Thoughts on buying a house from a colleague

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athan
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Thoughts on buying a house from a colleague

Post by athan » Mon Jan 16, 2017 6:12 pm

My wife and I have been passively looking online at houses in our town, with the idea of moving in approximately 5 years. We have two small children and currently live in a townhouse. I love it because I can walk to work, but also understand that we will need to upgrade at some point. Today I got an interesting phone call from a dentist in town. He is planning to put his house on the market in order to downsize, and was calling me because his partner told him we were looking at buying a house. I am a dental specialist in the town, and know this person to be extremely well liked and trusted in the community.

He said he had a couple people possibly interested in buying the house, and would explore these options before putting the house on the market. I gave him my email and told him to send me some details on the house. My wife and I agree that the house is in a great area and neighborhood.

If he does not get a realtor, would it be beneficial for me to get a realtor? If we like the house, how easy is it to do a private sale without real estate agents? Should I not consider buying from a colleague?

We are not in a real hurry to buy a house, but would move if the right opportunity presents itself. I would even consider renting out my current home.

Any thoughts would be appreciated.

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dm200
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Re: Thoughts on buying a house from a colleague

Post by dm200 » Mon Jan 16, 2017 6:22 pm

athan wrote:My wife and I have been passively looking online at houses in our town, with the idea of moving in approximately 5 years. We have two small children and currently live in a townhouse. I love it because I can walk to work, but also understand that we will need to upgrade at some point. Today I got an interesting phone call from a dentist in town. He is planning to put his house on the market in order to downsize, and was calling me because his partner told him we were looking at buying a house. I am a dental specialist in the town, and know this person to be extremely well liked and trusted in the community.
He said he had a couple people possibly interested in buying the house, and would explore these options before putting the house on the market. I gave him my email and told him to send me some details on the house. My wife and I agree that the house is in a great area and neighborhood.
If he does not get a realtor, would it be beneficial for me to get a realtor? If we like the house, how easy is it to do a private sale without real estate agents? Should I not consider buying from a colleague?
We are not in a real hurry to buy a house, but would move if the right opportunity presents itself. I would even consider renting out my current home.
Any thoughts would be appreciated.
Not complete advice/information - but a few thoughts -

1. Is this house in the price range that you can afford? Can you qualify for a mortgage sufficient to buy this house?
2. What would be the market for your townhouse if you were to place it for sale? Would you have a gain after paying off the mortgage? if so, might that be adequate for a downpayment?
3. I do not believe you need a realtor, but you would need to engage someone to take care of a few details, such as a real estate attorney. If all works out well between both of you, the savings from a realtor can be significant.
4. What is the timing of his desire to sell?
5. Is he (or might he be) willing/able for some kind of creativity or flexibility in selling to you, such as a deferral of part of the purchase price or taking back part of the financing.

Not Law
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Re: Thoughts on buying a house from a colleague

Post by Not Law » Mon Jan 16, 2017 6:35 pm

You most definitely do not need a realtor. Their primary job is to bring a buyer and seller together for a percentage of the transaction. That has already been achieved here without the realtor. What you need is a real estate attorney to make sure all of your interests as a buyer are taken care of. The attorney fees will likely be MUCH less than the real estate commission, AND you will have someone on your side looking out for you, not a realtor whose primary interest is their paycheck.

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Re: Thoughts on buying a house from a colleague

Post by Gropes & Ray » Mon Jan 16, 2017 6:46 pm

No need for a realtor. Even a lawyer is optional. A residential real estate transaction isn't so complicated that two intelligent dental professionals can't figure it out with a closing company to help. However, it's never wrong to hire a lawyer if it makes you feel more comfortable.

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dm200
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Re: Thoughts on buying a house from a colleague

Post by dm200 » Mon Jan 16, 2017 6:50 pm

Another thing a realtor sometimes facilitates (but not always) is assistance in locating financing. You can do that yourself, though, by looking at getting prequalfied by a mortgage broker or (I think better) speaking to several credit unions that offer home mortgages.

