question on FSBO, pay to take off market?

lsman

Diamond Member
Jul 10, 2001
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I have a question about a FSBO (for sale by owner).
The owner agree on my offer. He said give him:
1. attorney name, info
2. $1500 non-refundable check to the address
3. pre-approve mortage info

He said #2 is "quite standard" for this kind of real estate sale. For him to take it off from the listing. The non-refundable part smell fishy to me. Cause i never heard of that part. (my parants bought a FSBO and i really they do not remember they did any non-refundable check...., i put on a few offer for other MLS house and got the money $1000 back when the deal do not go through. )
So even there is a deposit, it should be to a attorney or others right?

I should find an attorney and talk it over, but i guess some of ATer know.
 

Sluggo

Lifer
Jun 12, 2000
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There is not going to be any kind of "standard" when FSBO. There are millions of FSBO and millions of ideas on what is "Standard."

I would ask for a non-refundable deposit, there are too many flaky people out there who will lead you on for weeks and not end up taking the deal. Meanwhile, you arent showing it or taking any offers since you thought it was sold.

Basically say the house is $100,000. You pay a 1000 deposit and put a closing date of August 15th, and the 1k comes off the purchase price. If for any reason YOU cant close the deal by then, you give up the 1000 or offer another 1k for another month, again non-refundable, but again it comes off the purchase price.
August 15 closing price is 99,000
September 15 closing price is 98,000

Now if for some reason the SELLER is unable to close by August 15, but still wants to do the deal with you, you COULD ask for 500 back at closing.
Say there was a August 22 closing date due to some fault of the seller, you COULD ask for a closing price of 98,500

Of course ALL of this should be spelled out in the contract, and reviewed by a competent and experienced real estate attorney.
 

DieselUV

Senior member
Dec 9, 1999
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Think about it. If you don't put some sort of collateral up, why would he hold the house for you when he has no garuntee that you're going to buy it. Say he holds it for you without any deposit and you fall through. He's wasted all that time for nothing. If you're going to put the deposit down, have everything in writing.
 

lsman

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Jul 10, 2001
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I have had several offers though realtor agency. Too bad, mostly outbid by others. All i have to do is write a $1000 check to a kind of trusting fund of agency and if offer do not go though, i got my check back.
If the offer accept by seller, the process go into attorney review (3-4 days). I can still back out from the deal and got my check back. (has to pay the attorney fee). After attorney review, we (seller and buyer) are bind to the contract, which usually say after one week or 2, bring some additional money to the table and at some point (2-3 months later) close the deal. The time is for security the mortage, title search etc.

The contract usually offer the only exit out are: structure problem or major problem during the home inspection, buyer can not get the mortage (may be buyer can not afford, sudden lose of job... or the house price is too high to brorrow the amount of money etc)

Even so, if its not my fault, i can got the deposit money back (less the attorney, mortage application fee or inspection fee...)

So i think "non-refundable" feel very fishy to me. Usually the deposit should go to a title company or escrow account or attorney etc. I don't think it will be to the owner. (to the address ??)
 

royaldank

Diamond Member
Apr 19, 2001
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We just sold my grandfather's house. We took a $500 non-refundable check from the buyers when they said they wanted. Granted, we offered to let them have a few days to make sure financing was there and all, but they handed us a check.

Your situation seems a bit more dangerous. You're talking about $1500 which is a pretty good chunk of change. The way I did it with my real estate agent last month was a $500 check down when I offered. In the offer contract, I had the $500 contingent on a home inspection and appraisal. If I pulled out for a reason other than those two, I lost my $500. If we just couldn't agree on the inspection and repairs, then I got the $500 back. However, in a case like this, you need time frames in place. I had 7 days for a home inspection to occur. After that, it was 7 days for the appraiser.

I'd talk to the guy. Unless he has other offers beating down his door, he might go for a contract of this nature. I'd just make sure to stress that you aren't pulling anything. You have quick timelines that will be followed to avoid keeping it off the market for too long should something be wrong. However, it's your good faith to buy the property. Either that or lower the non-refundable amout to something around $500.
 

arcas

Platinum Member
Apr 10, 2001
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He's generally correct about #2 though $1500 seems a bit much unless it's a very expensive house. It's called a "good faith deposit" and is applied to the price of the house at closing though I take issue with the term "non-refundable." Yes, they are generally held in a sort of escrow account until the closing date.

It all comes down to the contract you sign. In general, there will be a set of contingencies: home inspection, pest inspection, title search, etc. If one of these fails to pass muster and you can't come to an amicable solution, then the seller will be required to refund your deposit. Otherwise if the contingencies are met but you still want to back out of the deal, the seller can keep your deposit. Similarly, if the seller needs to back out for some reason, your deposit gets refunded. But it all comes down to your contract. For instance, the realtor association in my town has a standard contract which includes a clause that allows the seller, in the event of the buyer's death before closing, to sue the buyer's estate to follow through on the purchase (I'm not sure how this would work...no mortgage company is going to follow-through on issuing a mortgage to a dead person).

