If he's not going to hire a Realtor, he should definitely hire a lawyer.

Sorry to use that "v" word, but one more person who doesn't understand the value of the services we provide....hopefully he'll get the advice he needs

JT,

Holding paper won`t accomplish much if the buyer defaults down the road.

I don`t consider this a victory for the FSBO~.

Heck, I have 3 homes of my own we`re looking to sell.

I get every Tom, Dick and Jojo looking for me to hold worthless paper.

I`m trying to sell my homes, not become JP Morgan.

Wow - that is sad - a lot of liability -  hiring a Realtor would have been a huge prevenative measure for issues like this.

He is seeking free advice from you as well!  Looking forward to reading the posts.. I need it. "For Sale By Owners" is not my strongest area.

"Got a buyer for my condo. They want me to hold the mortgage. Any advice?"

This is the big concern, Jeff.  Arizona has no usury laws but real estate loans are heavily regulated.  if he screws up TILA, it could cost him all the interest paid to him.

Jeff- He obviously sound intelligent to do this on his own. Im surprised he is asking for advice. Sounds like he has nothing to worry about, but what do I know im only a Realtor.

Often home sellers try to save fees and commissions by selling their own homes. National statistics indicate real estate professionals sell the vast majority of homes. Before this seller moves futher, out in uncharted waters, I'd recommend they consider the amount of time they will be investing to successfully sell the their home. They should take an honest inventory of their skills and abilities to cope with this highly technical and legal process.

The whole mortgage?  Sure, he should hold the paper...if he wants to get screwed.

He probably won't even run a credit check on the buyer!

Tina in Virginia

Parked :) 

One thing I would point out is that a Realtor would already have given him the answers to all of his questions, plus pros and cons, before he even got a contract.

Very cool looking blog Jeff! 

I think he should go to real estate school first, pass the state exam, learn about disclosures and legal documents, take a mortgage loan course, list and sell a few homes, and then sell his own by himself. 

Hi Jeff, Long time no see. Hope you are doing wonderfully well.  You have raised an interesting question and a challenge. You refer to the seller as an Intelligent, Techno Savvy homeowner. I guess he is intelligent because he seeks advice and Techno savvy because he is seeking the information electronically. While I can't contest the later, I certainly wonder why he would think that any skilled professional would risk their own reputation in giving him advice without knowing him, his needs , his home and what the circumstances are of the person he is currently entertaining as a prospective Buyer. In California, to act as an agent for a principal is to be the agent of the principal. It has nothing to do with whether or not you are compensated. Free advise is never free. When it is good, it is real gold and is worth its weight. When it is bad, it is fool's gold and worth exactly was paid for it.

He found a buyer, he found a place to give and recieve advice. The title company can provide the mortgage documents. I dont see an issue...Most real estate agent I know couldnt have done as well....Are there risks, sure, but the same risks would be there with an agent involved. Not every deal requires the help of an agent

From what I read his statement that he's Got a buyer sounds quite naive and premature.  Seems he has found the typical FSBO prospect that needs seller financing.  Does he even have a written offer to review?  Hope he's bight enough to see red flags...  

The first comment of 'get an Attorney' is the best.   The request to hold the mortgage is because the new buyer has no credit or poor credit and can't go through the financing process.  The Seller will end up with his original house and his original mortgage on top of what every he is trying to purchase in the near future.  And I can't imagine that he will be allowed to purchase his new residence without the 'successful sale' of his current residence....

Very poor business judgement on all levels.

This is not a "deal" and this is not a "buyer". When someone has a buyer they have a person ready, willing and ABLE to make a purchase. It is simple DNA (Desire, Need, Ability). This person may have a desire, quite possibly a need but NO ability.  If the seller does not receive their funds  because the buyer is not ABLE than it is not a sale. I would not even have my sellers entertain such nonsense. My best advice would be to RUN!!! If a bank is unwilling to lend to a buyer than the buyer is risky, in this market with all the financial problems out there why on earth is someone willing to put their hard earned money (home) on the line??

Jeff,  Not only what Dan stated, but he appears to have no idea about the credit worthiness of this 'buyer.'  Even giving this man advice is not a good idea.  He needs professionals to handle this.  I see a whole quagmire opening and red flags blazing.

Jeff, At this point this guy needs to seek the advice of a competent Attorney. He should also have a mortgage broker qualify the buyer. Since he is thinking about "holding paper" he should do his due diligence and check out the buyer. He needs to think like a Lender. If the buyer checks out and the attorney can handle the paper work then he does not need a REALTOR(R). Good for him. 

