"The majority of residential transactions are very simple: 99 percent can be done without a broker. And the 1 percent screwed up--the broker couldn't have prevented it."* The foregoing statement is significant as it was made by a person with the credentials and background to know what he is talking about: William A. Black, a lawyer for the Wisconsin Department of Regulation & Licensing. He further states that he does not think consumers who bypass real estate agents are missing much. That said, let's move on to the basics of buying from an owner.
When you find a home you're interested in, first read over the Seller's Disclosure form. If the owner does not have them displayed, ask for it. It lists whatever knowledge the owner may have of any defects in the house. He should also give you the standard Lead Disclosure form. If the home was built before 1978 the owner should also give you the federal governments' lead brochure (which he can download from the fsbomichigan website).
To make an offer, then, the FsboMichigan client/owner will have a standard legal Offer-to-Purchase form for your convenience. Fill it out, with any contingencies you may want to include—like financing and/or financing at a particular percentage rate; a home inspection; having to sell another house; date of occupancy, and so on. (Some buyers and sellers actually sit down to fill this out together, discussing and negotiating as they go.)
Be sure to put the date of expiration on your offer—the seller must return it to you by that date or the offer is null and void. You will need to tender a deposit—often called "earnest money" or "good faith money—with the offer. It is often $1000, usually no less, but it can be any amount of money you and the owner agree upon. You will only have this money returned if some of the legal conditions as stated in the offer are not met. Otherwise, the amount tendered will be deducted from what you owe at closing. Be sure to get a receipt for this money.
The owner may make a counter offer, changing the price or another condition of the original offer. This will have another date on it by which time it must be returned by the buyer. The counter offer means that the original offer is null and void; so, until the buyer signs and returns the counter offer, legally there is no offer. And, the seller/buyer may choose to counter again.
When the offer has been accepted, careful attention must be paid by both buyer and seller to meeting the contingencies put in the offer, as each has a deadline. The buyer/seller, as the case may be, should provide the other with the appropriate legal paperwork that certifies the particular contingency for which that party is responsible, has been met. If there is any problem meeting any contingency by the deadline, the buyer/seller can easily re-negotiate deadlines, contingencies, or whatever is involved, that is agreeable to them both.
Consult the FsboMichigan Service Directory in your region for mortgage companies, title companies, inspectors, attorneys, and appraisers for expert help and advice to help you move forward to a successful closing. (They were chosen to be on there because they want to go the extra mile working with fsbo buyers and sellers.) Usually the buyer is responsible for arranging and paying for the inspection; while the seller is responsible for arranging for title insurance and final utility readings.
While the seller usually arranges the closing—and may choose to use one of the FsboMichigan Service Directory title companies with closing fees of between only $250 and $350 to handle the whole closing—the buyer's mortgage company may wish to handle all of this.
And, either party may choose to have an attorney look over the offer and/or handle the closing.
Whichever way is chosen, our experience is that buying from an owner is pleasant, informative, and very satisfying. And fsbo buyers are glad they went that way.