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Re: Thoughts on buying a house from a colleague

Post by athan » Mon Jan 16, 2017 6:53 pm

Not complete advice/information - but a few thoughts -

1. Is this house in the price range that you can afford? Can you qualify for a mortgage sufficient to buy this house? The surrounding houses in the neighborhood go anywhere from $350,000 to $550,000. My salary is around $200,000 per year, so it would be in my range. I have not gotten any detils from the seller yet in terms of price. This is all brand new to me as of the phone call today.
2. What would be the market for your townhouse if you were to place it for sale? Would you have a gain after paying off the mortgage? if so, might that be adequate for a downpayment? The real estate market in our town is cold, and there are new townhomes going up every day. I have around $70,000 in savings I could use for downpayment. Our townhouse is paid off (one reason I do not want to move)
3. I do not believe you need a realtor, but you would need to engage someone to take care of a few details, such as a real estate attorney. If all works out well between both of you, the savings from a realtor can be significant.
4. What is the timing of his desire to sell? He doesn't have a firm date he needs to be out. I think they just decided to downsize recently, but do not need to do anything.
5. Is he (or might he be) willing/able for some kind of creativity or flexibility in selling to you, such as a deferral of part of the purchase price or taking back part of the financing.[/quote] Very interesting. I wouldn't know how to even begin to bring this up to him. I would love to come up with some sort of payment option to lower the amount I would pay to the bank. I am open to suggestions in this area.

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Re: Thoughts on buying a house from a colleague

Post by jfn111 » Mon Jan 16, 2017 6:58 pm

You don't need a Realtor but you probably need a facilitator to handle the transaction. This could be an agent for a flat fee or an attorney. Even though you are buying from an acquaintance there still needs to be inspections and negotiations on price and potential repairs.
Some people are confident to do all this on their own but most like a buffer especially if you have a personal, or professional, relationship with the seller.

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Re: Thoughts on buying a house from a colleague

Post by onthecusp » Mon Jan 16, 2017 7:33 pm

Random thoughts of someone who has gone through a few houses and tried to be frugal with buying them.

1. You have bought and paid off a townhouse so you have a basic idea how this works you are in good shape there.

2. Your 70,000 is 20% of 350,000. So going higher in that range exposes you to potential PMI insurance which is a significant extra cost.

3. With your income, $350,000 is doable while 550,000 sounds like it would be a real stretch on resources unless you believe your income will continue to rise substantially, soon and for a few years. As far as I am concerned the "how much house can you afford" calculators encourage over commitment unless you really have no other interests than living there with your current furnishings. With similar income we got into a 300,000 house with 20% down and a 15 year mortgage a couple of years ago. It is OK, but I can't wait to get it paid off.

4. As a seller he is hoping to avoid about 7% commission. Say on $400000 making that $28000. At best he might split that with you. Is saving 14,000 or 3.5% today really a deal maker in your current plans?

5. How are you going to set a price? I'm not saying that a realtor, per se, can help, but going to see a few (dozen) houses in your price range and talking with a realtor is one way to get an education in what is available at what price. You don't commit to anything by looking. The realtor has a chance to show you something that is so much better and cheaper that it would be worth it to pass on the dentist's house and buy something else. That is the chance you are giving them. I'm a nice guy but I won't sell my house for a penny less than I think I can get, and that has little to do with other objective ways to value it. It is worth to you only what it is worth compared to other options. If after looking at other things you think you are getting a great deal, go for it. If not hold off and tell the realtor you will call them when you get serious again (if you liked the service you got). Last we bought we probably looked at 30-40 houses over a period of months. Finally found a great deal. We got good at looking at the weekly email and saying, no nothing looks good this week; Remember we want x, y, z.

6. On pricing, if your town is covered, Zillow and Trulia are good resources, keep clicking and you can often find price history that show previous sales prices on other houses in the neighborhood. The realtors poo poo the "zestimate", but on a comparative basis they are not bad. When you are selling the realtors say oh don't expect what Zillow says you can get. When you are buying they say, oh don't expect to be able to buy it for what Zillow says it should cost. I look at $/square foot in different neighborhoods and home trim levels. Then do some mental calculations for different size lots or garages and number of bathrooms. It is not precise but you get a feel for what is costing you money and then what an 'in the ball park' price is. Then offer less if the market is slow in your area.

