Buying a home is an exciting milestone for anyone, but the home buying process can be challenging to navigate. Should you work with a realtor? An independent seller? Rent to own? What about buying a home from a friend?
There’s a lot of houses for sale in Nashville currently, but your dream home may be the one you’ve known along. If your friend has the perfect house and they’re looking to sell it, don’t automatically jump without having all the right information first.
Buying a home from a friend can be a good thing, or a source of frustration. It is no different than buying from a seller you’ve never met–the process is still largely the same. You may avoid closing costs and be more likely to buy the home for your ideal price, with less negotiating involved. Sounds like a dream come true, right?
Before you go into things guns a blazin’, there are some things to remember before you buy a home from a friend or family member to save trouble in the future.
Buying from a Family Member or Friend – What to Know
The biggest mistake that people make when deciding to purchase a home from a friend or family member is skipping important steps in the home buying process. To avoid future problems, follow a few simple steps.
- Step 1: Meet with your friend first
Communication is key! This helps ensure that everyone is on the same page with the same expectations. Discuss the transaction in real terms and get any questions out of the way. Be sure to make sure they are current on all mortgage payments and taxes to steer clear of any legal woes.
- Step 2: Get an independent appraisal
This will give a real value for the home that is not over inflated by the seller. Having a real idea of the value will prevent over or under paying, protecting both buyer and seller. It was also let you know whether or not you can afford to purchase the home in the first place.
- Step 3: Don’t skip the inspection
It doesn’t matter how long you’ve known the person or how many times you’ve been in their home–get the inspection. This will alert you to any potential problems that need to be addressed and prevent hard feelings if a problem does arise.
- Step 4: Set pricing upfront
Buying from a friend may make you feel obligated to pay more, or, conversely, you may expect to pay less because you know them. Setting a firm price you’d like to pay and sticking to it will appropriately set expectations for all parties involved.
- Step 5: Get a contract
You may feel a handshake with a relative is all you need to seal every deal, but protect yourself by signing a contract. A legally binding contract cannot be changed–it’s better to be safe than sorry.
So, Is Buying A Home From A Friend Worth The Risk?
When buying a home from a loved one or trusted friend, treat the process the same way you’d treat it buying from a stranger.
Putting parameters in place may seem unnecessary, but they are almost more so in this case. Keep your relationships in tact and protect yourself legally.