I would say he's off to a good start with the "Any advice?" question.... he's just asking the wrong folks.  Answering the very question, and the 1,000 others he hasn't asked yet and doesn't even know to ask, is exactly why he needs an agent. 

Finding a "buyer" is the easiest thing in the world... it's all about price.  Taking that buyer from contract to closing is where we earn our fee. 

Technologically savvy - sure  Intelligent - give me a break!

When the buyer defaults on the loan, is he ready to go throught the eviction and foreclosure process?  Maybe he can open his own REO department. 

Caveat emptor -"let the buyer beware."  In this case, it goes for the seller, as well.

The new buyer asked this seller to hold the paper for a reason. There is a 80% chance this new buyer will default on the current mortgage. Hopefully he has a great real estate attorney otherwise he is in for trouble. If he sees the light in time he will hire a qualified real estate professional.

Keep us posted on what he decides to do Jeff, thanks.

Eddy

I applaud Mr. Seller for his efforts (and success) in finding a Buyer without having to "raise the price and get a Realtor involved," but it seems to be that he doesn't have all the answers he needs or he wouldn't be asking for advice. Maybe you can ask him if he's willing to pay a flat rate fee or a percentage so that you can "handle all the details" for him...that way, you can earn his trust and if the deal goes south, you'll be first one in. Seems to me like he might have had a not-so-great relationship with an agent in the past...which we can all agree, can and do happen frequently.

When faced with a similar issue in the past, I offered a flat rate (which was really a modified commission) and was able to help the Seller AND the Buyer when they couldn't work out their contract.

If your feeling less than generous with that approach, you could always try "Lots of people file for divorce by themselves, but those who have a desire to protect their assets and want to minimize their liabilities often are more successful when they have professionals who are dealing with law and similar issues on a daily basis."

Or, how about, "I am sure you can purchase the parts and take an on-line course to learn how to change out the breaks in your car, Mr. Seller, but how willing would you be to drive it afterwards?"

Just a few ideas...hope they help!

In this market every buyer is looking to get the lowest price and without a Realtor the seller is going to pay the fee either in a lower price or pay us to manage the  transaction. Good luck I think he will need it.

So this guy is seeking free advice?  After he doesn't want to compensate a professional?  I'm sorry - but IMO ... let him figure it out.  I don't work for free.

Nice face lift on the blog...This guy is a certified idiot. Since he doesn't want to get a Realtor involved I wouldn't get involved. Sometimes it takes hard lessons to wake up. 

Are you kidding me?  This is not surprising, try hanging out on the Trulia board!  It's amazing the questions that people (buyers and sellers) ask.  Then we wonder why we're in a mortgage/foreclosure crisis.

Who's he asking?  Surely not a real estate practitioners. 

Lenn... you are correct. He was asking his followers on Twitter. I was not one of his followers at the time. I am now. I found these comments while doing some Twitter searches. 

Never ceases to amazing me how people with little to no experience buying or selling houses seem to  "wing it" as though they at Home Depot free seminar learning how to tile a bathroom floor. When your dealing with hundreds of thousands of dollars you'd think they would take it lil more seriously then posing some dumbass question on a friggin blog, preying to get the right answer. Just to save $10K?? Yet most people spend more time choosing a dog groomer then they do finding a professional to represent their biggest investment. Please help me understand this.

Let me understand this, you are not representing the sellers and they are asking you for advice? This owner has insinuated that homes sold by Realtors are overpriced. That shows you how little he/she already knows. I would not touch this one with a ten foot pole. My advice to the seller/s, don't reinvent the wheel, always deal with professionals.

Tom, I'm not a REALTOR® and they did not ask ME specifically for any advice.  

I'm asking hypothetically, What would you say to this home owner? Why should he get a REALTOR® now and not later? 

Jeff - I have often wanted to create a response to this whole For Sale By Owner Question and your blog inspired me to do so.  I think the #1 value we as REALTOR's bring to the table is our experience in handling many different real estate transactions over time.  I like to equate the idea of selling a house to the idea of building one.  Sure, you can build your own home.  You might even be good at a few things, but not all of them!  Same thing goes for selling a house.  Here's a blog I put together on The Top 10 things a For Sale By Owner Seller should consider when going it alone

I find it interesting he is asking the professionals he did not want in the first place.  I would ask the homeowner how he plans to protect his investment when he plays bank and carried the note?

