Author Topic: How much will you save purchasing a home privately?  (Read 2492 times)

Marko34

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How much will you save purchasing a home privately?
« on: May 10, 2015, 01:13:34 PM »
Is there a standard percent or rule of thumb say per 100k value of home that you will save buying from someone directly?  My parents are near retirement age and are thinking about selling, and I am thinking of buying their home as a first real estate investment and long term rental as side income.  If I were to buy it directly, yet still mortgage it, does the savings from realty fees make this an even better investment.  On top of probably getting a sweeter deal to begin with.  I would love my first home investment to be a foreclosure, but this also sounds like it could be a great opportunity as well.

Thanks for the future feedback!!

KungfuRabbit

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Re: How much will you save purchasing a home privately?
« Reply #1 on: May 10, 2015, 04:32:04 PM »
if they went fair market value you would simply save realtor fees, which tend to be 5-6%.  So on the simplest terms if they sold to you at fair market value, but chopped out the realtor fee portion, you'd save about 5%.  if they sell below fair market value (hence your "sweet deal") then throw that on top of it. 

zephyr911

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Re: How much will you save purchasing a home privately?
« Reply #2 on: May 11, 2015, 10:00:47 AM »
Is there a standard percent or rule of thumb say per 100k value of home that you will save buying from someone directly?  My parents are near retirement age and are thinking about selling, and I am thinking of buying their home as a first real estate investment and long term rental as side income.  If I were to buy it directly, yet still mortgage it, does the savings from realty fees make this an even better investment.  On top of probably getting a sweeter deal to begin with.  I would love my first home investment to be a foreclosure, but this also sounds like it could be a great opportunity as well.

Thanks for the future feedback!!
Alabama Realtor here.
The main thing we do is advocate for our clients' interests and make sure they get the best deal possible for their needs. You probably don't need that sort of help for a family deal.
We also help manage expectations and help clients find all the other professional services they need, which you can probably handle on your own if you take your time, research, get references, and interview some prospects.

Relative to market value, what kind of a deal are you getting? How confident are you in that assessment? Are you familiar with the home and its condition, and do you have a good sense of what repairs or updates it might need?

bob@bfrazier.com

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Re: How much will you save purchasing a home privately?
« Reply #3 on: May 11, 2015, 12:43:59 PM »
Is there a standard percent or rule of thumb say per 100k value of home that you will save buying from someone directly?  My parents are near retirement age and are thinking about selling, and I am thinking of buying their home as a first real estate investment and long term rental as side income.  If I were to buy it directly, yet still mortgage it, does the savings from realty fees make this an even better investment.  On top of probably getting a sweeter deal to begin with.  I would love my first home investment to be a foreclosure, but this also sounds like it could be a great opportunity as well.

Thanks for the future feedback!!

Former Realtor here too. It depends, for you, mostly on whether or not the base cost of the house itself is actually worth the money. The 5 or 6 % you save might by dwarfed by paying too much to begin with. In the long run 5 or 6% pales in comparison to the risk by you as a shopper to swayed by your personal favoritism of the seller into purchasing it for too much. Loss of objectivity, you see.

More importantly though, ultimately the choice of using a Realtor or not is the sellers prerogative. You steering your aging parents away from the opportunity of qualified representation could appear as an attempted grab at an undervalued house. Would you be willing to get three appraisals from local realtors and arrive at the price that way?

I would also avoid buying a relatives home as an investment, probably, as the sheer act of using it as an investment in de facto suggests it was undervalued (It could appear to outsiders that if there was money to be made on it as an investment why aren't the retiree's making it?).

None of this is to say that I don't favor FSBO sales - I certainly do - just not from relatives under the parameters you suggest.

Bob


NoNonsenseLandlord

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Re: How much will you save purchasing a home privately?
« Reply #4 on: May 12, 2015, 03:32:54 PM »
Many property flippers buy directly from the owners.  They find properties in many ways, bird doggers, direct marketing, bandit signs, etc.

If you are buying your parents home with a mortgage, DO NOT use a realtor.  Someone will make 6%+, and it will not be you or your parents.  Just put together a sale agreement, and go to a title company.  The mortgage company will need an appraisal, and go with that price.  They need to sell at Market.  If you went with a realtor, it would not change the appraisal.

If you are paying cash, make the transaction for 6% less.  No realtor means your parents will have the same take-home as a sale with a realtor.