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dm200
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Re: Thoughts on buying a house from a colleague

Post by dm200 » Mon Jan 16, 2017 7:39 pm

athan wrote:Not complete advice/information - but a few thoughts -

1. Is this house in the price range that you can afford? Can you qualify for a mortgage sufficient to buy this house? The surrounding houses in the neighborhood go anywhere from $350,000 to $550,000. My salary is around $200,000 per year, so it would be in my range. I have not gotten any detils from the seller yet in terms of price. This is all brand new to me as of the phone call today.
2. What would be the market for your townhouse if you were to place it for sale? Would you have a gain after paying off the mortgage? if so, might that be adequate for a downpayment? The real estate market in our town is cold, and there are new townhomes going up every day. I have around $70,000 in savings I could use for downpayment. Our townhouse is paid off (one reason I do not want to move)
3. I do not believe you need a realtor, but you would need to engage someone to take care of a few details, such as a real estate attorney. If all works out well between both of you, the savings from a realtor can be significant.
4. What is the timing of his desire to sell? He doesn't have a firm date he needs to be out. I think they just decided to downsize recently, but do not need to do anything.
5. Is he (or might he be) willing/able for some kind of creativity or flexibility in selling to you, such as a deferral of part of the purchase price or taking back part of the financing.
Very interesting. I wouldn't know how to even begin to bring this up to him. I would love to come up with some sort of payment option to lower the amount I would pay to the bank. I am open to suggestions in this area.[/quote]

Go for it!!!

Any chance the seller wants to "downsize" to your townhouse? :sharebeer

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Re: Thoughts on buying a house from a colleague

Post by Watty » Mon Jan 16, 2017 7:46 pm

athan wrote:My wife and I have been passively looking online at houses in our town, with the idea of moving in approximately 5 year
Over the next five years there will likely be hundreds of potential houses for sale in your area and the odds that this random house is the best house for you out of hundreds of houses is pretty slim.

In addition to having an awkward situation with this person if there are glitches or major problems with the home sale it could tarnish your reputation with other people in the field.

I would pass on the house.

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Pajamas
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Re: Thoughts on buying a house from a colleague

Post by Pajamas » Mon Jan 16, 2017 7:59 pm

Watty is giving good advice. You were passively looking and planning to buy in five years so you shouldn't buy one now just because someone is looking to sell their house.

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Re: Thoughts on buying a house from a colleague

Post by athan » Mon Jan 16, 2017 8:01 pm

Go for it!!!

Any chance the seller wants to "downsize" to your townhouse? :sharebeer[/quote]

HAHAHA.....I actually thought about this.

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Re: Thoughts on buying a house from a colleague

Post by adamthesmythe » Mon Jan 16, 2017 8:05 pm

If you buy without realtors you need to know how to do due diligence to protect yourself. Survey? House inspection? Title insurance? Mortgage contingency? Expansive soils? Septic tanks? Radon? Whatever else there is in your area? If you know all this you are good. If not, you could get burned.

The fact that a person is "well liked and trusted" does not give me any more reason to buy a house without due diligence than, say, from a used car salesman.

Are you after this particular house mostly because you believe you will save...6%? 3%? You should look at other houses in the area first, or at least simultaneously.

athan
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Re: Thoughts on buying a house from a colleague

Post by athan » Mon Jan 16, 2017 8:07 pm

adamthesmythe wrote:If you buy without realtors you need to know how to do due diligence to protect yourself. Survey? House inspection? Title insurance? Mortgage contingency? Expansive soils? Septic tanks? Radon? Whatever else there is in your area? If you know all this you are good. If not, you could get burned.

The fact that a person is "well liked and trusted" does not give me any more reason to buy a house without due diligence than, say, from a used car salesman.

