In the end, the property has to appraise in order for the lender to give you a mortgage. Interview real estate agents and ask them to prepare a market analysis which compares recent sales of similar homes. If their asking price is over and above the market, you might be better off finding something else. There is a FHA product (203K rehab loan) that allows for repairs, but there are lots of hoops to jump through and generally the interest rates are a little higher.
Personally, I avoid doing deals with family because I don't want there to be any hurt feelings or uncomfortable Thanksgiving dinners. Sometimes it is better to keep family and business separate.
I don't mean to be rude, but this is more of question of family dynamics - I wonder what Dr Phil, Ann Landers, or Dear Abby would say?
Find a Realtor that you like and trust:
The five of you sit down and this is what you say:
"Mom and Dad, we want to buy the house, but if it is going to cause a riff between us, we would all be better off looking elsewhere. We figured that we should have RON (hypothetical, I won't come to Mn.) help us with the paperwork and the communication. "
And then you let Ron tell them, in a detached, third party way, what is wrong, what needs to be done, and where you stand:
If you cannot meet in the middle, call the whole thing off and give Ron a card for dinner at Appleby's.
Good luck and may God bless
I DO think everyone agrees that having some type of 3rd party influence to give you opinions on what the home is worth and probably what it will sell for is a good idea. It costs $$$$ to pay a buyers-co op fee and a listing agents $$$, so even if you are 5-7k off I would think your parents would wrather just sell it to you then spend the extra time and money to probably net the same result.
You could also have your parents carry some of the financing. Seems to me it would be pretty mean of them to give you a higher interest rate than market value. At least this way you are paying them the interest instead of the bank. I see alot of people doing COD's with their parents and it does work.
Then again with my family I would NEVER do this haha! It all just depends. Just know it will probably be difficult for YOU to sway them off of price. Better to get a realtor that knows the market and/or appraiser to help.
Okay you need a Realtor to buy their home, simple and plain, you need to have someone that will speak with authority and will say that this or that is not in good shape, that this addition did not add value, that this items is outdated and that the home has to leave room for the buyers to make upgrades and updates! Ask a Friend Realtor or some local Realtor for this help and say its a done deal so I am offering a flat fee just so that you can make them come to a reasonable negotiation!
If you're able to determine a price you can both live with (and if you're borrowing the money from the bank a price that the home will appraise for) then you can either hire an attorney or a real estate agent. Either party will do the work for a flat fee and can set up escrow with a title company. In Minnesota, either an attorney or real estate agent can provide the services you will need. An outside title company will do the actual closing.
If you need a reference for an appraiser, you can check with your local bank. For an inspector, see the link below.
Usually, you can expect the winning side of the transaction to have far more interpersonal influence on the relationship. You're effectively trading dollars for personal feelings.
Since the whole point of getting a property from a known relationship is to get a better deal than normally possible in the market and save on commissions, if you're not comfortable with the price being offered, you should just back out of discussions right away. Otherwise, you just end up antagonizing eachother without necessarily coming to an agreement.
One solution that I've used in similar situations is to suggest that you get a real estate broker at a reduced commission, perhaps 1-2% instead of 6-7%. This way, you'll both have somebody who can make sure the contract paperwork is handled properly and can offer market comparables for a more realistic price. From my experience, a 1-2% commission is a very small price to pay when the buyers in self-negotiated transactions tend to over pay by 5-10% to try to keep the seller "happy".