DEAR BOB: I currently rent in a condo complex. My neighbor, age 83, in great health both physically and mentally, agreed to sell me her condo for fair market value. We have a real estate agent friend who will do the paperwork for $3,000, which will save my neighbor about $18,000 in sales commissions. She wants to use her sales proceeds to invest in the stock market at around 4 percent but with some risk. I offered to pay her 5 percent interest for two years if she will finance my purchase. I want to help her, but I also want to help myself. With a seller finance, I will avoid the hassles of obtaining a conventional mortgage, paying points, and all the loan fees. My neighbor has agreed to do this. What is your opinion? – David G.
DEAR DAVID: You are very wise to seek seller financing for your condo purchase. However, two years is a very short loan term.
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Try to get at least five years or longer, even if you have to offer 5.5 percent or 6 percent interest. It will still be a finance bargain for you and a great deal for the condo seller. Be sure to get everything in writing so there are no misunderstandings.
HOW CAN HOME BUYER GET $4,000 DEPOSIT REFUND?
DEAR BOB: In December, my wife and I made a $4,000 good faith deposit to buy a home. The seller accepted. But over the holidays we discussed our home purchase with family and friends. They told us we were paying too much, the house is located too far from my job (about a 45-minute drive), it is only three bedrooms and we really need four bedrooms, the schools aren’t the best, etc. We decided we really didn’t want the house. But the seller refuses to let us cancel the sale without forfeiting our $4,000 deposit. How can we get our $4,000 back? – Rudy L.
DEAR RUDY: When you made a written purchase offer that the seller accepted, that didn’t entitle you to a “free look” allowing you to change your mind and get your deposit refunded.
Unless your purchase offer included a contingency clause that was not met, such as your approval of a professional inspection report or a satisfactory appraisal by your mortgage lender, you are not entitled to a refund of your $4,000 good faith deposit.
If the home seller doesn’t get at least as much as your purchase offer from another buyer, he might sue you for breach of contract damages. For more details, please consult a local real estate attorney.
CAN HOME BUILDER FORCE USE OF BUILDER’S MORTGAGE LENDER?
DEAR BOB: We want to buy a new home in a specific development. But the builder insists we use his mortgage company. The terms sound good, but our friend who works for another mortgage lender tells us the builder’s mortgage lender is very dishonest. I’ve heard other complaints about this lender. But the builder says, “If you want to buy one of my houses, you have to finance it with my mortgage lender.” Is this legal? – Josie H.
DEAR JOSIE: In most states it is illegal for a home builder to require the buyer use the builder’s mortgage company. However, home builders often give incentives such as upgrades on carpets or free landscaping when buyers use the builder’s lender.
I suggest you talk with the builder’s mortgage representative to learn what terms are available. Unless they are unacceptable, if you really want to buy the builder’s new home it might be easier to go along with the flow that to create problems. After your purchase is complete, if you feel you were “ripped off,” consult an attorney.
The new Robert Bruss special report, “How the New Tax-Deferred Realty Exchange Rules Can Make You Very Wealthy,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
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