Home Buying in 97080>Question Details

Katyb, Home Buyer in Gresham, OR

We are currently renting a home that the owner has offered to sell to us on contract. What should we know first?

Asked by Katyb, Gresham, OR Mon Aug 9, 2010

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Find out if the owner, owns the home, or has an outstanding loan. Just go to a title company. He cant sell it to you if he doesn't own it outright without the lean holders permission. Also, you might want to talk to an attorney. You need to find out if the home is worth what he is asking for it, sometimes it's not, and thats why a contract sale. Also, you may want to see about working with a broker, their services are usually free to buyers on a standard purchase. I would charge a small fee to investigate this sale for you, and find out what you need to know and who we can contact to make sure your getting a fair deal.
Chuck Simpson Broker - SFR
Short Sale and Foreclosure Resource Certified
Oregon First Realty
Cell 503-380-7495
0 votes Thank Flag Link Mon Oct 31, 2011
The seller will be amazeded at how far prices have come down compared to what he was thinking a few years ago. There are some great deals out there. As one agent mentioned getting a credit from past paid rent cannot be done today and only with exceptions. From what mortgage brokers tell me, credited rent can only be credit if it is above current rent to be credited back. Follow what the agents have said they all make good points. Sellers don't want you to use a broker because the brokers always want the seller to do all the correct things when selling a house and they can get away with doing all the wrong things with no one to speak up unless you have been through it before. Before you do anything talk to a mortgage broker first and see where that takes you but the seller is really the bank here. If you need to buy on credit or if the seller is looking for some income better than a CD it might just work out the best for both of you. Get an appraisal and an attorney to write the contract and and agent to also be on your side. Good luck to you and you should have a smooth transaction.

Tom Inglesby, Broker
RE/MAX Equity Group inc
ABR,CRS,CDPE, Earth Advantage Broker
503-319-9035
0 votes Thank Flag Link Mon Aug 9, 2010
There are a lot of helpful answers so far. Basically, seek professional assistance at a reasonable cost. There is no reason a real estate agent or mortgage broker should charge you full price for helping you with a situation you are already in. I would try to obtain assistance with a reasonably low flat fee. The real estate agent does not have to help you find the home and the mortgage agent doesn't actually have to produce the loan - so it should cost much less. A lawyer isn't a bad idea - just an expensive one. I can help and I'm sure most agents could.
0 votes Thank Flag Link Mon Aug 9, 2010
I want to clarify my comment because it does sound confusing. I said "agent/attorney" when I meant an agent AND an attorney. My mistake. At the end of my paragraph I specified that the attorny would protect you legally, but I did not mean to say that agents and attorneys are one and the same. I apologize for my error. Good luck and I like what I am reading! Good job to all those taking the time to offer advice! We are all learning... All the time!
0 votes Thank Flag Link Mon Aug 9, 2010
The main reason I mentioned speaking with a mortgage professional is to first ascertain whether or not you could get approved for a loan. If you can't get approved for a loan you may not be in the best position to purchase anything, even if it is on contract terms. Most sellers that offer to sell on contract will ask for interest rates that are higher than what you can receive by obtaining a new mortgage.

It's better to have all your ducks in a row before you jump in! Get educated and be informed - that means talking with the right people -even if you are not going to utilize their services.

Garett Chadney, SFR
Principal Broker

RE/MAX Equity Group
(503) 495-3123 direct/cell
0 votes Thank Flag Link Mon Aug 9, 2010
What I just meant to say....not that " seller is selling to you" but that the seller is holding the paper on it (acting as the bank)....just to clarify how the land sale contract works.

June Lizotte, Principal Broker
Providing Real Service
June Lizotte
503-310-8032
june@junelizotte.com
Buy and Sell With Confidence!
Web Reference: http://www.junelizotte.com
0 votes Thank Flag Link Mon Aug 9, 2010
Maybe I'm working missing something, but I can't figure out why some agents are telling you to contact a mortgage broker if you are buying on Land Sale "Contract". This doesn't require any lender involvement unless there is a clause in your contract which will require you to refinance within a short amount of time to pay off the seller.