Are you after this particular house mostly because you believe you will save...6%? 3%? You should look at other houses in the area first, or at least simultaneously.

Could a real estate lawyer do all of this?

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Re: Thoughts on buying a house from a colleague

Post by tim1999 » Mon Jan 16, 2017 8:23 pm

adamthesmythe wrote:If you buy without realtors you need to know how to do due diligence to protect yourself. Survey? House inspection? Title insurance? Mortgage contingency? Expansive soils? Septic tanks? Radon? Whatever else there is in your area? If you know all this you are good. If not, you could get burned.
This stuff is easy to coordinate.
Survey - call a local company to arrange for it and have the attorney review it. You want any easements or encroachments plotted on it. This may cost a few more bucks it is worth it.
House inspection - Call a local home inspection company with good online reviews. The report will make it obvious what the deficiencies, if any, are. The home inspection company will usually recommend radon, termite, and septic testing companies.
Mortgage contingency - Real estate lawyer writes up a purchase/sale agreement, similar to what a realtor would, and this would contain a mortgage contingency if desired along with the normal provisions for negotiating repairs found in the home inspection, problems found in septic or radon inspections, etc.
Title insurance - if you are using a real estate attorney, he will order a title report, review it, and have the policy issued. He will also coordinate the closing with the mortgage company, allocate pro-rations of taxes, etc.

What you need to leverage in your favor is what the seller is saving on realtor commissions and work that into a lower sales price that's a win/win for both of you. At most the attorney should cost you a grand or two, less if you aren't in a HCOL.

A decent real estate attorney knows a heck of a lot more than a realtor when it comes from protecting you from getting taken advantage of. A realtor just wants to close deals and collect commissions. An attorney that makes a major oversight due to lack of diligence has a lot more at stake.

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Re: Thoughts on buying a house from a colleague

Post by ram » Mon Jan 16, 2017 8:42 pm

I did this for my current house.
I saw the house and told the colleague that I will pay 'X' for the house. You continue to find other buyers and sell at the best possible price. If you do not get anything better than X then contact me. I am not in a hurry. We continued to look at other houses.
6 weeks later he called me and we had a deal. No negotiation other than this.

I used a real estate attorney (about $200 in a LCOLA) to review the contract. We (buyer and seller) saved about 20K in real estate commission.

I was already looking for a fairly similar house and did have a house inspection done ( $250). Went to 3 local banks / credit unions, looked online and took the best mortgage available.
Ram

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dm200
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Re: Thoughts on buying a house from a colleague

Post by dm200 » Mon Jan 16, 2017 8:46 pm

athan wrote:Go for it!!!
Any chance the seller wants to "downsize" to your townhouse? :sharebeer
HAHAHA.....I actually thought about this.[/quote]

Make him an offer! A longshot, of course! Make it sound half like a joke! cannot hurt.

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Re: Thoughts on buying a house from a colleague

Post by adamthesmythe » Tue Jan 17, 2017 10:38 am

athan wrote:
adamthesmythe wrote:If you buy without realtors you need to know how to do due diligence to protect yourself. Survey? House inspection? Title insurance? Mortgage contingency? Expansive soils? Septic tanks? Radon? Whatever else there is in your area? If you know all this you are good. If not, you could get burned.

The fact that a person is "well liked and trusted" does not give me any more reason to buy a house without due diligence than, say, from a used car salesman.

Are you after this particular house mostly because you believe you will save...6%? 3%? You should look at other houses in the area first, or at least simultaneously.

Could a real estate lawyer do all of this?
Sure, an RE lawyer will write in whatever you tell him to.

You may have a challenge deciding how to write a contract safe enough for you but not too scary for the seller.

bluebolt
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Re: Thoughts on buying a house from a colleague

Post by bluebolt » Tue Jan 17, 2017 3:32 pm

I sold a house to a colleague. He kept asking me questions about the P&S and finally I had to tell him that he really needed a lawyer to answer those questions.

