Treadmills …. sure. Lawn mowers …. maybe. But a house?
Definitely! Craigslist is an awesome tool for buying anything from juicers to concert tickets and even houses! When I am on the search for houses to buy as rentals, Craigslist is my first and often only destination. Sure, you can search the local real estate company or ForSaleByOwner.com but what you’ll find there are folks trying to sell their houses the “traditional way” … or maybe in the case of ForSaleByOwner.com, close enough to the traditional way that we are not interested. What I mean by that is that the vast majority of people that sell their houses, whether by owner or through an agent, want to be PAID IN FULL at closing. These are not the types of houses that college students (or someone with let’s say “less-than-stellar” credit) look for unless you got lucky and found a cosigner for a mortgage or found a local bank willing to give you a non-conforming loan. As a college student, you are looking for the proverbial needle in the haystack … you’re looking for the owner that is willing act as your banker and sell on a Land Contract.
In fairness, most sellers have no other choice than to be paid in full at closing. Most houses have loans on them that need to get paid off when the title changes hands. Some sellers need to sell their house in order to clear their credit and buy another house. Some need the proceeds from the sale for another down payment. Land Contracts for all intents and purposes are not possible, or at least very risky, if there is an existing bank loan on a property so let’s not go there right now. We are not interested in houses with bank loans on them. In fact, we would rather not deal with banks at all.
So how do we find these elusive sellers who own their house free and clear and who don’t need a lump sum of cash immediately? We search for Land Contracts. Personally, I would start by scrolling through the listings before doing a more targeted search. In your cities Craigslist, under “Housing”, click on the “Real Estate for Sale” link. The problem with this directory as a whole is that the majority of the listings end up being brokers who have wised up to the power of Craigslist and are posting their client’s houses there. Lame. You can tell these apart because they have the “real estate – by broker” link after the listing. You see, some real estate agents (or Realtors ®, as those that are part of the National Association of Realtors like to be called) have wised up to the “power of the interweb” and think that putting their listings on Craigslist is a good idea. But don’t get me started on Realtors … or real estate agents for that matter.
To find the individual owners that are selling without brokers, scroll down until you find a listing with a “real estate – by owner” link after it. Click on that link to get only the “For Sale by Owner” listings. To make it quicker, you can just go to the following link …. http://annarbor.craigslist.org/reo (obviously substitute your city for the “annarbor” in the example). These are the listings that we as savvy buyers are interested in and only include listings where the actual owner is trying to sell their own house. The other stuff is just riff-raff and can easily be found and more effectively searched on Trulia or Zillow or any one of hundreds of websites that pull data from the MLS.
As you look at each listing in the “Real Estate by Owner” directory, you will start to get a feel for how common (or how uncommon) land contracts are. Even in the For Sale by Owner listings, very few owners can or want to offer Land Contract terms. As with the more traditional listings, most of these folks need to get paid in full at closing. As far as Land Contract listings are concerned, some motivated sellers may advertise that they’re willing to offer a Land Contract right in the title of the listing like these gems, pulled straight from the http://annarbor.craigslist.org.reo on May 5th, 2013.
Large Campus/Downtown Ypsi Condo – Land Contract! $34900 / 2br – 1000ft²
3 Bedroom Brick Ranch. Land Contract Available
More often, the seller is willing to offer a land contract but would rather be fully paid at closing and therefore will not advertise it as a selling point. In cases like these, this is usually indicated in the body of the Craigslist posting:
“NICE BRICK HOME, NEW ROOF WITH FULL BASEMENT FERNDALE SCHOOLS!!!!!!!!!!!! XTRA LARGE KITCHEN AND DINING AREA NICE LIVING ROOM. GOOD SIZE BEDROOMS. HARD WOOD FLOORS. THIS HOUSE IS A FIXER UPPER NEEDS KITCHEN COUNTERS , PLUMBING, WATER HEATER ONLY $3500 LAND CONTRACT WITH LOW MONTHLY PAYMENTS. BRING ALL OFFERS OWNER WILL ACCEPT A LAND CONTRACT. THIS IS A NICE SOLID HOUSE IN A CENTRAL LOCATION. CALL XXX-XXX-XXXX FOR DETAILS.”
Why do so many sellers write their ads in all caps? That’s a very good question.
Let’s talk a little bit about the psyche of people that are selling their house on Craigslist. As a buyer or investor, ideally we are looking for motivated sellers. We are looking for people that REALLY want to sell their house. If someone is offering a land contract as a selling point, then they are more than likely a very motivated seller. So that’s a good thing right? Well sort of … but be careful. They could be motivated for all the wrong reasons. If their house is trashed and unrentable without considerable improvements and repairs, then we may want to stay far away from that house. A lot of the folks that offer land contracts fall unfortunately fall into that category.
So how do you figure out why someone is a motivated seller? Well, give them a call! There are tons of reasons why someone might be a motivated seller. Maybe they’re moving out of town. Maybe the are in the business of flipping houses, not managing them. Maybe they’re sick of being a landlord. Maybe they inherited the house … and the list goes on. Also, just because a house need some TLC doesn’t necessarily mean it’s a bad house or a bad investment.
Buying houses on Craigslist is all about Social Credit and relationships. Each and every time you contact a seller you are starting a relationship with them. If you end up negotiating a Land Contract with them, this relationship could last for years. I am still very good friends with the first guy I bought a house from on a Land Contract. We have done several subsequent deals together, he has mentored me in many ways, and we have actually become close friends.
Once you’ve found the house you want to buy and begun a relationship with the seller, the negotiations begin. With a deal like this, chances are you will not be using banks or real estate agents (or Realtors®, as they would prefer). You will be using a sales contract, possibly a home inspector, and definitely a title company to close the deal. The techniques for closing the deal can be found at the end of my “College Student Home Buying Guide“. (Of course, the same techniques apply if you’re not a college student).
As always, it is my goal to help you buy a house, whether it’s your first house to live in or your first rental property. If you have any questions, please feel free to contact me and I will respond as soon as possible with whatever advice I can give. Thanks for reading to the end of this post and have a great rest of the day.