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Brown, Home Buyer in Niagara Falls, NY

What costs are involved in a private sell with the seller holding the mortgage?

Asked by Brown, Niagara Falls, NY Sat Aug 29, 2009

My husband and I are interested in buying a house we looked at. The seller is holding the mortgage but wants us to pay for the closing costs. What guidelines should we follow to protect ourselves in this transaction ?

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Robin; I said "In a traditional mortgage" regarding escrow, not owner financing. I also said outlay of cash, not a closing cost.
The seller's fees in Erie County are still the same unless you get a Quit-Claim Deed which is not wise.
Fees not applicable and not required are 2 different things. A buyer should still get an appraisal to ensure that the property is worth what they agree to pay. Title Insurance is not required but is still wise. Updating the Title Search is not required in a private sale but a buyer would be very foolish to close on a property without an updated Title Search and the same applies with a new survey. I currently have a deal going down the drain right now where the seller "Thought" he bought extra land from a neighbor and built a garage on it. The transaction was not handled by an attorney and now in trying to close, we find that the original owner (2 back) still owns the extra land with the current seller's garage on it.
1 vote Thank Flag Link Sat Aug 29, 2009
OK agents, lets move on. We can spend more time in the Agent to Agent section if you would like.

Brown's attorney, who should know best, will advise as to the best approach given the price of the pproperty, the condition of the Title and the other factors that we have to deal with in our area.
0 votes Thank Flag Link Sat Aug 29, 2009
If you would have read my answer more thoroughly, you would see that I told him that he needed the title searches and should buy the title policy for himself anyway. In a purchase transaction, that is the more expensive policy in NY anyway. The policy for the lender is minimal in comparison.
0 votes Thank Flag Link Sat Aug 29, 2009
Robin, although the seller would not require an appraisal, Joe is right in that the buyer would want to ensure that they are not over paying for the home. And of course you want to purchase Title Insurance.

Too often in this business we see buyers/sellers try and go it alone in an effort to save money only to create problems in the future like Joe's story confirms. The best way to protect your interests is to be working with a professional that can guide you through the process like working with a Buyer Broker or if in your instance you are already in the middle of a transaction your Real Estate attorney.
0 votes Thank Flag Link Sat Aug 29, 2009
Joe, if Mr. Brown has stated that the seller is holding the mortgage, some of the fees you mentioned would not be applicable, those are fees that a bank will charge. I am assuming the seller is not going to require an appraisal or a credit report, but of course one never knows. Also, I am sure the seller is not going to escrow for taxes and insurance.
0 votes Thank Flag Link Sat Aug 29, 2009
There are closing costs on both sides; buying and selling. If what I understand is correct, they want you to pay for both. Do you have an agent that you are working through? The seller's costs are to update the Abstract of Title and re-survey the property, pay Deed Transfer Tax (if Niagara County, I believe it is $4/$1,000 of the sale price. There is also a discharge of mortgage if there is a current mortgage and some filing fees. Your closing costs as a buyer will be; credit report, appraisal, mortgage tax. One of the biggest outlays of cash in a transaction involving a traditional mortgage is establishing an Escrow account for taxes if you put less than 20% down.
In a normal purchase with owner financing you both save some fees but, unless you have problems obtaining a mortgage through traditional means, you may be better off getting a mortgage through a bank unless you are getting some fantastic interest rate. It sounds as though this may be a "For Sale By Owner" so if it is, make sure you have a real estate attorney involved in all aspects and get title insurance AND an appraisal. Neither of these are required for owner financing but I would recommend it to protect your best interests. Just my opinions with out all the facts.
Joe Sorrentino
MJ Peterson Real Estate
0 votes Thank Flag Link Sat Aug 29, 2009
If the seller is filing an actual mortgage document, which the probably are, you would have almost the same closing costs as if you were taking a bank loan, as far as title goes. The only thing you would save is the lender's portion of the title, because I would assume the seller would not care about that. You would still want the policy that you hold for the entire time you own the home. You would want most searches to be done that are normally performed on the home and owners before you close so that you are assured that there are no liens against the house, the person has not declared bankruptcy, things like that. The seller would want you to pay to file the mortgage and deed, and you would have to pay the state mortgage tax, assuming you are buying in NY as you have stated.
What you will save are the various bank fees, appraisal costs, and bank attorney fees. If they want you to pay the real property transfer tax that the seller normally pays, that would be for you to decide. The most important thing is, is this person giving you a good deal on this? If you cannot obtain a loan some other way, it may be something you want to do. If you can qualify, then you would want to make sure that his offer is competitive.
0 votes Thank Flag Link Sat Aug 29, 2009
You should seek the advice of a Real Estate Attorney.
0 votes Thank Flag Link Sat Aug 29, 2009
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