Purchase my neighbor's house

[Heather Dane]

My next door neighbor is moving to North Carolina and I would love to buy his house. He would love to avoid showings and sell his place to me. This may seem like a silly question, but where do we start? Do we have to have a realtor to complete this transaction? Can I get a home appraisal, inspector ect without a realtor. This would be my first investment property. And finally how would we set up the loan with a bank? I appreciate your tips and time on these questions.

[Tue Huynh-Nhut Vo]

There is no need for a realtor. If you do not have the cash to buy his home outright you can either get a conventional loan or get him to agree to owner financing. 

First get both parties to sign a contract. BP has the resources for this.

Conventional loans are with any major banks. You can look up your preferred bank and apply for a mortgage online. Then a mortgage officer will call/email you to proceed. Generally, for conventional loans, the bank will want to get their own guys to appraise the home. This will cost ~$500.  The appraisal is very important to the underwriter (the guy who says yes/no to the mortgage), basically if they see anything that would deem the house unlivable, then they will reject it. Also, make sure to read all the break down of costs the mortgage officer sends you for your "estimate to close". 

At the same time as the appraisal is being scheduled and done, you will need to be talking to a title company. Usually the banks will have one on hand if you do not have someone already. You will need to send in the earnest money with a copy of the contract to the title company. They will also be checking for liens on the home.

If all goes well, the underwriter will approve of the loan and both parties will meet the title company to transfer the deed. 

Owner financing is basically the owner and you scheduling payments to pay off the home. He would act as the bank and seller in this case. I do not have sufficient knowledge on this topic though. 

If there's anything I missed, I hope other BP members can correct me.