That said, the process was super smooth. No brokers on either side. He paid in cash with a large deposit, so that certainly took a lot of uncertainty out of the transaction.

Upsides:
Super cheap transaction
Lots of trust between the parties
Got paid slightly higher than market because he knew we could trust each other and have a smooth transaction
A few random pieces of mail & packages got delivered there long after I moved out and he made it very easy to collect them

Downsides: For the first few days and up to a couple months afterwards, I would get random emails like, "How do I program the thermostat?" or "Can you remind me how to use the stove?"

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Re: Thoughts on buying a house from a colleague

Post by Jack FFR1846 » Tue Jan 17, 2017 3:47 pm

The entire job of the real estate agent is to work in the interest of the SELLER.
I bought my house without one. I am not afraid to negotiate. I go negotiate at car dealers for my friends because I find it fun. We got the entire amount that would have gone to a real estate agent and then some.

We hired the bank's lawyer. It was very cheap and although he's representing both my and the bank's interest, I saw nothing that would be a conflict. He still had to search the title and do the closing (in my state). He had the added benefit of holding the checks. We had him do both our house sale closing (morning) and new house buy closing (afternoon). We were busy loading up the moving truck and moving during this time.

Don't be afraid to offer a price that's 6% below selling prices of comps since most comps had real estate agent commissions to pay. Oh, we bought from a co-worker.
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Re: Thoughts on buying a house from a colleague

Post by Lafder » Wed Jan 18, 2017 8:33 am

Look at the house and see if you even like it :)

Get familiar with a fair price. Have you been looking? Likely a seller thinks their home is worth more than the buyer does!

Let the seller tell you what price they want.

If you make an offer, make it contingent on appraisal/financing, as well as an inspection.

It can be a deal to get a home before it is on the market and save on realtor fees. But you still want to treat it as any unknown home no matter how nice the sellers as.

As a colleague, maybe they will give you a better deal. Who knows.

If it were me, if they told me a price, I would quickly see at least 5 (or more - but I like looking) homes in the same price range to be sure that home really stands out as the right home at the right price. You can arrange to see homes through their listing agent. If you know a realtor, or contact one, you can let them know you may be buying a FSBO. They may be willing to take you around to see local listings (it is much easier to arrange to see many homes with one realtor than using each separate listing agent). The realtor has a chance of making a sale by doing this, and you are being honest about your intentions. Some realtors will do paperwork for a FSBO for a reduced fee than their usual commission.

I have bought once and sold once without a realtor in a high demand area where FSBO get snatched up quickly. But I have a realtor in the family who helped walk me through the process. In general, all of the hassle involved in the sale was worth the cost of the realtor to me.

lafder

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Re: Thoughts on buying a house from a colleague

Post by ponyboy » Wed Jan 18, 2017 8:55 am

I just purchased a home from my inlaws. No realtor needed obviously. Just an attorney...cost was $600 for all paperwork and peace of mind knowing I didnt mess something up trying to do it myself. Money well spent.

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Re: Thoughts on buying a house from a colleague

Post by snackdog » Wed Jan 18, 2017 9:18 am

Check all the risks and trade offs.

Seller can sell fast and save commissions.

You can maybe get a better price due to reduced commissions.

Both are at risk if real estate attorneys are not used.

You are at risk of:
- buying a sub-optimal property for your needs because you are not 100% familiar with the market and all that is available
- buying sooner than you need to
- paying too much because you don't know the market
- dealing directly with a person in your profession who may become your worst enemy if things go sour before, during or way after sale


At the very least, I would get a realtor (who understood they would not be part of any deal with the dentist although their opinion on the property value and location would be requested) and study the market very closely for at least 6 weeks with heaps of viewings. If I determined, the house in question was optimal and that the timing was ok, I would estimate a fair price then negotiate to share at least half the commission savings with the seller. Then I would hire the best inspector, title company and real estate attorney I could find. If the deal went through, I would let the realtor sell the townhouse.