Pam... he was not asking real estate professionals. He was asking his Twitter followers, who, so far as I can tell, are not real estate professionals. 

I'd tell the intelligent techno savvy seller that he is amazingly accurate and correct, providing he had his home priced several apples and oranges below what comparable homes sold for in the MLS!(The comps used from the MLS include the apples and oranges for the brokerage fee, so if this seller was truly intelligent, he knew his asking price needed to be lower than that of the comps (since his didn't include the brokerage fee).

He was so intelligent that he knew both he and the buyer couldn't save the same fee, that is why he had his condo priced lower! Therefore, he can in fact raise his asking price, and it will be the correct price, which will be the same as what comps sold for on the MLS. A REALTOR should be able to sell it quickly, since it is still properly priced.

(Posted tongue in cheek...)

I converted a fsbo recently, home didn't sell in 4 months so he decided to take it back, no problem. Then he raised the price and put it back on as a fsbo.

Mr FSBO hasn't found a buyer.  Sounds like a renter possibly a rent with an option to .....maybe continue renting.  FSBO needs to continue looking for a real buyer.   No need to get into the real net averages of a FSBO vs Agent listing.  All FSBO's need to go through the pain of selling their own home.

Even as a licensed Broker, I refuse to sell my own properties.  Too challenging re: emotional attachment etc.  I understand the value of listing with full commissions/payouts. 

Improves traffic  and more importantly, the bottom line.  Wish you well.

P.s.  the paper he may holding might come in handy in the bathroom when supplies are low

I wouldn't say anything.  He didn't ask for my advice.  And if he did, he certainly did offer to pay me for my expertise.  ;-)

If I felt compelled to say something, I would suggest he find someone who knows the ins and outs of owner financing, like a Realtor or an attorney. 

What Broker Bryant said, and, don't a lot of investors like to buy that way, you know, use the other guys money?  

Good story for FSBOs.  I went to a seminar when I was brand new on buyer agency.  The teacher was one of those guru types that goes around the country giving seminars.  He has sold millions upon millions as a Realtor but is one the types that makes far more money collecting from new agents who attend seminars. Anyhow....he mentioned selling his last house.  Casually he sai "...and when I asked my Realtor what the terms were...." Someone stopped him dead in his tracks. The new agent said "YOU use a Realtor? WHY?"  He said "You better BELIEVE I use a Realtor!  If I didn't believe that Realtor's were of value I wouldn't BE HERE.  This is far to big a transaction not to be done by a third party.  I would NEVER trust myself to sell my own house."  2.5 years later - i realize he was absolutely right.  Everytime I dealt with and agent selling his/her own property - nothing but TROUBLE.  They were too close to see the trees from the forest.  I would NEVER sell my own house.  I've seen too much. 

 Btw, I'm pulling up a chair, putting up my feet and getting myself a bowl of popcorn.  Maybe a snack for the pups too. This  is far too entertaining to just leave.

Gee.....sounds to me like he needs to hire a Realtor to give him advice, lol...He needs to call an attorney. I wouldn't offer up any advice to someone I am not representing. Leaves too many doors open, so why risk it.

Jeff,

The home owners who will seek competent counsel when needed should do all right in selling their own home, for the other's...hire a real estate professional.  I sold my home myself before I became a licensed agent and the deal went smooth without any issues...it can be done.

How is this buyers  credit?  Does the seller even know?  What happens if the buyer defaults.  Does the seller know what he has to do?  Aw forget about all the stuff I said.  I would just let the buyer have it.  Maybe the buyer wants some cash out too. 

Hi Jeff, I'm already logged out, but I think this is a fascinating question.  It's the sort of relevant discussion that agents need to be having with members of the public.  I love the challenge to answer with a post.  If my schedule permits, I'll do so and link back here. 

Unfortunately this is just another example of an ignorant homeowner who thought they were doing themselves a favor and "saving" money.  If they were to really educate themselves, they would find how much a real estate agent brings to the table, not just in increased sales prices, but in risk reduction!  Sad.

Jeff- I will echo what many others have said. Seek out legal counsel and work to make sure the buyer is qualified to actually purchase and pay for the property.

Best,

Scott 

At this point he needs a good real estate lawyer... possibly a mortgage broker to qualify the prospect for him.  He'll probably end up with an agent after he finds out (after spending a bunch of money figuring out that this prospect is hopeless) that this "buyer" isn't ready to be taken seriously.  

