How much should you offer for a house?

When making an offer, you should consider the following factors:

• The advertised price of the house.
• What you can afford.
• Prices for comparable houses.
• Whether the local real estate market is hot or cold.
• The seller's needs, like whether the seller needs to close quickly.
• Whether the house is uniquely valuable to you.
• How much you feel good about paying for a particular house.

What is a house "closing"?

The so-called "closing" is the final transfer of the house to the buyer. It occurs after both the seller and the buyer have met all the terms of the contract and the deed has been recorded. Closing also refers to the time when the transfer will occur, such as "the closing on my house will happen on January 27 at 10:00 a.m."

The event referred to as the closing frequently takes place at the office of the professional who handles the transaction, such as a title officer or real estate lawyer.

Do I need an attorney to create a house purchase contract?

This varies depending on state law and local custom. In some states, such as California, attorneys are not typically involved in residential property sales, and an escrow or title company handles the entire closing process. In many other states, particularly in the eastern part of the country, attorneys (for both buyer and seller) have a more active role in all parts of the house transaction, and handle all the details of offer contracts and house closings. Check with your state department of real estate or your real estate broker for advice.

How does seller financing work?

In rare cases, a seller will agree to loan you part or all of the money to buy the property. This can happen when you can't borrow enough money from a bank or commercial lender or when the seller wants to spread his or her income from the sale over a number of years. This can be carried out in one of two ways.

The first possibility is for the seller to take back a mortgage on the house. You, the buyer, sign both a promissory note (promising to repay the loan) and either a mortgage or a deed of trust (allowing the seller to foreclose if you fail to pay). In return, the seller signs a deed transferring title to you. Because you hold the title, you can sell the house or refinance. But you must keep making the agreed-upon payments to the seller.

The second and less popular possibility is for the seller to keep title to the property for as long as it takes you to pay off the loan. The contract you and the seller sign is known by various names, including "contract for deed," "contract of sale," "land sale contract," or "installment sales contract." It works like this: The contract states that the seller will keep title to the property until you pay off the loan. (You normally pay the loan off in a series of regular payments, similar to a standard mortgage.) After you pay off the entire loan, the seller signs a deed transferring title to you. Because the seller keeps the title over the life of the loan, you cannot sell or refinance the property until all payments are made and the title is transferred -- an obvious reason for the unpopularity of these contracts.