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The real estate market is large enough and has enough players in it for some variations from the norm to exist. Among them are private sales, Power of Sale listings, "fixer-uppers," and Rent To Own, Buy with Nothing Down, or other departures from the usual terms of purchase.
All of them have their good and bad points and it seems useful to run through them, if only to help you determine whether or not they should be considered when you're looking for property of one kind or another.
So then ...
FSBO's
There are two main reasons why people put their property on the market privately. Either they think they can find a buyer on their own and thereby avoid the need to pay a commission. Or they've already had it listed with a realtor only to find it didn't result in any (acceptable) offers, and they therefore think they can do a better job themselves. In the first case, they stand some chance of getting a sale if their asking price is what it ought to be. In the second, it's quite possible that their asking price was too high and, if it's reduced by the amount of commission, it may then attract a buyer.
However, private sellers all too often have their own idea of what their place is worth and have little interest in hearing anything to the contrary. Even so, the reality is that there's a serious interest in getting the place sold and a reasonable offer may well be accepted.
In any case, FSBO's are worth considering if the price is right. Indeed, they may even be priced below their market value if the owners haven't done any proper comparison checking.
There are two main reasons why people put their property on the market privately. Either they think they can find a buyer on their own and thereby avoid the need to pay a commission. Or they've already had it listed with a realtor only to find it didn't result in any (acceptable) offers, and they therefore think they can do a better job themselves. In the first case, they stand some chance of getting a sale if their asking price is what it ought to be. In the second, it's quite possible that their asking price was too high and, if it's reduced by the amount of commission, it may then attract a buyer.
However, private sellers all too often have their own idea of what their place is worth and have little interest in hearing anything to the contrary. Even so, the reality is that there's a serious interest in getting the place sold and a reasonable offer may well be accepted.
In any case, FSBO's are worth considering if the price is right. Indeed, they may even be priced below their market value if the owners haven't done any proper comparison checking.
Power of Sale listings
These can certainly help you buy for less, but you do need both patience and the willingness to lose out to someone else. They aren't as common as they were a few years ago. Job losses and other financial setbacks are now much less frequent and the banks are more willing -- and able -- to help people get through whatever misfortunes befall them. Nevertheless, POS listings still come onto the market, although the commercial and industrial sectors see a greater number of them than the residential field does.
The problem lies with the time it can take before the asking price gets reduced to what you want it to be. Invariably, the lender starts with a figure that's almost no different from ordinary listings and then keeps shaving it until it produces a sale. Thus, if you want to get the property for say 25% less than the market, someone else may beat you to it by making an offer when the price has been reduced by only 10%. In turn, you need to recognize that you're buying a place "as is" and therefore have no redress if you're faced with unforeseen renovation or upgrading costs -- which, of course, means you can only blame yourself if you didn't take a good, hard look at what you were buying.
Fixer-uppers
In some cases, these fall into the Power of Sale category. In others, they're simply the result of deterioration that's beyond the owner's physical or financial ability to recover from it. Either way, though, they're priced below the market -- or at least ought to be.
As such, they undoubtedly offer an opportunity to acquire property that can be updated (and often upgraded as well) and result in a respectable increase in value. Buying and repairing them can also be a quite profitable investment exercise.
However, the necessary prerequisite is a buyer's ability either to do the work personally or to pay for having it done. Moreover, whether available under Power of Sale or not, fixer-uppers are much harder to find than they were when economic times were tight.
Rent to Own, etc.
The ability to pay rent -- not to mention a long history of having done so -- ought to enable people to become home owners, but, rightly or wrongly, the banks have never shown much willingness to agree with this thinking. Even worse, it's still far from easy for a buyer to obtain a mortgage once their "above market" rent instalments have accumulated to the equivalent of a downpayment. Furthermore, although some owners favoured the idea when they couldn't otherwise give their property away, it's rarely considered necessary in today's market. In effect, the chances of finding a rent-to-own property are now rather slim.
However, recent changes in mortgage plans now include provision for buying a house without a downpayment. Gifts from family members and friends can be counted and even some loans can be accepted to make up the difference between the mortgage amount and purchase price. All that's really required is the right income and a sufficiently good credit rating.
Thus, it's better to discuss the possibilities with a mortgage broker (but not a bank!) than to have hopes of finding a rent-to-own listing.
Lease (with option) to Buy
The commercial and industrial sectors are a decided exception to the absence of No Money Down opportunities. Buying an existing business or procuring premises for establishing or transferring one can quite often be delayed until a downpayment is accumulated or until parting with it makes financial sense. Such chances aren't too unusual and have in fact existed for some time, regardless of the economic situation.
They do, though, differ from residential transactions. There is seldom an "above market" lease payment and a downpayment will still be necessary against a mortgage when (or if) the time arrives to turn the lease into a purchase. However, they offer the two following benefits to the buyer (and, for that matter, to the seller):
a) The buyer is able to "test the waters" before deciding to purchase. If the property's location and facilities prove to be less than perfect, there is simply the expense involved in finding this out.
b) If everything is as the lessee hopes, the property will allow a deposit to be built up from running a business on the premises, which will also facilitate eventual arrangements for a mortgage.
Getting at the truth
You need to take a couple of factors into account in pursuing any of these possibilities or whatever variations of them that you happen to run across.
On the one hand, you should insist on a Comparative Market Analysis so that you know the true value of what you're being offered. Don't, in other words, believe what the seller or the relevant listing agent tells you. In all these special cases, the market is not tilted in your favour, no matter how it seems to be.