BTW, in this situation it might be better to do a lease purchase with an above market rent to help with the down payment at the end of the lease period.  (mileage and local laws may vary)

There are a lot of buyers if the seller will take paper. In this market where there are a lot of homes foreclosing we get calls from people who want to tie up another home before they foreclose the first one - huh? A seller that sells by himself likely is not euipped to know when to run from a situation like that.

Well personally I wish him the best!  Some people pull it off. It only requires a few things

Knowing  Arizona Contract law, Disclosure law, Agency Law, Title and Escrow procedures, Mortgage structures and all the different kinds of potential mortgages and many other things.  In Arizona as many other states our state constitution allows a Realtor to represent a client in any Real Estate transaction, in effect to act as a specific "Lawyer" for real estate transactions.

If he doesn't sell, will he need to Short Sale?  If so is he up on what that takes? Does he know his legal obligations and the buyers obligations. Will he know if he is in a breach situation or if the buyer is, what to do?

If his desire is to reduce commissions perhaps he should at least allow Agents to show the home for an agreed upon fee structure.  I have sold dozens of For sale By Owners this way to my interested buyers.

So I wish him good luck, maybe he does have what it takes, its a tough market for those of us with experience.   

Is it just me, or does anyone else get sick of repeating the same things over and over. The property is not going to sell for more, just because they're now using a REALTOR. The comparable sales they're using to price their property, were most likely sold by a REALTOR. That sale price included a commission. So why would this property be any different? 

I just feel like beating my head against a wall sometimes. 

WOW! Alot of good advice in response to your post.  I think the seller is trying to save the commission, and he probably could sell higher with an agent and net more than selling himself.  And when we get the buyer prequalified and the deal holds together the seller gets all his money  Most cases he does not need to carry the paper.  This seller isn't thinking with his head.

Boy Jeff, that's someone who's desperately in the need for some help.  Raise the price and then use a REALTOR?  Doesn't he know that there will be buyers out there who've been tracking the price and will see through his little greedy trick?

Actually Jeff, my question was rhetorical. 

I don't give FSBOs or BUBBAs the time of day.  It's a mutual agreement. 

I think FSBOs become prey to people with bad credit, Noah's Ark and anything else that may be "unrentable".  I would say he needs a lawyer if he wants to go this route at this point!  I do know people who successfully collect down payments, foreclose when needed and do rehabs when the property "turns over".

This is a sticky situation.  He needs to treat this almost like a suped up lease option.  He needs to investigate credit, see what kind of animals they have (that will destroy the property), etc. 

It seems like this is happening more and more lately.  I sometimes use comparisons to rationalize it.  If you are sick, generally you seek the help of a doctor.  Some people go on the Internet and try to figure out what it wrong with them without the help of a professional, but in the end, if they are really sick, they need to see a doctor.  If you need to prepare your Last Will and Testament or need help with other legal issues, you would generally seek the advice of an attorney.  Again, you might use the Internet and see what you can find on your own, but if you are involved in something of a legal nature that can greatly affect your life, you will most likely turn to an attorney.  Hopefully, the point is made.  We as REALTORS are able to help sellers (and Buyers) with so many aspects of their home sale or purchase.  Here are some of the things that we can help with:

• Valuing property (to determine a reasonable listing price and a reasonable purchase price)
• Clarifying the principal's needs
• Discovering pertinent facts about the neighborhood, the property, and the parties to the transaction and disclosing this information to the principal
• Filling in and explaining in simple terms the purpose and effect of the contract forms involved (the listing agreement or buyer agency agreement and the purchase contract) while never engaging in the practice of law
• Recommending that the principal seek expert advisers (such as attorneys, accountants or inspectors) when appropriate
• Making best efforts to sell or find the property
• Explaining different financing options available from local lenders
• Negotiating offers and counteroffers
• Meeting deadlines

Thank you for your post and I hope that the together we can all help people realize that when it comes to selling or purchasing their largest investment, they should not do it alone.

I think it is sad the number of people that assume that we Realtors do absolutely nothing and just collect a paycheck at the end. 

Here's a primer I have been meaning to do for awhile.  It was in my head mostly for the people who are doing a lease option or OWC and getting foreclosed on.  Problem is, most of these are scams.  If they buyer found you, probably a scammer.  If the seller is doing this, probably a scammer. 