In a land sale contract its the Seller who is selling to you (which means he typically owns the house free and clear...or that he doesn't have an escallation clause to worry about in his own contract). You'll need to understand how that works before you enter into an agreement with current owner.

Any Realtor can help you know what the payments of PITI will be. The important thing is to know if the home appraises. Typically you as buyer would pay for the appraisal IF you are taking out a loan to purchase the home....but with strong negotiations you can make it a stipulation of you purchasing the home that the seller get it appraised in advance of you entering into a contract or as a stipulation of the purchase agreement.

Again....I would like to reiterate you should have a representative...not to protect you legally (as one agent mistakenly mentioned) because we are not licensed as legal consultants. We can help you maneuver through the necessary documentation and watch your back through the process...which keeps your best interests in the forefront of the negotiations and ultimately saves you headaches in the future!


June Lizotte, Principal Broker
Providing Real Service
June Lizotte
503-310-8032
june@junelizotte.com
Buy and Sell With Confidence!
Web Reference: http://www.junelizotte.com
0 votes Thank Flag Link Mon Aug 9, 2010
First I'd like to see a recent appraisal to see if it's worth the price that it is being offered at.
0 votes Thank Flag Link Mon Aug 9, 2010
Not to throw you off the path of what seems to be a great opportunity... I would encourage you to seek the help of an agent/attorney. An agent can provide you with a CMA which will give you a good idea of what the market value is. Note that the market value would include a commission for both a buyer's and seller's agent. In this case, it sounds to me that there are no agents involved at this time. I would expect those fees to be taken off of the market value if no agent is involved. The attorney will protect you legally.

The most important thing in my opinion is to keep an open mind. Sometimes you can find another home that would be more appealing to you in location and attributes. You know the neighborhood you live in now, that is definately a positive because you have tested it for however long you have lived there. Make an effort to look around at other options, that will give you the best perspective of buying your rental home. Good luck!

I just recently helped a client who started where you are now. There mortgage broker, on of my referral partners, suggested that they chat with me. I offered a free, no obligation comparative market analysis (CMA) for the home. After reviewing the seller's price of $220K, we determined that based on similar homes that had sold in the area within 3-6 moths, the true at fair market value was closer to $200K. The seller not only was not flexible on the price with the renter, the seller became hostile because the renter/potential buyer was not willing to pay their price. Needless to say, they made an offer on another property and are happy with their decision.

I recommend talking with an agent before making a decision, someone who doesn't push another house, but does give you some perspective.
0 votes Thank Flag Link Mon Aug 9, 2010
Katyb,

Here's the short list.
Get a Real Estate Broker to represent your best interests (so much can go unhandled without one).
Your agent will recommend a Real Estate Attorney if you don't already have one. (for final review of docs)
You'll need to know if the house is worth what the seller is asking for it (Realtor can help with that anaylsis)
You'll want a professional home inspection (after you've agreed to terms but MAKE SURE this is part of the written negotiations and it should be completed and negotiated within the first two weeks of getting into a contract..
You may want to set up your payment to include principal,. interest, taxes and insurance and I would recommend having a professional Contract Management Company handle all the disbursements. Here is the company that you would likely use in the Portland area and bit about their services;
Guardian Contract Services Inc | PO Box 2316 | Lake Oswego OR 97035

Basic services includes (Not all services apply to Lease Option Accounts):
• act as a neutral third party
• able to provide account felexibility such as balloon payments, interest rate and payment
changes, late charges and prepayment penalties
• provide an itemized interest statement to the buyer and seller. Seller receives payment notices as receipt of payment once received.
• Complete all interest income and expense reporting required by the IRS
• Furnish IRS Form 1098 and 1099 INT to buyer and seller
• May set up reserve account for payment of taxes and insurance
• Safekeep original documents
As you can see using a contract management company will be beneficial to both buyer and seller and the fees for you per month to have that service are about 17.50. That can be split between the two parties and its well worth it.