On the other hand, you need to have someone who's on your side and not the seller's when you're considering these departures from the norm. The true nature of them is frequently far from obvious and you need to make sure that you aren't in for some unexpected surprises.
All in all, you're perhaps involved in a war of nerves and can't afford to blink, but your best bet -- and I know you won't be surprised to hear me say it! -- is to work with a Buyer Agent who understands how to help you end up being a winner.
With my repeated thanks for letting me stay in touch with you this way. And also with hopes that Halloween will see you safe from goblins --and favoured with some left over candy.
Duncan Pollock, Real Estate Broker,
427 Gate Street, Niagara-on-the-Lake, Ontario, Canada L0S 1J0
Tel: 905-468-3154 Fax: 905-468-3812 Cellular: 905-704-9037
email: duncanpollock@sympatico.ca
Note: E-mail addressed changed as above on Nov 3 2007
website: http://www.duncanpollock.com
These can certainly help you buy for less, but you do need both patience and the willingness to lose out to someone else. They aren't as common as they were a few years ago. Job losses and other financial setbacks are now much less frequent and the banks are more willing -- and able -- to help people get through whatever misfortunes befall them. Nevertheless, POS listings still come onto the market, although the commercial and industrial sectors see a greater number of them than the residential field does.
The problem lies with the time it can take before the asking price gets reduced to what you want it to be. Invariably, the lender starts with a figure that's almost no different from ordinary listings and then keeps shaving it until it produces a sale. Thus, if you want to get the property for say 25% less than the market, someone else may beat you to it by making an offer when the price has been reduced by only 10%. In turn, you need to recognize that you're buying a place "as is" and therefore have no redress if you're faced with unforeseen renovation or upgrading costs -- which, of course, means you can only blame yourself if you didn't take a good, hard look at what you were buying.
Fixer-uppers
In some cases, these fall into the Power of Sale category. In others, they're simply the result of deterioration that's beyond the owner's physical or financial ability to recover from it. Either way, though, they're priced below the market -- or at least ought to be.
As such, they undoubtedly offer an opportunity to acquire property that can be updated (and often upgraded as well) and result in a respectable increase in value. Buying and repairing them can also be a quite profitable investment exercise.
However, the necessary prerequisite is a buyer's ability either to do the work personally or to pay for having it done. Moreover, whether available under Power of Sale or not, fixer-uppers are much harder to find than they were when economic times were tight.
Rent to Own, etc.
The ability to pay rent -- not to mention a long history of having done so -- ought to enable people to become home owners, but, rightly or wrongly, the banks have never shown much willingness to agree with this thinking. Even worse, it's still far from easy for a buyer to obtain a mortgage once their "above market" rent instalments have accumulated to the equivalent of a downpayment. Furthermore, although some owners favoured the idea when they couldn't otherwise give their property away, it's rarely considered necessary in today's market. In effect, the chances of finding a rent-to-own property are now rather slim.
However, recent changes in mortgage plans now include provision for buying a house without a downpayment. Gifts from family members and friends can be counted and even some loans can be accepted to make up the difference between the mortgage amount and purchase price. All that's really required is the right income and a sufficiently good credit rating.
Thus, it's better to discuss the possibilities with a mortgage broker (but not a bank!) than to have hopes of finding a rent-to-own listing.
Lease (with option) to Buy
The commercial and industrial sectors are a decided exception to the absence of No Money Down opportunities. Buying an existing business or procuring premises for establishing or transferring one can quite often be delayed until a downpayment is accumulated or until parting with it makes financial sense. Such chances aren't too unusual and have in fact existed for some time, regardless of the economic situation.
They do, though, differ from residential transactions. There is seldom an "above market" lease payment and a downpayment will still be necessary against a mortgage when (or if) the time arrives to turn the lease into a purchase. However, they offer the two following benefits to the buyer (and, for that matter, to the seller):
a) The buyer is able to "test the waters" before deciding to purchase. If the property's location and facilities prove to be less than perfect, there is simply the expense involved in finding this out.
b) If everything is as the lessee hopes, the property will allow a deposit to be built up from running a business on the premises, which will also facilitate eventual arrangements for a mortgage.
Getting at the truth
You need to take a couple of factors into account in pursuing any of these possibilities or whatever variations of them that you happen to run across.
On the one hand, you should insist on a Comparative Market Analysis so that you know the true value of what you're being offered. Don't, in other words, believe what the seller or the relevant listing agent tells you. In all these special cases, the market is not tilted in your favour, no matter how it seems to be.
On the other hand, you need to have someone who's on your side and not the seller's when you're considering these departures from the norm. The true nature of them is frequently far from obvious and you need to make sure that you aren't in for some unexpected surprises.
All in all, you're perhaps involved in a war of nerves and can't afford to blink, but your best bet -- and I know you won't be surprised to hear me say it! -- is to work with a Buyer Agent who understands how to help you end up being a winner.
With my repeated thanks for letting me stay in touch with you this way. And also with hopes that Halloween will see you safe from goblins --and favoured with some left over candy.
Duncan Pollock, Real Estate Broker,
427 Gate Street, Niagara-on-the-Lake, Ontario, Canada L0S 1J0
Tel: 905-468-3154 Fax: 905-468-3812 Cellular: 905-704-9037
email: duncanpollock@sympatico.ca
Note: E-mail addressed changed as above on Nov 3 2007
website: http://www.duncanpollock.com