Found off market deal with working with realtor. How to proceed?

Question

I've been working with an agent for a couple months now in hopes of finding my second deal. He was previously my teacher in high school, so I've had a relationship with him and I've signed a buyer's agreement with him. About a month ago a family member of mine let him know that he was going to sell his dad's house. He just wants to sell the house and use to $ to help his father with health issues, so he's willing to sell for under market value. It's worth about 175k, and he's willing to take 140k for it. The thing is he wants to sell it directly to me (FSBO) without the use of an agent to save on commissions. I'd told my agent this a few weeks ago, and my agent told me technically he is owed a 3% commission but he won't hold that against me since it's a family member and I'm starting out. I want to move forward with the purchase because it is a great deal on paper but I don't want to do my agent dirty either. I'd thought about offering 145k and allowing my agent to take a 3% comission ($4,200), use the $800 on any inspection/closing costs, and the seller walks away with 140k. That would the extra 5k would technically come out of my own pocket, right? Does this sound reasonable? I would be financing the property via a bank. Any thoughts would be appreciated! Thanks!

Cory King · Answer

It sounds to me like you've found value in the relationship enough to workout an offer that compensates everyone and doesn't leave you feeling in a weird spot. It's all negotiable. Find a number you're both (you and your agent) are comfortable with. I'd recommend having them help out with the contract portions, if anything to help with liability concerns. Agents pay for insurance for these kind of things. Check your buyer rep agreement for how that's arranged.

I'm an agent so maybe I'm biased. I've had clients who've bought off market without me and personally I value the relationships over the money so it is what it is.

Levi Rawlings · Answer

@Taylor Robertson, you may also consider if you'll need any assistance from an agent on this deal. Given you already have a property, you may feel comfortable enough with the home-buying process and reviewing of the contracts. However, if you do feel you need some representation/consultation, it may be beneficial to make an offer which can include some commission for your agent. A good agent can help reduce your risk, and that may be worth the 3%.

I do agree with Andrew, if your agent hasn't helped you find the deal, nor has he/she provided representation/consultation throughout this deal, you shouldn't feel obligated to provide a commission to them (pending what it says in your existing agreement, of course).

Abel Curiel · Answer

@Taylor Robertson

Some buyer agreements include language for situations like this. For example, an agent would collect a reduced commission, flat transaction fee, or no commission if the buyer sources an off-market deal directly.

In your case, if you'd like to compensate your agent, you can include it in the loan. Since you're purchasing it under market value, you shouldn't have an issue getting it appraised at $145K.

The seller would net $140K and the additional $5K would be seller's concession towards broker commission and closing costs.

Another option would be to keep the purchase price at $140K and bring a check to closing for your broker. The bank would still want to know about the commission to include it as an expense on the final closing disclosure.

All the best!

Abel

Andrew Bang · Answer

Sounds like you are throwing money away. This agent of your didn't play any part in finding this property for you. If he brings you a good deal and you buy it, then he earned his commission.

Found off market deal with working with realtor. How to proceed?

4 Replies