As you can see I have some knowledge of these types of transactions and would be wiling to speak on your behalf to the seller if you decide not to go it alone. There is more to know, such as the importance of using a Title Company and all that goes with that, the importance of getting written forms called seller's property disclosures from the seller, knowing the types of inspections to perform and how to negotiate any repairs, making sure you meet all timelines so you don't lose your contractual rights, negotiating how previous payments may be applied to the purchase price of the home and more. Important- nothing should be by verbal agreement....all should be in writing, dated and signed by both parties, with the title company getting a copy of all docs.

If seller is unwilling to have a buye's representative drawn into the mix (for your representation) you should immediately hesitate in procedings and determine why. If its only because seller doesn't want to pay a fee it would be a good idea to speak to me or agent of your choice about this and discuss how you might still retain services. I have been in situations where offering help to the seller get through the timelines and understand the correct procedures as well is often the step that convinces the seller to allow a professional into the mix. This, to me is a last resort...I particularly prefer representing only one side of the transaction, but it dies the seller good to at least know there will be someone making sure all the appropriate steps are followed.

Let me know fi you have further questions by contacting me directly.

All the best,

June Lizotte, Principal Broker
June Lizotte Real Estate
Providing REAL Service
503-310-8032
june@junelizotte.com
Buy and Sell with Confidence!
Web Reference: http://www.junelizotte.com
0 votes Thank Flag Link Mon Aug 9, 2010
Hi Katy,

What a great opportunity if indeed your current rental home is the home that you would envision purchasing!!

First and foremost, I would find a good realtor as well as real estate attorney. You'll want to see if the seller would consider using previous rent payments to go towards your down payment or principal.

Know the terms of your agreement with the seller from the start. All of these items will need to be stated in your purchase agreement.

Best of luck with this transaction!

Brooke Hengst
Your Castle Real Estate
0 votes Thank Flag Link Mon Aug 9, 2010
You need to make sure you know what the total price is, what the interest rate is - the payment, making sure it is covering both principal and interest and the number of years they are amortizing the loan over. Just for your information if the loan is for 15 yrs instead of 30 yrs the payment may not be that much more and you won't pay as much interest! Make sure you have it through a collection escrow also...that way a third party is handling the payments and the documents so that when it is paid you dont have to try to find the seller. Finally NEVER buy a property even on contract without going through escrow, to make sure there are no liens against the property and you are getting it free and clear. I hope that helps.
0 votes Thank Flag Link Mon Aug 9, 2010
Hi Katy,

There are several things you need to know before you enter into a contract to purchase. First and foremost: make sure your are pre-approved with a local lender to make sure you are qualified to buy a home. The best lenders in Gresham are the ones that come highly recommended by people in the know: Gresham Realtors! I have been helping clients in Gresham for over 17 years and can tell you we have some excellent lenders.

After finding out the price the seller wants for the home, your next step is to contact a local Realtor to complete a Market Analysis. A market Analysis will show you what other properties similar to the one you want to buy are currently selling for (as well as ones that have recently sold). In order to be in a better position to negotiate you need to have market knowledge. The analysis is one of the keys to this.

A lot of people don't realize that you, as the buyer, can have your own agent represent you when purchasing a home directly from the seller. In most cases, there will be no cost to you as the fee for the Realtor is negotiated with the seller as part of their costs when selling the home. It is very important that you have your own representation when purchasing a home as there are a number of pitfalls that can spring up. An experienced & reputable Realtor will help guide you through the process.

If you would like more information or would like to schedule an appointment, please don't hesitate to give me a call or send me an email. Good luck with everything!

Garett Chadney, SFR
Principal Broker

RE/MAX Equity Group
(503) 495-3123 direct/cell
0 votes Thank Flag Link Mon Aug 9, 2010
You should know that you do not know the legalities of the transaction. Find a good real estate attorney to review and make recommendations on the contract before you sign it. If you waiting until after you sign it is to late.
0 votes Thank Flag Link Mon Aug 9, 2010
You need to know the price and terms; you also need to understand the terms. You need to make sure that your monthly payments will remain affordable, and you'll want a real-estate attorney to review your P&S and note.
0 votes Thank Flag Link Mon Aug 9, 2010
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