Nolo's Essential Guide to Buying Your First Home (45 page)

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Authors: Ilona Bray,Alayna Schroeder,Marcia Stewart

Tags: #Law, #Business & Economics, #House buying, #Property, #Real Estate

BOOK: Nolo's Essential Guide to Buying Your First Home
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Cobuyer Discussion Worksheet
 
To make sure you will be compatible, discuss the following issues before buying a place with someone else. Add anything else important to this list—for example, whether or not you want a dog or cat. Jot down your notes and then draft a co-ownership agreement (with an attorney’s help or with one of the contracts in
Living Together: A Legal Guide for Unmarried Couples
, by Toni Ihara, Ralph Warner, and Frederick Hertz (Nolo)).
1. How long you plan to stay in the house (and possible reasons that this may change, like moving to take care of an ill parent or getting married).
 
 
2. How you’ll each be able to afford mortgage payments and carrying costs, and what happens if one of you falls on hard times.
 
 
3. Rules for sharing space (for example, cleaning up, dividing the costs of utilities and house supplies, limiting music volume levels, and overnight guests (short- or long-term)).
 
4. How nicely decorated the house should be, and how you’ll budget for decorating.
 
5. How much of the property each of you will own, and how you will take title.
 
6. What will happen if one of you dies—for example, whether the deceased’s interest in the house will go directly to the other owner, or go to an heir.
 
7. What will happen if one of you wants to move out or sell the house sooner than the other would like to. (Many buyers include what’s called a “right of first refusal” in their co-ownership agreement, giving the nondeparting owner first crack at buying the other owner’s share of the property, at a specified value, usually either the original purchase price or the currently appraised value.)
 
8. How you will handle disputes.
 
OTHER:
Subdivide Your Space: Renting Out a Room
 
If total privacy is a luxury you can sacrifice, at least in the short term, it may help you afford a home. In fact, if you’ve already got a roommate who you enjoy living with, that person might be content writing the rent checks to you, instead of to your current landlord.
You can often charge almost as much as what renters would pay for an apartment and set down rules regarding which rooms they can use, kitchen cleanliness, and more—it’s still
your
place. The rent will help you pay the mortgage, and you can charge for a portion of the common costs, like utilities. Of course, you’ll want to protect yourself with good tenant screening and a written rental agreement.
If you can’t face the thought of a stranger having your front door key, look for a duplex, a place with a cottage in the back or a basement apartment, or another multiunit building.
 
CHECK IT OUT
 
Planning to be a landlord?
Get help from:
•
Every Landlord’s Legal Guide
, by Marcia Stewart, Ralph Warner, and Janet Portman (Nolo). Although aimed primarily at off-site landlords, this book will help you find and screen tenants and draft your rental agreement.
•
Every Landlord’s Tax Deduction Guide
, by Stephen Fishman (Nolo). Find out how to save even more money by taking advantage of favorable tax laws.
 
 
Hey, Where’s Their Agent? Looking for FSBOs (For Sale by Owners)
 
Another way to broaden your search is to visit FSBOs, that is, houses sold directly by their owners. Just how many sellers go the FSBO route is impossible to say, but most estimates put it around 15% of all U.S. houses. That’s a lot of houses your real estate agent might not, under ordinary circumstances, be showing you.
In a few cases, FSBOs can also save you money. The seller may have underpriced the house or be willing to share the commission savings with you. But don’t count on either—sellers going through the effort of advertising and showing their houses aren’t always interested in parting with any of their earnings.
Your Agent’s Role in Buying a FSBO
 
Most agents don’t routinely search for FSBOs, so you’ll need to work out whether you want this service in advance. One option is to do the searching yourself, using the resources listed in the next section. If you see an ad for a FSBO that looks interesting, the appropriate next step is to tell your agent about it before visiting the house.
That lets the agent deal with the next important issue, which is how he or she will get paid. Your agent will call and ask whether the FSBO seller will “cooperate” regarding the commission (that means paying the portion of the commission that the seller’s agent would normally hand over, usually 2½%). If the answer is no, the agent will come back to you and discuss the commission, to see whether you’re willing to pay it. You should agree on the rate in advance.
Finding FSBO Houses
 
Because FSBO sellers aren’t represented by real estate brokers, they don’t have access to the MLS database (unless they’ve made a special effort to find and pay a broker for the discrete task of listing the house). That means you’ll find most FSBOs either listed on independent websites (like those below) or advertised by more-traditional means (local newspapers or yard signs).
 
