their siding, adding an addition, building fences or sprucing up in general. As long as you can observe that sort of effort going on, don’t worry. You’re just the vanguard.
The other observation about my neighborhood: nothing stays on the market for more than a week. The houses are small so the prices are in a very affordable range for just about anyone. My house didn’t even go on the market – I called “dibs” with my neighbor, gave them a contract and we closed six weeks later. At the same time, my next door neighbors put their house on the market. Within 5 days, they had three offers on the table. If you can observe that kind of action – grab the house for whatever you can get it!
(And yes, I’d stipulate in the contract that the seller/owner/landlord has to fix the furry wall and don’t close until it’s fixed to your satisfaction.)
If you won’t get a realtor, get an attorney at least for the contract part.
If they don’t want a real estate agent, how do I arrange to get one and make them pay for it?
Thanks! I’ve done a bit of research and know what I want, it’s just that I’ve never gone through the process of buying a home before, and I want to make sure I don’t sign anything stupid.
I would absolutely not do this without a lawyer. Put it this way - I bought a house from my parents. I love my parents, and have no reason to doubt they’d do anything for me. They’re that type of people, they live for their kids. I still got a lawyer to draw up the documents.
It was very inexpensive - somewhere between $200 and $400 if I remember right. The lawyer will not only make sure you’re not being screwed by the people selling the house, but will also ensure that the deal is done correctly and that nobody’s forgotten a document or filled something out incorrectly. You don’t want to spend 5 years paying on a house and find out then that Important Document #5 didn’t get filed and as a result the previous owners still have a claim to the house.
If you can afford $110,000 on a house, you can afford a lawyer to make sure that you’re actually buying it correctly.
IMO a real estate lawyer is heads and shoulders above a real estate agent as far as protecting you, and WAY cheaper to boot. There’s no real reason to get an agent in this situation either. By far, the most time consuming part of an agent’s job is finding a buyer for the house. Take out that part because you’re going to buy the house, and the only thing the agent does is fill out the paperwork. A real estate lawyer is heads and shoulders more qualified at doing this than an agent, plus a lawyer will be representing YOU, not the sellers. Talking the sellers into going through an agent primarily protects them, not you.
Agents typically cost about 6% of the selling price of the house, and are typically paid for by the sellers. You’ll probably have a hard time talking the sellers into going through an agent unless you pay for at least part of that 6%.
Get a lawyer. It’s the best and cheapest way all around.
We’re in Springfield, Oregon. Also known as Springtucky, heh. Property values are shooting up at an insane rate all over the area, and houses do sell extremely quickly, but Springfield is definitely the economically depressed half of Eugene. It’s weird, there are really no definable “good” or “bad” neighborhoods here. Our house is one of the nicest on our street, directly behind us is this house.
This is really true here, too. I was poking around online and found a listing of recently closed or pending sales, and there are houses shown there that would be perfect for us (small, good condition, funky early 40s-50s houses, cheap), that I never even saw listed, despite looking up all new listings every day for months.
Oh, yeah that would be fine. Somehow, I imagine a lawyer costing thousands of bucks or something. I’ll rummage around today and call a few in the area. Any LegalDopers out there in the Eugene area?
Let me chime back in and say, along with many others, get a lawyer. He or she will be worth the fees many times over as the lawyer will make sure all the legal aspects of buying the house are taken care of. This will benefit both y’all and the sellers. The peace of mind in knowing all the legal stuff is good is well worth the lawyer’s fees.
Actually the lawyer who files all the paperwork with the town/county/state usually works for the lender. The bank will hire a lawyer (who the buyer pays for as part of the closing costs) to make sure everything is OK with the current owner’s title, the transfer takes place correctly, etc. The bank has just as much interest as the buyer does to make sure you have a free and clear title in the house.
Having said that, I’d suggest to MixieArmadillo that if you’ve already selected a lender, ask them who they’ll use for a closing attorney, and see if that attorney will draw up a Purchase and Sales Contract for you. That’s the document that sets out all the terms of the sale, and the responsibilities of the buyer and seller. You’ll probably want to add a clause about the bathroom, possibly with an escape - if the repairs will cost over $xx, either party can cancel the deal with no penalties, something like that.
A handshake deal is fine when everything goes right - but is a problem when things go wrong. Given the amount of money involved, you don’t want a problem if things go wrong.
If you can all find a lawyer to even answer a phone for $200, then by all means, grab them and let them do the work!
I only mentioned a real estate agent because there is SO much I did not know about when buying a house, and for most people, that will be the most expensive thing they ever buy so ya wanna do it right.
I am sure your bank is also working with you and will verify simple things like, does your landlord really own the house free and clear? And to make sure the house isn’t on a street that is secretly being zoned for Betty’s Bar And Booty Club, and that the new EPA study didn’t find mercury poisoning in the ground water and…well, you see what I mean.
Seriously, I am not trying to make you paranoid, but as Athena even admits when buying a house from her parents, caution is good. And your landlord will respect you for doing dilligence - I am sure they didn’t become landlords because they made foolhardy business decisions. Just don’t rush headlong without someone impartial taking a thorough look at the paperwork.
Hmmm… the only lawyer I’ve ever seen involved in a real estate deal was the one I brought. All the banks I’ve dealt with had forms they used that were probably drawn up by the banks corporate lawyers (far away in a different office), but the person filling them out was the mortgage officer. Maybe it differs by state? Regardless, if the bank uses a lawyer, that lawyer is looking after the bank’s interests - which in this case are similiar to your own, but not exactly the same.
The other thing lawyers help with is the initial contract, long before the bank EVER gets involved. I once had to back out of a deal - long story, but suffice to say there were more than a few mistakes and miscommunications between us, the seller, and the two real estate agents involved in the deal. The only way I got my ernest money back was through the use of my lawyer. This was before the bank even got involved.
That was a great first step. Yes, you need an inspection, an appraisal, and absolutely a lawyer to draw up the contract. Just that won’t cost too much. In fact some unions & such have a referral service for their members that will do a “simple contrat” for free or a small fee. You hire the lawyer- that’s important. Then he represents you. Even if it costs a few hundred, it’s a small price to pay for a purchase that big.
Next year- have your taxes done by a pro (an EA or CPA) and thus be sure to save everything paper-wise. Many of those goddam stupid escrow charges can at least be written off by a good tax pro. Next- there will be a few really stupid charges on the escrow. Don’t be afraid to dispute them (like a “messenger service” that delivered a dozen escrow docs, and they charged all 12 the full amount). You might not get them to reduce them, but at least keep them on their toes (“copying fee” of $20 for 3 pages is another… :mad: )
Your “title search” will find any real problems. Usually this is a complete rip-off, along with “title insurance” (there’s a misnomer if there ever was one :rolleyes: ), but it is often required and buys some peace of mind.
Oh, and if you have to pay “PMI” that generally means you can’t really afford that house.
My only real advice in this aprticular situation is to get a lwayer.
Buying a home has some serious, deep legal intricacies that you will need a professional to look at. What ever the cost, get one. (A reputable one.)
In Canada (ymmv) I don’t think (nearly) anyone buys a house without a lawyer. It’s just commonplace. “Who’s your agent?, Who’s your lawyer?”.
A lawyer will go over the house contract and make sure there isn’t anything buried deep in there that could come back to screw you later, and they also handle the deed switching with the city, the tax switchover with the city or county, and they clear all old accounts on the house (so the Hydro company doesn’t send you a bill for previous tenants or other outstanding debts on the property.)
