First thing, let’s hit real quick on is, when is it a good time to sell for sale by owner versus a good time to use a real estate agent or Realtor. If a house is in need of a lot of repairs, like maybe Jacee’s drawing with the bad roof, it can eliminate a lot of retail buyers from the equation. Major repairs with issues such as roofing, electric, plumbing, or a/c, can make it so that a house is no longer financeable for retail buyers. If your house won’t pass a four-point inspection for insurance, and you don’t have the funds to fix it up before selling, then in this case it may be your best bet to go for sale by owner.
Some more reasons to sell for sale by owner would be due to things such as specialty situations. Specialty situations could be things where a house has a lot of code violations, is currently going through probate, or if you recently fell into foreclosure. Oftentimes, a Realtor who works with retail clients, isn’t able to navigate these issues as they are very technical and can require very specific experience and connections to handle them. When it comes to a house that is in foreclosure, putting it on the market and waiting for a buyer can put you at risk of losing the house to foreclosure before you are able to sell it.
Next, let’s talk about the procedures when selling a house. The first thing to know about would be the inspection process. Most buyers are going to want to inspect the house after it is under contract. They will typically hire a licensed home inspector and get a four point inspection. If your buyer is paying cash or obtaining private financing, they are usually far more flexible and oftentimes will inspect houses on their own or they may bring contractors through to help with and quote the price of different repairs.
After the inspection, the price and terms really shouldn’t change except for specific scenarios. If your house needs a roof and that comes up on inspection but you disclosed that prior, it won’t come as a surprise and shouldn’t change anything with the contract. There are times however when we have discovered structural issues with rafters or significant termite damage or hidden mold underneath the roof. These things can add thousands of dollars in repairs and are real reasons why a buyer might come back and want a discount after the inspection. Our advice would be simply to disclose any problems ahead of time to avoid an uncomfortable circumstance later on.
The other things to be aware of would be things such as a survey and an appraisal. If your buyer is going to be getting a mortgage, they will just about always need a survey and an appraisal. The survey is pretty simple. It just outlines the bounds of the property line and for most people this isn’t a big deal whatsoever. If this is an issue, 99% of the time, you already know it before the survey is done and you probably already know what needs to get done to fix the problem.
The appraisal would be a third-party opinion of what your home is worth so that the lender know they are not loaning too much money against the house. If your house were to appraise for less than the contracted price, a buyer may not be able to obtain funding to purchase it. For most cash buyers, appraisals aren’t needed unless they are going to get a hard money loan, which is really more of an institutional loan.
The last thing that you want to have happen is for your buyer to fail to close on the house last minute. Qualifying your buyer ahead of time is the biggest thing you can do to prevent this from happening. To do this, make sure that your buyer is pre-approved for a loan, not pre-qualified, or has proof of funds. A buyer who is pre-qualified shouldn’t be mistaken for a buyer who is pre-approved. A pre-qualified buyer typically has submitted very minor information to find out how much of a loan they can probably get to buy a house. A pre-approved buyer has actually had they credit pulled and their information verified. They will have a letter from a specific institution stating how much money they are officially approved for to buy a house.
If you are working with a cash buyer, ask for a proof of funds. What you will find out from most cash buyers when you bring the topic up, is that most cash buyers aren’t cash buyers at all. Most people who offer to buy your house cash are usually wholesalers. Basically these are people who attempt to get your house under contract and then they go mark up the price and try to find a real investor like us to buy it. Wholesalers can be beneficial for some sellers, but you have to realize that there are many times when wholesalers are not able to find a real buyer and they will back out of the contract last minute.
If you are thinking of selling your house by owner, hopefully this video gives you a good outline of what it might look like as well as some key points to be aware of. When you are ready to sell your home, give us a call or fill out the form on our website. We would love to work with you.