Detailed information on buying a house with a nonspouse can be found in Living Together: A Legal Guide for Unmarried Couples Living Together: A Legal Guide for Unmarried Couples, by Ralph Warner, Toni Ihara, and Frederick Hertz (Nolo). Yes, it's written mostly for romantic couples, but much of the information still applies to anyone living together, and the book contains useful sample agreements. If you're a lesbian or gay couple, similar information is found in Yes, it's written mostly for romantic couples, but much of the information still applies to anyone living together, and the book contains useful sample agreements. If you're a lesbian or gay couple, similar information is found in A Legal Guide for Lesbian & Gay Couples A Legal Guide for Lesbian & Gay Couples, by Denis Clifford, Frederick Hertz, and Emily Doskow (Nolo).

Cobuyer Discussion Worksheet To make sure you will be compatible, discuss the following issues before buying a place with someone else. Add anything else important to this list-for example, whether or not you want a dog or cat. Jot down your notes and then draft a co-ownership agreement (with an attorney's help or with one of the contracts in Living Together: A Legal Guide for Unmarried Couples Living Together: A Legal Guide for Unmarried Couples, by Toni Ihara, Ralph Warner, and Frederick Hertz (Nolo)).1. How long you plan to stay in the house (and possible reasons that this may change, like moving to take care of an ill parent or getting married).

2. How you'll each be able to afford mortgage payments and carrying costs, and what happens if one of you falls on hard times.

3. Rules for sharing space (for example, cleaning up, dividing the costs of utilities and house supplies, limiting music volume levels, and overnight guests (short- or long-term)).

4. How nicely decorated the house should be, and how you'll budget for decorating.

5. How much of the property each of you will own, and how you will take title.

6. What will happen if one of you dies-for example, whether the deceased's interest in the house will go directly to the other owner, or go to an heir.

7. What will happen if one of you wants to move out or sell the house sooner than the other would like to. (Many buyers include what's called a "right of first refusal" in their co-ownership agreement, giving the nondeparting owner first crack at buying the other owner's share of the property, at a specified value, usually either the original purchase price or the currently appraised value.) 8. How you will handle disputes.

OTHER:.

Subdivide Your Space: Renting Out a Room

If total privacy is a luxury you can sacrifice, at least in the short term, it may help you afford a home. In fact, if you've already got a roommate who you enjoy living with, that person might be content writing the rent checks to you, instead of to your current landlord.

You can often charge almost as much as what renters would pay for an apartment and set down rules regarding which rooms they can use, kitchen cleanliness, and more-it's still your your place. The rent will help you pay the mortgage, and you can charge for a portion of the common costs, like utilities. Of course, you'll want to protect yourself with good tenant screening and a written rental agreement. place. The rent will help you pay the mortgage, and you can charge for a portion of the common costs, like utilities. Of course, you'll want to protect yourself with good tenant screening and a written rental agreement.

If you can't face the thought of a stranger having your front door key, look for a duplex, a place with a cottage in the back or a basement apartment, or another multiunit building.

CHECK IT OUT.

Planning to be a landlord? Get help from: Get help from:* Every Landlord's Legal Guide Every Landlord's Legal Guide, by Marcia Stewart, Ralph Warner, and Janet Portman (Nolo). Although aimed primarily at off-site landlords, this book will help you find and screen tenants and draft your rental agreement.* Every Landlord's Tax Deduction Guide Every Landlord's Tax Deduction Guide, by Stephen Fishman (Nolo). Find out how to save even more money by taking advantage of favorable tax laws.

Hey, Where's Their Agent? Looking for FSBOs (For Sale by Owners)

Another way to broaden your search is to visit FSBOs, that is, houses sold directly by their owners. Just how many sellers go the FSBO route is impossible to say, but most estimates put it around 15% of all U.S. houses. That's a lot of houses your real estate agent might not, under ordinary circumstances, be showing you.

In a few cases, FSBOs can also save you money. The seller may have underpriced the house or be willing to share the commission savings with you. But don't count on either-sellers going through the effort of advertising and showing their houses aren't always interested in parting with any of their earnings.

Your Agent's Role in Buying a FSBO

Most agents don't routinely search for FSBOs, so you'll need to work out whether you want this service in advance. One option is to do the searching yourself, using the resources listed in the next section. If you see an ad for a FSBO that looks interesting, the appropriate next step is to tell your agent about it before visiting the house.

