Check out these seven points to seriously consider when selling or purchasing a home that’s off the market.
It happens all the time. Jack hears that a friend of a friend, Diane, is seeking to purchase a place. Turns out, Jack is seeking to sell his home. Or a renter in someone’s home informs the owners they’d love to obtain the property, should the homeowners ever decide to sell.
And so it begins the discussion between the prospective buyer and seller of a home that’s not even on the real estate market. How can they do the transaction? What steps are needed?
There are pros and cons for the two parties and major considerations before either puts a deal together. Here are seven questions to ask yourself about selling or purchasing a home that’s off the market.
How Serious Are Both Parties?
Buyers and sellers like the idea of an off-market deal. Nevertheless, when it comes down to it, are both parties really on the same page? Has the buyer been on the market for a short time? Are they really ready to buy? Is the seller really ready to sell? Are their numbers within the same price range, or is one way off?
Often, an unrealistic seller may toss out a number that’s way higher than what the market supports. On the other hand, an uneducated buyer will throw out a lowball offer if they haven’t been in the game long enough to understand the value.
How To Decide On Price Point
Both parties have a serious commitment and are ready to do a deal. Great; they have to agree on the best way to make it happen.
Among other things, a price has to be established. If both parties are within a similar price range, but can’t agree to a specific number, then there are a few options available.
One option is to have both parties get two separate appraisers to come out and do formal appraisals of the property. The buyer and the seller would each pay for their respective reports to get done. In the end they can average the prices on the two and decide on that number. Many can argue that the appraised value (the amount the appraiser comes up with) is always lower than the market value (the amount an able and willing buyer/seller is willing to pay on the open market).
The second and most successful option is to hire a real estate agent. This agent can pull sold comps in the area and come up with a pretty accurate value on what the property would sell for on the open market based on market data.
Can You Really Save On The Real Estate Commission?
Many sellers find the opportunity to market off the market as a chance to save the agent’s standard 6 percent commission. First, both parties often bring a real estate agent to the transaction at some point. Second, the buyer may want the 6 percent commission deducted from the purchase price, however, most sellers would not see it that way. For example, the seller may want $500,000. If they split the difference and the home sells for $485,000 then they both win.
What ultimately happens is that the market decides the purchase price. If stock is reduced and the buyer wants to make the deal work, then they may pass the savings to the seller. Or if it is a sluggish market and there’s a lot of inventory, the seller may pass on the savings to the buyer.
Are There Any Risks Involved?
The buyer and seller will likely have that little voice in their head saying, “What would this sell for if it were on the market?” Buyers may wonder if they’re paying a great deal, while sellers might worry they could get more money on the open market. This is the risk parties take within an off-market deal. Both the buyer and seller need to feel comfortable before they sign the contract. This is a big reason to get a real estate agent involved that can advise and consult on the specifics of the transaction to benefit the party he represents.
What Is The Real Estate Agent’s Role?
With so much at stake financially and emotionally, many buyers and sellers ultimately don’t want to go it totally alone. Their fear or uncertainty will outweigh any potential savings.
Most good real estate agents will advise on their opinion of value based on market data. A great real estate agent might be responsible for quartering backing the entire deal from signing to close to include the monitoring and review of all inspections, appraisals, disclosure reviews, vetting buyers and their ability to perform along with tactical negotiations of the purchase contract. They will also cover any and all costs of marketing, open houses or showings of the property.
Should You Involve An Attorney Or Escrow Company?
There are some situations where the buyer has a specific home they want to buy and a fair price that is obvious to both parties. Maybe there is a one-of-a-kind home they’ve been occupying in their neighborhood for years, and they know the value because they live nearby. If the prices are right for both parties, and there aren’t any concerns as it relates to the disclosures or inspections they it looks like you may have a for sure close. In this case, the most experienced Real Estate professionals will always recommend their Escrow company to service the transaction. Some may seek the services of an attorney or an escrow company to facilitate the deal for a flat or hourly rate.
Covering The Bases
If you opt not to go the formal listing and sales path, be sure to cover your bases and protect yourself legally and financially. If something does not seem right or you’re uncertain, bring in the professionals. Going at it alone may have its upsides, but the downsides could outweigh them in the end. Do not be afraid to ask your real estate agent for advice.