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Re: Thoughts on buying a house from a colleague

Post by athan » Thu Jan 19, 2017 9:38 pm

Ok...here is an update. Originally the dentist told me he was going to Florida for a few weeks, and would email me when he got home. However, this wasn't good enough for my "get things done" wife. She took it upon herself to find the address of the house from mutual friends. She then drove by the house today. Then she got out and knocked on the door! The dentist's wife answered, and my wife introduced herself. They were packing for their trip to Florida (leave tomorrow), but let my wife in to look around.

My wife really liked the house, and we would not need to put much, if any, work into the house. The public schools are great, and so is the neighborhood. Over the past couple of days I have gone on Zillow to find comps. There are houses on the same street for sale, or recently sold for prices ranging from $350,000-$435,000. Also, they have completely finished the basement and it is beautiful.

My wife and I talked it over yesterday and decided that $350,000 was a solid offer for us, considering that we are not in a hurry to leave our townhouse. Also, real estate is cold in our town. Houses like this often sit on the market for months at a time.

A few hours ago the dentist's wife emailed my wife a bunch of pictures and info. At the bottom of the email they listed a price of $465,000 pre-real estate agent. $485,000 put on the market with agent. Obviously I feel this is high, but also know my wife likes the house and wants me to tour when they get back from Florida.

I am not willing to spend this amount on the house, even though I have to say the pictures were impressive.

Thoughts?

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Re: Thoughts on buying a house from a colleague

Post by Pajamas » Thu Jan 19, 2017 9:49 pm

What you are willing to offer is partially based on your own criteria (not in a hurry) and not the house itself. Apparently they think it is worth significantly more on the market. If they are right, then you are not ready to buy at their price as you value it at significantly less.

How does the price of this house compare to the prices of the other houses on a square-foot basis?

Depending on the market and the house and the price, it would not be unusual to see the price cut after a couple of months if the house doesn't sell. The fact that it is nicer and significantly more expensive than the other houses in the area may make it more difficult to sell. On the other hand, it is in great condition.

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Re: Thoughts on buying a house from a colleague

Post by newbie_Mo » Thu Jan 19, 2017 11:08 pm

You are not in a hurry to buy, they are not in a hurry to sell. You want to offer 350k. They want 465k. Good luck!

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Re: Thoughts on buying a house from a colleague

Post by Katietsu » Fri Jan 20, 2017 2:22 am

Spend the time they are in Florida looking at other houses to get an idea of what is reasonable.

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Re: Thoughts on buying a house from a colleague

Post by stevekozak2 » Fri Jan 20, 2017 7:09 am

My thoughts are simplistic. You have a paid for home now, and no real need to move for five years. You have $70,000 in savings to use as a down payment right now. With a $200,000 income, and a paid for residence, I would think you would be able to aggressively save for the next 5 years and have, at the least, a much bigger (maybe even all of it) down payment on a house that you did not rush into. You seem happy in your current place. I would wait. No need to add risk to your life unneccessarily.

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Re: Thoughts on buying a house from a colleague

Post by carolinaman » Fri Jan 20, 2017 7:25 am

Gropes & Ray wrote:No need for a realtor. Even a lawyer is optional. A residential real estate transaction isn't so complicated that two intelligent dental professionals can't figure it out with a closing company to help. However, it's never wrong to hire a lawyer if it makes you feel more comfortable.
IMO, this is bad advice. You need a real estate attorney. Their fees are generally reasonable and they can handle all of the legal aspects. Also, they provide title insurance for the transaction. This protects you in case there are liens against the property and the attorney does not discover these. If you DIY and do not discover liens, then the liens are legally yours after closing.

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Re: Thoughts on buying a house from a colleague

Post by taguscove » Fri Jan 20, 2017 9:00 am

athan wrote: A few hours ago the dentist's wife emailed my wife a bunch of pictures and info. At the bottom of the email they listed a price of $465,000 pre-real estate agent. $485,000 put on the market with agent. Obviously I feel this is high, but also know my wife likes the house and wants me to tour when they get back from Florida.