That lets the agent deal with the next important issue, which is how he or she will get paid. Your agent will call and ask whether the FSBO seller will "cooperate" regarding the commission (that means paying the portion of the commission that the seller's agent would normally hand over, usually 2%). If the answer is no, the agent will come back to you and discuss the commission, to see whether you're willing to pay it. You should agree on the rate in advance.

Finding FSBO Houses

Because FSBO sellers aren't represented by real estate brokers, they don't have access to the MLS database (unless they've made a special effort to find and pay a broker for the discrete task of listing the house). That means you'll find most FSBOs either listed on independent websites (like those below) or advertised by more-traditional means (local newspapers or yard signs).

CHECK IT OUT.

Your best bets for finding FSBOs on the Web are: * * ForSaleByOwner.com * * www.owners.com * * Craigslist.org ("real estate for sale" is right there under "housing"-they're not all FSBOs, but some are), and ("real estate for sale" is right there under "housing"-they're not all FSBOs, but some are), and* www.fsboguide.com, for links to FSBO websites in your area.

Dealing With FSBO Sellers' Varying Personalities, Skill Levels

A FSBO seller doesn't have an agent to educate him or her about the real estate market and act as a buffer in negotiating with buyers. That means that the success of buying a particular FSBO house-from setting a price to closing the deal-depends largely on the seller's own personality, real estate knowledge, and skill set.

In the best-case scenario, you might find a FSBO seller who is a knowledgeable, fair-minded lawyer or retired real estate professional, who sees no reason to enlist extra help for a familiar process. In the worst case, you might find a seller who is a skinflint curmudgeon know-it-all or a total flake, who has overpriced the house, refuses to discuss commissions, and cancels the sale the minute you bring up inspections or repairs. And even the most expert sellers sometimes approach negotiations based on emotion.

Get to know our FSBO seller. Maria and her husband had been keeping their eyes open for a house that would not only fit them and their two girls, but include an in-law unit for an elderly parent. "We knew such a house would be hard to find," says Maria, "so when we heard that my husband's sister's best friend's mom's house was sitting empty-she'd recently moved into an assisted-living center-we contacted the family to sound them out. They'd just begun thinking about selling and were intimidated by the amount of work it would take to clear out the place (the mother was a packrat) and to fix it up (it desperately needed a new roof, not to mention cosmetic fixes like replacing the orange shag carpet). But after my family and I saw the house-which was just what we wanted-I talked to the mother directly, and we hit it off. In fact, eventually she told her daughter that selling the house to us was almost like keeping it in the family. We agreed to buy it without an agent, at a price that was reasonable given all the fix-ups and the commission savings. The whole arrangement was mutually beneficial in many ways-including when we began picking up the seller at her assisted-living center and driving her to the house so she could sort through the lifetime of possessions." Maria and her husband had been keeping their eyes open for a house that would not only fit them and their two girls, but include an in-law unit for an elderly parent. "We knew such a house would be hard to find," says Maria, "so when we heard that my husband's sister's best friend's mom's house was sitting empty-she'd recently moved into an assisted-living center-we contacted the family to sound them out. They'd just begun thinking about selling and were intimidated by the amount of work it would take to clear out the place (the mother was a packrat) and to fix it up (it desperately needed a new roof, not to mention cosmetic fixes like replacing the orange shag carpet). But after my family and I saw the house-which was just what we wanted-I talked to the mother directly, and we hit it off. In fact, eventually she told her daughter that selling the house to us was almost like keeping it in the family. We agreed to buy it without an agent, at a price that was reasonable given all the fix-ups and the commission savings. The whole arrangement was mutually beneficial in many ways-including when we began picking up the seller at her assisted-living center and driving her to the house so she could sort through the lifetime of possessions."

Buying a FSBO With No Agent

If you don't have or want an agent yet, you can buy a FSBO on your own-but be prepared for a steep learning curve. Unless you're already friends, a canny seller might try to take advantage of you. And any deal can get mired in disagreements. There's a reasonable chance you will be friends or acquaintances, however-common when someone hears about a house for sale before it's advertised. But you'll still need a standard, written sales agreement to protect both of you.

If saving money is a key concern, consider hiring an attorney for limited parts of the transaction. (In a few states, you'll have to use an attorney for certain tasks, anyway.) A few hours' worth of advice can save you from later heartache and expense and still cost you thousands less than an agent's commission. Michigan attorney Fred Steingold says, "One option is to hire a lawyer to serve as your coach. Ask the lawyer to give you a purchase agreement form that's widely used in your community and that fairly protects both you and the seller. The lawyer can also explain how to complete the form yourself, and then review your handiwork."