 

Christoph

Senior member
Jan 9, 2001
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When you say he agreed to your offer, was the offer and his agreement in writing? What did your offer say about contingencies, inspections, financing, etc?

I would not agree to non-refundable earnest money, particularly if the funds are going directly to the seller rather than into some sort of escrow. For all you know he may not even have clear title to the property.

Talk to your attorney before proceeding.
 

royaldank

Diamond Member
Apr 19, 2001
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I'll second what Arcas said.

For my grandfather's house, it was just something that happened. He was wanting to sell, and the neighbors wanted it. The $500 is applied to the sales price, but we are holding ourselves...not in an escrow or anything. It's not really a hot market, either, so it may be different where you live.

I think you need to get a standard contract drawn up by a lawyer. Include those items discussed here in a way that works as most realor transactions. Make contingencies on the house inspection, appraisal, termite clearance, and anything else common. I would image the homeowner would be ok with that as long as the contract specified time spans for this stuff to happen.

If you have one of your old contracts on the offers you made, look through there. Let an attorney draw up something close to that.

There's also buyers agents out there. Never dealt with one, but it's supposedly like a realtor but the buyer pays them. I guess they are supposed to handle everything. This kind of person might be able to negotiate a better situation. They might also come armed with standard contracts and things like that to make it more standard.
 

lsman

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Jul 10, 2001
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the house in mid 300,000
an 2000 build on an old house foundation.
The offer is only on price, no talk on the contingencies yet. no agreement on writing yet.

Its a nice house. only 2 problems. lack of garage (need new one, so it will be about 2-30000 ? guess) and only 1.5 bath. For a house of 4/5 bedrooms, 1.5 bath just do not cut. But the main bath can possible divide into 2. I think i will pay another visit today for final any contingencies and agreement , after i double check if the bathroom can split into 2. (another 10000, maybe) (i don't know what the owner was thinking to even conside one big bath upstair.)
 

royaldank

Diamond Member
Apr 19, 2001
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My buddy just bought a $275,000 house last year. He cut off part of the spare bedroom and installed a master bath there. Ended up running about $8000 for the entire project. He did interview several folks before he got someone that low. Others were around $10 - $15,000 for the new shower, vanity, and toilet. Nothing all that fancy at all. This was in Norfolk, so a somewhat higher cost of living than where I live (Tennessee).

BTW, for a $300,000 house, a $1500 up front fee doesn't seem too bad. As long as you got contingencies setup that are fair, I wouldn't have too much trouble doing that. Non-refundable isn't correct, though. Refundable only in extreme cases seems better.
 

lsman

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Jul 10, 2001
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At my current house, we added a new bathroom.I had a plumber friend help in the duct/water line work. My father and i finish the rest. Its not difficult to add a bathroom. But change an existing one will require more work.
The exisiting bathroom of that house actually look very good: jaccz bath and shower 2 vantities.... why he do not do 2 bath is unthinkable. Imagine 4 rooms of people get up in morning to query up for the bathroom.... late for school/work etc....
 

911paramedic

Diamond Member
Jan 7, 2002
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Pass on the non refundable part. What if it doesn't pass inspection? What if it burns to the ground while in escrow? What if...
 
Jan 18, 2001
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Earnsest money is standard. You agree to give the seller $x dollars as soon as the seller accepts your offer to buy house. The earnest money is applied to the balance at closing (300k - earnest money @ closing).

however, it is also standard to give only give that earnest money over to the seller after the seller has accepted your offer to buy. Your offer to buy will list the selling price, the amount of earnest money to be transferred immediately, AND any and all contingencies. For example, it would be foolish to let the guy have the deposit without an inspection contingency because if you get the house inspected, and the inspector finds a bunch of problems, YOU can't get your money back even if there are problems that weren't disclosed by the seller.

The offer to buy is a legal document, and should be considered carefully. Do not just give the guy a check to take the house off the market, unless he agrees to your offer to buy contract.
 

CPA

Elite Member
Nov 19, 2001
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The non-refundable check is not "standard". What's to cover you if the house fails inspection or you find too many things wrong after inspection and the owner does not submit to changes? The money should be a refundable escrow, at least until inspection is done. After that, if you back out, you should be out of the money.

BTW, anything he says is negotiable and if you don't like his "standards" go somewhere else. There is always a bigger, better deal out there.


Edit: YamahaXS basically hit the nail on the head.