CHECK IT OUT
 
Your best bets for finding FSBOs on the Web are:
•
ForSaleByOwner.com
•
Craigslist.org
(“real estate for sale” is right there under “housing”—they’re not all FSBOs, but some are), and
•
www.fsboguide.com
, for links to FSBO websites in your area.
 
 
Dealing With FSBO Sellers’ Varying Personalities, Skill Levels
 
A FSBO seller doesn’t have an agent to educate him or her about the real estate market and act as a buffer in negotiating with buyers. That means that the success of buying a particular FSBO house—from setting a price to closing the deal—depends largely on the seller’s own personality, real estate knowledge, and skill set.
In the best-case scenario, you might find a FSBO seller who is a knowledgeable, fair-minded lawyer or retired real estate professional, who sees no reason to enlist extra help for a familiar process. In the worst case, you might find a seller who is a skinflint curmudgeon know-it-all or a total flake, who has overpriced the house, refuses to discuss commissions, and cancels the sale the minute you bring up inspections or repairs. And even the most expert sellers sometimes approach negotiations based on emotion.
 
Get to know our FSBO seller.
Maria and her husband had been keeping their eyes open for a house that would not only fit them and their two girls, but include an in-law unit for an elderly parent. “We knew such a house would be hard to find,” says Maria, “so when we heard that my husband’s sister’s best friend’s mom’s house was sitting empty—she’d recently moved into an assisted-living center—we contacted the family to sound them out. They’d just begun thinking about selling and were intimidated by the amount of work it would take to clear out the place (the mother was a packrat) and to fix it up (it desperately needed a new roof, not to mention cosmetic fixes like replacing the orange shag carpet). But after my family and I saw the house—which was just what we wanted—I talked to the mother directly, and we hit it off. In fact, eventually she told her daughter that selling the house to us was almost like keeping it in the family. We agreed to buy it without an agent, at a price that was reasonable given all the fix-ups and the commission savings. The whole arrangement was mutually beneficial in many ways—including when we began picking up the seller at her assisted-living center and driving her to the house so she could sort through the lifetime of possessions.”
Buying a FSBO With No Agent
 
If you don’t have or want an agent yet, you can buy a FSBO on your own—but be prepared for a steep learning curve. Unless you’re already friends, a canny seller might try to take advantage of you. And any deal can get mired in disagreements. There’s a reasonable chance you will be friends or acquaintances, however—common when someone hears about a house for sale before it’s advertised. But you’ll still need a standard, written sales agreement to protect both of you.
If saving money is a key concern, consider hiring an attorney for limited parts of the transaction. (In a few states, you’ll have to use an attorney for certain tasks, anyway.) A few hours’ worth of advice can save you from later heartache and expense and still cost you thousands less than an agent’s commission. Michigan attorney Fred Steingold says, “One option is to hire a lawyer to serve as your coach. Ask the lawyer to give you a purchase agreement form that’s widely used in your community and that fairly protects both you and the seller. The lawyer can also explain how to complete the form yourself, and then review your handiwork.”
And whatever you do, don’t go without the services of an escrow or title company to help guide you toward the closing, as described in Chapter 11.
 
TIP
 
If no agent is involved in a FSBO, some states don’t require seller disclosures.
In that case, bring in the most thorough professional home inspectors you can find to assess the property’s physical condition.

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