And whatever you do, don't go without the services of an escrow or title company to help guide you toward the closing, as described in Chapter 11.

TIP.

If no agent is involved in a FSBO, some states don't require seller disclosures. In that case, bring in the most thorough professional home inspectors you can find to assess the property's physical condition. In that case, bring in the most thorough professional home inspectors you can find to assess the property's physical condition.

On the Auction Block: Buying Short Sale, Foreclosure, or Probate Properties

Particularly following a huge drop in house values, you may find the market littered with tempting real estate bargains. The lowest-priced homes are often short sales, foreclosures, or probate properties.

Purchasing one of these types of properties is not for the faint of heart. As we'll explain, the already-stressful process of buying your first home can be exacerbated by complications in the process at every step.

Buying a Short Sale

A "short sale" is real estate lingo for a house that's being put up for sale for less than the homeowner owes on the mortgage-usually, a homeowner in financial distress who is trying to avoid foreclosure. Sometimes, but not always, the seller has already defaulted on the loan.

A short sale may have an alluringly low price-especially in comparison to what the seller owes-but that doesn't necessarily make it a good deal. The seller may have overpaid to begin with, or the market may have fallen significantly. And as we'll explain below, as the buyer you may be responsible for significant additional costs that aren't accounted for in the selling price.

The biggest problem with a short sale is that the seller's lender must approve the sale, because it's going to take a loss in the process. The lender must balance that loss against the anticipated loss (and cost and hassle) if the property continues on into foreclosure.

For this reason, short sales rarely happen quickly. Even after you put in an offer and the seller accepts it, the two of you could be waiting around for months for the lender to decide whether the deal is acceptable. And you run the very real risk that the lender will say no, particularly if the seller has advertised the property for much less than is owed on it, desperately fishing for any offer to take to the bank.

Making an Offer on a Short Sale

If you're interested in a short sale property, choose an agent who's dealt with them before. The agent should do some homework before you make an offer. You want to know how much the homeowner owes on the property; if it's a lot more than you're willing to pay, the lender is unlikely to approve the sale. You also want to know whether the homeowner has more than one loan.

If so, you'll need the approval of all lenders to make the sale, and the more lenders there are, the harder that will be to get, because they must each agree to taking a smaller piece of the pie. In any case, this basic information is available just by looking at the deed, which your agent can do for you.

Also, make sure your agent talks with the seller's agent about what kind of legwork has already been done. Banks will approve a short sale only if the seller is in financial distress. Even though you're going to need the bank's ultimate approval, you want to be sure the seller has at least contacted the bank and gotten confirmation that the bank will consider a short sale. Unless you're not in any particularly hurry to buy a place, you don't want to waste your time waiting for a bank to respond to an offer if you're fairly certain it will just be rejected anyway.

What to Expect With a Short Sale

If you decide, after obtaining the information above, that you still want to buy a short sale, expect it to differ from a regular sale in a few different ways: * Lower commissions. Lower commissions. The lender, who is ultimately paying the real estate agent commissions, may negotiate them down with the seller's agent, and your agent will get paid less as a result. If you agreed to pay your agent more in a buyer's brokerage agreement, you'll have to do so out of your own pocket. The lender, who is ultimately paying the real estate agent commissions, may negotiate them down with the seller's agent, and your agent will get paid less as a result. If you agreed to pay your agent more in a buyer's brokerage agreement, you'll have to do so out of your own pocket.* The property will be sold "as is." The property will be sold "as is." Lenders offer the property in its present condition, with no reductions for repair needs. To make sure you know what state things are in, you should be certain you have an inspection contingency in the contract, allowing you to have the property professionally inspected and back out of the deal if you're not satisfied with the results. (We discuss inspections in greater detail in Chapter 12.) Just don't expect to negotiate any of the repairs with the bank. Lenders offer the property in its present condition, with no reductions for repair needs. To make sure you know what state things are in, you should be certain you have an inspection contingency in the contract, allowing you to have the property professionally inspected and back out of the deal if you're not satisfied with the results. (We discuss inspections in greater detail in Chapter 12.) Just don't expect to negotiate any of the repairs with the bank.* You'll pay all closing costs. You'll pay all closing costs. These fees are usually split with the seller, but the bank will likely refuse to pay any of them. These fees are usually split with the seller, but the bank will likely refuse to pay any of them.* The transaction will take longer. The transaction will take longer. You may spend months waiting for your offer to be approved or rejected by the bank. Make sure your offer terminates at some realistic point in the future. A few short days probably won't do it, but if you let the offer remain open-ended, it's sure to end up parked on a desk somewhere. You may spend months waiting for your offer to be approved or rejected by the bank. Make sure your offer terminates at some realistic point in the future. A few short days probably won't do it, but if you let the offer remain open-ended, it's sure to end up parked on a desk somewhere.