I am simply amazed at the comments when this was an excellent opportunity to write our own posts :)

Caveat Emptor (or maybe let them eat cake) and have a most wonderful day!

I like the very first comment from Sherry above.  :)

Renee... great stuff. Thank you!

Excellent Renee...

You actually got it :)

TLW...ROAR!

:curtsy: :curtsy:

:)

That is scary. I wouldn't do it. No way. It sounds like he's going to get into a mess. I hope he decides against this.

Jeff.. This is simple... "You get what you pay for".  He wants to save.. and he will loose.  I guess he won.

I plan to save a bundle by removing my own appendix. Doctors are way over paid. I could use a little advice though. What stitch should I use to close?

Jeff, I thought I'd have to write a post in response...then realised I'd already written one to answer at least part of his comment.  Here is the link: Why Chasing Down the Market May Be A Bitter Pill to Swallow... I agree with Renee...I think this was a terrific opportunity.  The post is specifically written for Grand Rapids home owners, but the principles are applicable to all. 

If i were the seller, I am not sure I would trust advice doled out on the web!!  If the seller wants advice on how to proceed with a real estate transaction, he should have hired a realtor.  There are many attorneys who may not be able to do all the paperwork properly.  Heck, there are a lot of realtors out there who can's fill out the paperwork properly!!

hmmmm... i can see the seller's point...  I'm just not sure I'd want to take the listing at a higher price than the seller had offered it as FSBO...

Look, if All you care about are commissions, it will bleed through your conversations and communications with this FSBO client. Options, including selling the home themselves has always been an option for the home owner. Take that away and you sound like a salesman, not a professional consultant. Offer the option to provide them with resources, including an attorney, stager, lender and have them put the house on the market for 30 days. If nothing comes through, let them know that at that point in time, when they get frustrated at the cost and time of dealing with prospects, ask them to hire you as their listing agent. If they do sell the home FSBO, perhaps ask the buyers if not represented if they would like to hire you to help with the paperwork for both parties on a fee for service basis if this is permissible and legal.

Ok, advice isn't free and until the seller touches the flame they won't understand why it's called hot. Where are the sign rental companies who encourage going it alone. Where are the neighbors who said they sold their home without a realtor and suggested him to, where is the media who downplays the importance of those overpaid realtors?

Bottom line, stop trying to operate on yourself or be your own legal counsel, or fix your own car when you don't know what your doing. The foolish hype got you into the mess and then they aren't there to help you out of it. This is like the guy who cheats on his girlfriend then when the other girl dumps him he wants to go back to the first one. I say this not to be harsh,but to educate so that the people telling people how great FSBO is will stop giving bad advice.

Kudos for the FSBO to try and get free advice. Heck why not. If everyone spends a few hours and gives him all the free hand holding that he wants, heck why not.

What I see is common with FSBOs. They don't get that you need 5 interested parties to get one real offer. They get all excited and think they are practically done.

Here is an oldie but goody blog post, one of my favorite. It should answer  every concern he has with going FSBO. And from somebody that used to offer FSBO services, it is an insider's look. 

Go FSBO! Save $20,000! Agent Tells All!

Also make sure he buys a Kodak v570 on ebay! 

Frank 

Jeff - I think you got a few responses. It will be interesting to see what happens after all of this.

Ive listed Fsbo's who do just that- Raise the price and call a realtor to make his x amount of profit. In real estate most fsbos and sellers all they care about is their bottom line. But he's seeking advice about holding a mortgage and now he needs professional help because he's in over his head! Too late to hire a pro?

Cape Cod Realtor

I don't see why everyone is knocking the buyer without knowing his qualifications.  I am a successful Realtor with a 740+ credit score and I have bought three investment properties with owner financing and have always made the payments at least two weeks before they are due.  I get a better interest rate than I could get as an investor through the banks, with no closing costs and less downpayment.  By the way, if anyone has a property that would make sense as a rental and the owner will carry, let me know.

Jeff - I would advise him to go ask his mechanic or paperboy or who ever it was that advised him to sell himself because they obviously know more than those who make a living at putting together real estate tranactiions that work for both the buyer and the seller.

Try calling your doctor or lawyer for free advise and see what response you get!

I have not checked  out Twitter. I had no idea FSBOs advertise on it. He should get an attorney involved if he want to sell whether he is financing the buyer or not.

I smiled when I read this blog.

The first thing the Seller did was seek advice as soon as an offer was received.

Surely this indicates that the Owner is not equipped to sell his/her property without a professional Realtor.