How to Buy a Home From a Friend
Home buying can sometimes be a lengthy, drawn-out process. So, say a buyer is looking for a home and their friend just happens to be selling one that is right about what the buyer hope to get. What could be wrong with this scenario? Lots, if one isn't careful. With these tips, buyers can get the home of their dreams without losing friends or getting in trouble with the law.
Get the Details
Buyers know that any seller has an interest in persuading someone to buy the property, despite its flaws. With a friend or relative, they may be even more reticent to give you all the details about the condition of the home or the status of their mortgage. Make sure that everything concerning the mortgage is on the level. If they are late on payments or going into foreclosure, it could affect a buyer's ability to buy the home. Request a home inspection, even if the friend insists everything is in good condition. An objective look from a qualified third party may be all you need to confirm that both sides know everything that is going on.
Set Firm Expectations
As a friend, many individuals tend to gloss over a person’s foibles and mistakes because they like the person anyway. However, this should not extend to the purchase of their home. Don’t let a fear of conflict push you into buying a home that is not suitable for your needs. If the buyer has been to the home many times, they should ask someone to come along when scoping it out so that they can point out possible concerns that are no longer apparent to the accustomed eye. If a thorough view of the home or the home inspection yields unsatisfactory results, make this clear as soon as possible. It is better to back out early than to go half-heartedly through the process and change one's mind at the end.
Negotiate a Fair Deal
Just like one would with a seller they have never met, buyers need to get every aspect of the purchase contract in writing when buying from friends. Anything that is said verbally can only hold so much water once a real estate agent or lender is involved. Realize that anything said in haste may turn out to be impractical, if not impossible. Your friend may have offered you an excellent deal on the sale price that did not take into consideration the size of the mortgage. They may say they will take care of all the repairs until a huge bill results from the home inspection. Negotiating a fair deal for both parties is also the best way to avoid triggering an audit of the transaction by government organizations, as well.
Keep Transactions Above Table
From an outsider perspective, the biggest problem with buying a home from a friend is that someone might actually break the law in the process. If a lender even thinks that mortgage fraud might be involved in the transaction, it could grind the sale to a halt and bring one or both parties under heavy scrutiny. If buying the home with an FHA loan, complete an Identity of Interest Certification Form. In a short sale scenario, buyers need to fill out an “arm’s length” affidavit to certify that you are not trying to cheat the lienholders of their rightful due.
Buying a home from a friend may be easier than a long search for another home, but you have to keep your wits about you. Using these tips, you can reduce conflict and secure a fair deal for everyone.
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