Expert: liznarr - 3/18/2007

Question
We're in Pensacola, FL.  We are in the beginning process of buying a home from a neighbor without a realtor (we've agreed to buy, he's agreed to sell). We've agreed on price and conditions of sale.  Know we need a septic inspection. We're getting a new loan and a title company. What other things do we need to know/do. Should we get a "transaction agent"? What other info do you need to answer.  We own a home that we will not be selling or financing to buy this one. Help!

Answer
Hi Beverly,

Some of the basics you need to make sure are definitely included in your Contract for the purchase of your neighbor’s home are listed below.

The Contract should be contingent on all the following:

1.   Financing.  If your loan does not go through, you have no further obligation to the Seller, and all your earnest money will be refunded.  

I would also make sure that Contract language is included that the property must appraise for no less than the sales price.  This way, if you were to make a huge down payment and the lender would still be willing to make the loan in view of a huge DP with an appraisal of less than the sales price, you are protected with the appraisal clause in your Contract for “no less than sales price.”

2.   Earnest money should NOT be held by the Seller if you are not working with a Realtor.  Have whatever attorney or title company who will close for you to hold the earnest money.

3.   Home Inspection:  You should have a home inspection completed within ten business days of acceptance.  Ask around for recommendations, and make sure you use a qualified, experienced home inspector.

Language should be included that if the inspection reveals defects you were not previously aware of and you ask the Seller to correct and he/she refuses, the Contract can be voided and all earnest money will be immediately refunded to you.

In addition, should the inspection come back TOTALLY unacceptable to you, you have the right to void the Contract and, again, all earnest money will be immediately refunded to you.

Any repairs made by Seller as a result of home inspection repair request should be completed by LICENSED contractors, and you should have the right to reinspect all repairs prior to closing to make sure they were properly corrected.

4.   HVAC and Termite/Water Damage Letters:  Contract should be subject to CLEAR letters/inspections for these inspections.  If I were you, I would choose the inspecting companies, but Seller should agree to pay for any repairs to give a clear letter.  

Should there be any disagreement on the amount to be spent for the repairs, the Seller, of course, has the right to obtain his own estimates.  Contracts used in my area do not specify WHO has to make the repairs for these two letters, only that CLEAR letters must be obtained prior to closing and SELLER pays for repairs.  Again, if Seller should choose a repairing company different from your inspecting company, you should have the right to inspect repairs prior to closing to ensure they were properly made.

5.   I strongly recommend, even if your lender does not require it, that you have a new survey done to make sure that what you think you are purchasing is actually what you will be purchasing, and that there are no encroachments or projections shown by a survey.  If Seller has had a recent survey done by a reputable company, this would be acceptable in lieu of a new one and would save you this expense.

6.   On your septic letter, make sure that if any repairs are required, it is at Seller’s expense.

7.   If there is also a well at this property, you might want to stipulate that the well also be tested.  At a bare minimum, I would have the water tested to make sure it is safe for human consumption.

8.   If Florida requires a Seller to provide a completed Property Disclosure Form (even in the event of a sale by an owner with no Realtor involved), make sure you get this.  You can go to Florida’s Real Estate Commission site and check this out to see what is required.


I hope the above is helpful and points you in the right direction.

Good luck to you, and feel free to write again if you have additional questions.

Regards,
Elizabeth