Thursday, July 9, 2020

Eagle Butte
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Buying a home without a real estate agent

Floyd Braun

Greetings everyone, I hope all is well with all of you. In the past few weeks I have seen an increasing number of homes listed for sale on local online garage sale sites. I would like to share some basic tips on buying a home without a licensed agent, as most of these listings are for sale by owner. Some of these owners may have agents but most often do not openly listed that information.

First I will start with two of my own experiences in buying and selling real estate.

My first experience was when I was just 19 years old. I was offered to buy a home from a family friend on a seller contract with no bank note. It was an old home built in 1880, it was livable but way more than I bargained for. After just one year, I opted to sell the home since I was unable to secure a bank note for a remodel due to city zoning requirements. I was lucky and the person I purchased the home from bought it back. It was a learning experience for sure and I was fortunate enough to walk away debt free.

My second purchase was a piece of land that I hoped to build on one day. This land was bought through a realtor and was a good decision. Life situations changed over a couple years and I hired a realtor to sell the land. I was able to sell and with that came a new experience- taxes. If you do not reinvest your profit on real estate within three months, the government hits you with capital gains tax. I did not lose anything but giving the feds 33 percent of what I made left me with a bad taste in my mouth for land and home ownership for a while.

This leads me to the next part of real estate- there is no easy way to make money in it. There are lots of reality shows that make it look easy but it’s not. The average person, like myself, rarely has the capital and time to make this work as a source of income.

Buying a home for your residence is a smart move, but remember it’s a long term investment, often taking 15 to 30 years to pay off. Over this time, you will see large fluctuations in value in today’s markets. Overall, if all goes well, you will be living in your best retirement plan.

Checklist for buying real estate without an agent

1. Know how much home you can afford after your out-of-pocket cost that, with an agent, often times can be rolled into your loan.

These cost include, at minimum, gas to go view listings.

Home inspection cost on average is $300.00, plus mileage one way.

Taxes in a private sale taxes may have to be paid out of pocket. The property tax rate in South Dakota is 1.32% plus any city or county taxes. It is imperative to research more about what taxes may apply to you as an property owner and potential buyer.

Title search cost is completed to ensure no one can claim your land and any debt tied to it. This expenditure may be included in legal fees which can cost about $200.00.

Loan origination fees: this fee depends on the lender. It is important to discuss this before you buy.

Seller agent fees can and should be negotiated. Do not pay more than 3.5 percent, in my opinion.

Lawyer fees can range between $500.00 to $1500.00.

Appraisal fees can start about $300.00.

Home disclosures are usually figured as part of legal fees.

Liens varies on property. I would avoid homes with any liens.

This is the short list of the most common costs associated with purchasing a home. It is important to learn about all these fees as they will add up quickly.

2. View homes you can afford. There is no use wasting time looking at what you can’t buy.

3. Know your values as far as closing costs by comparing similar property sales.

4. If a seller is not willing to do the above listed items in the sale agreement, run away. It could be a scam or just a situation that is not worth pursuing.

5. Take time to check out the area and neighborhood. Ask the area governing body what the plans for the area are.

Remember, this is a long-term decision you are making and finding what you want and what you can afford. Doing things the right way takes time and effort. Give yourself at least 30 days to choose a home and then figure 30 to 90 days to close on the sale without an agent.

This checklist is not the full and complete list for every situation, but is meant to help to get you thinking about how a legitimate sale takes place.