Aug 6th, 2011, 02:46 PM
So what's everyone's take on buying a property without a agent? This will be my first home and I am kind of worry... but the advantages is definitely there! It seems like a great deal in terms of price.
What are somethings to watch out for? Anyone have a list?
Secondly, the seller is offering to resume there mortgage without paying them anything! Is fixed at 5.45% with 2 years till mortgage renewal. If I take over his mortgage, I will save $18K! Which is a lot as the asking price of the house is $200K. I figure that with todays fix rate at 3.89% vs the 5.45%, I pay a extra $140 per month! But this will last for only two years. Plus with renewal, the seller claim that I do not have to put a down payment!
Please comment, thx!
Aug 7th, 2011, 10:30 AM
It appears to me that you are being given some terrible advice by the seller whose only purpose seems to be to take advantage of you to further their own sale. Meanwhile the seller obviously doesn't realize that upon closing this deal is likely to fall through.
Do yourself a favour before you put in an offer and speak to a lawyer first, you will need one to close the deal anyway or at least be sure to place within the offer a condition that the sale is subject to the approval of the assumption of the mortgage and another that makes it subject to the sole and absolute discretion of your lawyer.
The problem you face is that while the seller's mortgage agreement may allow for it to be assumed, the mortgage company will have to approve of you assuming it which is highly doubtful without a downpayment. Secondly, even if you manage to be approved or the seller takes back a second mortgage to get around this, you will be faced with the same issue upon renewal. Thirdly, if the mortgage is at a rate lower than that which is currently offered, the seller will be required to pay a penalty and in any case someone will be required to pay the transfer fees etc., ensure within the offer that it is expressly the responsibility of the seller.
Aug 7th, 2011, 06:34 PM
Sites like comfree avoid the high commission rate that real estate brokers charge.
That will save the seller a huge amount of money, about 5% x $200,000 = $10,000
As they buyer, you don't pay commissions, so there's not much advantage to you at all.
Unless of course the seller has dropped his price to give you some of the $10,000 saving.
I'm not sure where the $18,000 saving you talk about comes in.
It's possible to use comfree if you really know what you are doing with real estate, but it sounds like you know very very little.
It sounds like you are trying to buy a house with no downpayment, which is totally insane.
The lender will want to qualify you and make sure they are not overextending credit based on you and based on the security (the value of the house and what is currently owed to the bank)
Even if the lender lets you assume the mortgage, there is a regulation that you cannot borrow more than 80% of the valule.
So in 2 years, if the house is worth $200,000, the maximum mortgage amount will be 80% x 200,000 = $160,000
If the current mortgage is $190,000 you will need to come up with $30,000 or lose your house.
Worse, if the housing market drops - which it will - and the house is only worth $150,000, the maximum mortgage will be 80% x 150,000 = $120,000
You will have to pay the difference between the 190,000 owed and the new 120,000 borrowing amount = $70,000
I'm sure you won't have 70,000 in cash on hand in two years so goodbye house, hello bankruptcy.
Yes real estate commissions are ridiculously high and some agents are useless. But in this case, it sounds like you are doing something very risky with no knowledge. I think for your first home you better find a good agent. And even smarter might be to rent for a few years and save your cash until you have at least 25% or more of the home price. I think you will be much better off financially.