As you can see, short sales are extra work and hassle. Unless you're going to get a property at a deep discount-even after adding up the costs of your real estate agent's commission, repairs, and closing costs-and you have enough time to wait around for the bank to respond to your offer, you're probably better off buying a house that isn't conditioned on bank approval.

Where Most Foreclosures Happen The ten cities with the largest percentages of homes foreclosed upon in mid-2008 included:* Stockton, CA* Riverside/San Bernardino, CA* Las Vegas/Paradise, NV* Bakersfield, CA* Sacramento, CA* Ft. Lauderdale, FL* Phoenix/Mesa, AZ* Oakland, CA* Fresno, CA* Miami, FL Source: www.RealtyTrac.com

Buying in Foreclosure

Even more challenging than buying a short sale is buying a foreclosure. Foreclosure occurs when a homeowner can't pay back a mortgage loan, and the lender exercises its legal right to force a sale. But they've become especially common with recent meltdowns in the bank and mortgage industries, leading to renewed interest by bargain-hunting homebuyers. Foreclosures happen in every market, from the highest-end houses to the lowest. The bank or lender doesn't usually foreclose right away-they give borrowers a grace period first. When a lender does move toward foreclosure it creates opportunities for new buyers at three stages of the process: preforeclosure, at a public sale or auction, and by buying directly from the bank (called real-estate-owned, or REO).

Regular Sellers Are Starting to Try Auctions Some ordinary home sellers are deciding that auctions-either live or online-are the fastest, most profitable way to sell. This is most common on the East Coast, but catching on in the West.Live auctions are usually handled by professionals who let potential buyers visit an open house first and hire inspectors before making a bid. The buyer pays the company a premium, usually 7%-10% of the house price.The online auctions are usually handled on sites like eBay, and the procedures vary depending on the sellers: Horror stories are already emerging of naive buyers who purchased houses sight unseen. The bottom line is you might get an auction bargain, but there are unusual up-front costs and risks.

The main advantage in buying a foreclosure is price-you're likely to get some sort of a discount no matter what stage you buy at. The main disadvantages to buying foreclosure properties are: * Going without usual buyer protections. Going without usual buyer protections. As we'll explain further below, at most stages in the foreclosure process you'll forgo at least some of the normal protections available in a typical transaction; for example, you may not get to see the property before you buy, have to accept it "as is," and have to go without title insurance. As we'll explain further below, at most stages in the foreclosure process you'll forgo at least some of the normal protections available in a typical transaction; for example, you may not get to see the property before you buy, have to accept it "as is," and have to go without title insurance.* Waiting to make sure the owner is protected. Waiting to make sure the owner is protected. Most states have laws to make sure banks can't rip properties out from under late-paying owners on a moment's notice. For buyers, that means deadlines, delays, court rules, and uncertainty-particularly in the many states that allow the former owner to "redeem" or buy back the property within a certain period of time after it was sold in foreclosure (usually from ten days to one year). Of course, if that happens, your money will be refunded. But as attorney Fred Steingold notes: "Do you really want to be held in limbo, unsure of whether you'll ever be able to occupy the house?" Most states have laws to make sure banks can't rip properties out from under late-paying owners on a moment's notice. For buyers, that means deadlines, delays, court rules, and uncertainty-particularly in the many states that allow the former owner to "redeem" or buy back the property within a certain period of time after it was sold in foreclosure (usually from ten days to one year). Of course, if that happens, your money will be refunded. But as attorney Fred Steingold notes: "Do you really want to be held in limbo, unsure of whether you'll ever be able to occupy the house?"CHECK IT OUT.

To find out your state's redemption period and get other summaries of your state's law regarding foreclosures, see: * * www.realtytrac.com * * www.foreclosureforum.com.