Securing a Mortgage in Private Deals: Unique Challenges and Solutions

When you arrange to buy a home via a private deal, you may feel like you’ve won the lottery. The real estate market is increasingly challenging for buyers, and securing a property outside the normal market can help you skip much of the stress and anxiety that comes with finding the ideal property. However, finding a mortgage may prove to be a challenge. Knowing what to expect during an ownership transaction can help you plan ahead and navigate the process with a little more ease.

Difficulty Navigating the Process

First, those who purchase a home without the help of a real estate agent often have a hard time navigating the mortgage process. There is an enormous amount of paperwork that goes into getting a mortgage, particularly since the 2008 crash. Banks want to be sure beyond a shadow of a doubt that you can afford the home and that you are not hiding debts or taking loans to cover the cost of your down payment and other expenses. 

In order to cover their bases, they require tons of documentation and paperwork that may not necessarily make sense to you. Without a realtor or other professional representing you, it’s easy to miss deadlines or send in the wrong paperwork. This leads to unnecessary delays and frustration on the part of the lender, which is why lenders often prefer to work with customers who are represented by a realtor.

Assessment and Appraisal Concerns

In private deals, getting a home assessed and appraised can complicate your mortgage application process. A realtor may begin to prove the value of your home by providing comparable sales data and using other valuation methods. However, a layperson won’t use these same techniques or even have them at their disposal. They will still have to go the standard route of having the property appraised by an approved professional. 

This is another step that can cause hiccups in the process; private sellers have a tendency to overinflate the value of their home in their own mind, due to their emotional attachment to the home, the memories they’ve experienced in it throughout the years, and the work they have put in. This issue isn’t nearly as widespread in standard home purchases, since sellers are guided by realtors who aren’t emotionally invested in the process. If a home comes in well under the sale price, you’ll likely be unable to get a mortgage that covers those extra costs.

Paperwork and Documentation Woes

As noted earlier, buying a home is a process rife with documentation, paperwork, and financial reports. When you work with a realtor or real estate attorney, this paperwork is streamlined, and much of it isn’t even handled by you as a buyer. In a private sale, though, the burden of paperwork falls squarely on your shoulders. If you don’t know what documentation is required of you or where to find it, the sale could fall through or you could miss important deadlines that require you to put in additional work and money.

Inspection Demands

When you purchase a home with a mortgage, the mortgage lender wants to know that the home is safe and habitable. They don’t want to invest their money in a property that is essentially a ticking time bomb. Whether you work with a standard home seller or a private home seller, they are required to disclose known defects and dangers. However, private sellers are more likely to be aware of those dangers and to disclose them. This could lead to issues when dealbreakers pop up, rendering the home unsellable or uninhabitable. While these issues may have been identified earlier in a standard sale, identifying them late in the game could put you out a significant amount of money, time, and effort.

How to Manage Risks During Private Deals

Purchasing a home in a private deal can help you avoid the chaos of the housing market in Maryland, but you should protect your own best interests by consulting real estate professionals when necessary. That may include talking to a realtor or a real estate attorney if you want to protect yourself from negative outcomes and ensure that your housing money is well-spent.