Thoughts?
We bought a home directly from friends this past summer, and it was a great experience.
Like the others, I agree with skipping the realtor but retaining an attorney.

I'm surprised that there's such a difference between your valuation and their valuation. It's in your self interest to undervalue and their self interest to overvalue. Between zillow.com and Realtor.com, you can put together a spreadsheet of comparable homes. You could even share it with them. A professional appraiser could also be useful.

Figure out the real market value, and take 3-5% off to reflect lower fees.

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Re: Thoughts on buying a house from a colleague

Post by Gropes & Ray » Fri Jan 20, 2017 9:04 am

carolinaman wrote:
Gropes & Ray wrote:No need for a realtor. Even a lawyer is optional. A residential real estate transaction isn't so complicated that two intelligent dental professionals can't figure it out with a closing company to help. However, it's never wrong to hire a lawyer if it makes you feel more comfortable.
IMO, this is bad advice. You need a real estate attorney. Their fees are generally reasonable and they can handle all of the legal aspects. Also, they provide title insurance for the transaction. This protects you in case there are liens against the property and the attorney does not discover these. If you DIY and do not discover liens, then the liens are legally yours after closing.
Just to be clear, I did say "with a closing company to help." Everywhere except Iowa, the closing company does the title insurance.

stan1
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Re: Thoughts on buying a house from a colleague

Post by stan1 » Fri Jan 20, 2017 9:17 am

Well, you are kinda stuck. At first glance your wife wants a $465K house and you want a $350K house. A realtor won't help you with that situation but since you aren't familiar with what's on the market it is going to be hard for you to know whether the seller's $465K ask is reasonable.

Since you are acting as your own agent you'll need to drill down into the comps. A house that sold for $350K or $550K is probably not a good comp. It's going to be tougher for you to figure out a reasonable asking price because you are in a slow, low volume area. First try to find if there are any comps with similar square footage and number of bedrooms that have sold within the last 6 months. Those are going to be your best comps but if there are only a handful you will need to drive by them and hopefully find photos on the internet to see if they really are comparable and make small adjustments up or down.

You'll have to get up to speed on the local market for houses in this price range quickly. If you don't have time to do that right now or don't want to then I'd wait until you are ready to buy.

One approach would be for each of you to hire an appraiser and average the two values. If you both are OK with that then you have a deal. If either of you doesn't like the number you can walk away with no penalty.

athan
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Re: Thoughts on buying a house from a colleague

Post by athan » Fri Jan 20, 2017 11:16 am

stevekozak2 wrote:My thoughts are simplistic. You have a paid for home now, and no real need to move for five years. You have $70,000 in savings to use as a down payment right now. With a $200,000 income, and a paid for residence, I would think you would be able to aggressively save for the next 5 years and have, at the least, a much bigger (maybe even all of it) down payment on a house that you did not rush into. You seem happy in your current place. I would wait. No need to add risk to your life unneccessarily.
I am happy in the townhouse, since I can walk to work and yoga studio. However, my wife feels cramped, and she is the one at home all day with the 2 kids. While she is ok with waiting for a few more years, she is looking on Zillow daily. Sort of a hobby of hers at this point.

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Watty
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Re: Thoughts on buying a house from a colleague

Post by Watty » Fri Jan 20, 2017 11:46 pm

athan wrote:She took it upon herself to find the address of the house from mutual friends. She then drove by the house today. Then she got out and knocked on the door! The dentist's wife answered, and my wife introduced herself. They were packing for their trip to Florida (leave tomorrow), but let my wife in to look around.

My wife really liked the house,......

I would suspect that your wife in not a very good poker player :D

athan
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Re: Thoughts on buying a house from a colleague

Post by athan » Sat Jan 21, 2017 1:06 am

Watty wrote:
athan wrote:She took it upon herself to find the address of the house from mutual friends. She then drove by the house today. Then she got out and knocked on the door! The dentist's wife answered, and my wife introduced herself. They were packing for their trip to Florida (leave tomorrow), but let my wife in to look around.

My wife really liked the house,......

