In The Beginning…
So you have decided to sell your home without the help of a real estate professional. Many successful for sale by owner’s close on their home and receive funds from the buyer every day. However, many for sale by owner’s go from excited that they have their property “under contract,” to frustrated that they are now back to the basics with the for sale sign on the corner of the street. How could this happen? The buyer is going to be the person that gives you the money for your home! Anyone can submit an offer to purchase your home, but not everyone can actually afford it. Your home is a very significant asset; do not give any leeway with any of these buyers:
- I’m the buyer that showed up in the nick of time (just before you were going to call a real estate agent to list your home) and wrote you a very strong offer.
- You’re my relative Mr. Seller, you know I really love your home…I will close on it in 30 days, I promise!
- Don’t worry about a thing Mr. Seller; my real estate agent will take care of all the details involved.
This list goes on and on, but the point is that you must heavily screen any potential buyer that might sign a legally binding contract.
Get to Know Your Buyer
This is an absolute must. The more familiar you and your buyer are with each other, the more information your buyer will be willing to give you. You should ask questions like, where are you from, how long have you been living in this area, do you currently rent or own your own home, is your home on the market right now, what is your motivation for moving, where do you work, how long have you worked there, is this your first time buying a home? Some of these questions will give you a better feel about the potential buyer and may even give you some insight into how important this particular home is to them.
When the Buyer Writes the Offer
Usually, the buyer will go to consult an attorney to help them strike up the offer. In any case, when the buyer brings you the offer, it is nothing more than a written bid to buy your home. This offer is not legally binding until there has been a “meeting of the minds” and the signatures of all parties to the transaction are signed/initialed on the offer. At this point, you have gone too far to fast. We need to back up a bit and demand some information from the buyer. Any piece of solid (usually written out on paper) evidence that supports the buyer’s comments and ability to go through with the sale is acceptable. If the buyer says no and won’t give you this information, then they are not really ready to buy your home and you should do some serious thinking about accepting an offer from a buyer like this. Some common documents to ask for are:
- A bank statement signed by the bank manager (this is the buyer’s personal bank, not the lending institution).
- The pre-approval letter from the lender (be cautious, lenders are different from mortgage brokers)
- Verification of employment (a pay stub or something similar)
- The buyers current address (if not on any of the above paperwork)
- A certified or personal check for an earnest money deposit ($500 per every $100,000 is a good rule of thumb to go by)
Now that you have all of this information from the buyer, it is time to make some phone calls. You should call the employer and ask them how long the buyer has been working with them and weather or not he/she is reliable. You may not have to worry about closing costs nearly as much as your buyer will, but this is the reason to obtain the bank statement. It is standard to estimate about 3.5%-4.5% of the final sales price for the buyers closing costs. This would mean that on a $200,000 sale, the buyer would need to bring roughly $9,000 to the closing table (check the bank statement for savings and checking amounts). The next issue that must be dealt with is a phone call to the lender (whose number will be on the pre-approval letter). Wait a minute, what is the difference between a lender and a broker?
A mortgage broker is a “middle man” between the buyer and the actual lender. Brokers will shop for the lowest rates from other competitive lenders and then they will add in their own fees, on top of the lenders fees. When you are attempting to sell your home, you will want to make sure that your buyer is dealing with a lender or a well reputable mortgage broker.
Now that we know the difference between a lender and a broker, we need to call them. Ask the lender/broker if they will be able to close the deal within the time limit specified in the contract (try to get a copy of the contract to the lender as soon as possible). As always, try to establish a good talking relationship with this person, they will be the one to inform you about the progress or possible upcoming problems.
The Communication Process
Of course, there are many other hurdles to overcome with the sale of your current home. Please browse the rest of this website for a better understanding about this process. And remember, nothing closes deals faster than good communication.