I would suspect that your wife in not a very good poker player :D

Yea...you got that right

athan
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Re: Thoughts on buying a house from a colleague

Post by athan » Thu Feb 09, 2017 5:18 pm

stan1 wrote:Well, you are kinda stuck. At first glance your wife wants a $465K house and you want a $350K house. A realtor won't help you with that situation but since you aren't familiar with what's on the market it is going to be hard for you to know whether the seller's $465K ask is reasonable.

Since you are acting as your own agent you'll need to drill down into the comps. A house that sold for $350K or $550K is probably not a good comp. It's going to be tougher for you to figure out a reasonable asking price because you are in a slow, low volume area. First try to find if there are any comps with similar square footage and number of bedrooms that have sold within the last 6 months. Those are going to be your best comps but if there are only a handful you will need to drive by them and hopefully find photos on the internet to see if they really are comparable and make small adjustments up or down.

You'll have to get up to speed on the local market for houses in this price range quickly. If you don't have time to do that right now or don't want to then I'd wait until you are ready to buy.

One approach would be for each of you to hire an appraiser and average the two values. If you both are OK with that then you have a deal. If either of you doesn't like the number you can walk away with no penalty.
So here is an update. My wife just saw a house on the same street as the dentist's house, and the asking price is $390,000. The house is just as nice, but we actually like the open layout a little better. These people put a note on Zillow that they are moving back to South Carolina because their daughter misses her friends and wants to start high school with them. They have been in the house for less than a year, and bought it for $425,000.

Also, the house next door was on the market for a solid year at $365,000...then $347,500. It has not sold and the owners recently took it back off market.

Our housing market is ice cold according to Zillow. My question to you bogleheads is: how low an offer should we put in to the people who are asking $390,000, and need to be out by end of summer? Would it be better to offer all cash (have my parents finance and pay them back monthly). Again, we are not in a hurry to move, but do like this neighborhood. Also, is there a benefit to having a realtor for the walk through and offer, or should we do this on our own?

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dm200
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Re: Thoughts on buying a house from a colleague

Post by dm200 » Thu Feb 09, 2017 6:18 pm

Our housing market is ice cold according to Zillow. My question to you bogleheads is: how low an offer should we put in to the people who are asking $390,000, and need to be out by end of summer? Would it be better to offer all cash (have my parents finance and pay them back monthly). Again, we are not in a hurry to move, but do like this neighborhood. Also, is there a benefit to having a realtor for the walk through and offer, or should we do this on our own?
1. If you pay cash, then get a mortgage, not all of the interest on the mortgage is tax deductible.

2. I assume the house is listed by a realtor. If you are set on this house, then there might be some flexibility from the selling agent if he/she gets both buyer and seller comission.

3. I would focus on getting preapproved for finacing and presenting yourselves as solid buyers. It may be that the $390,000 was set to make a solid sale. Or, maybe they would take less. The risk in coming in too low is that you may miss out and someone else buys it.

athan
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Re: Thoughts on buying a house from a colleague

Post by athan » Thu Feb 09, 2017 6:56 pm

dm200 wrote:
Our housing market is ice cold according to Zillow. My question to you bogleheads is: how low an offer should we put in to the people who are asking $390,000, and need to be out by end of summer? Would it be better to offer all cash (have my parents finance and pay them back monthly). Again, we are not in a hurry to move, but do like this neighborhood. Also, is there a benefit to having a realtor for the walk through and offer, or should we do this on our own?
1. If you pay cash, then get a mortgage, not all of the interest on the mortgage is tax deductible.

2. I assume the house is listed by a realtor. If you are set on this house, then there might be some flexibility from the selling agent if he/she gets both buyer and seller comission.

3. I would focus on getting preapproved for finacing and presenting yourselves as solid buyers. It may be that the $390,000 was set to make a solid sale. Or, maybe they would take less. The risk in coming in too low is that you may miss out and someone else buys it.
Interesting that the realtor may have flexibility if he/she gets both buyer and seller comissions. So we may be better off without a realtor if we want to offer less than asking price.

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