Putting offer on first home, no agent.. tips? and offer suggestion

Buying & Selling Real Estate
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Putting offer on first home, no agent.. tips? and offer suggestion

Eric P.
South Jersey, NJ · Member since 2014 · 154 posts · 50 votes

Wife and I are ready to put an offer on a home we are in love with.  We've been watching the market for months and this home fits our needs the best.  The home has been on the market over 100 days, has "motivated sellers", no offers yet, and I'm using a family member real estate attorney and foregoing the buyers side agent.  This should save the seller $12k-$14k worth of buyer side commission which should allow me to ask for a lower price.  Any additional suggestions?

quick property info:  asking $425k.  Could use new siding above the garage and one or 2 other areas (maybe whole house).  A similar house in the neighborhood was just price dropped to $415k.  The home next door sold 2 years ago for $395k and is extremely comparable. 

I'm saying a fair value is about $405,00 based on the similar properties.  I'd want $10k off for the siding and a few other little things, then about $8,000 for closing costs from the commissions savings.  So $395,000 and $8,000 in closing sound fair?  Should I start a little lower so I leave myself more room to come up or is that too aggressive?

Any suggestions would be great!

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Alexander FelicePro Member
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
11y

@James Wise is probably right. Using no agent won't save them any money and you're giving up a free asset. I always use an agent when buying MLS.

Techincally the selling agent COULD give up his commission, but that benefits only you, not him. That's not really how capitalism works ;) 

GL!

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  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
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    The way listing agreements are written you going in without an agent likely won't save the seller any money. The listing agent will just make more.

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  • Eric P.
    OP
    South Jersey, NJ · Member since 2014 · 154 posts · 50 votes
    11y

    Can the listing agent not step in and say "I'm going to be making an extra $14,000 commission on this, so I guess I can cut my commission a bit to cover the $6,000 closing cost and still walk away $8,000 ahead".  Or at the very least wouldn't it give the listing agent motivation to talk his sellers into taking my offer right now.  

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  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    11y

    Would you walk into your bosses office and say

    "Bob, i'm doing pretty good now that I own some rentals. Here is half my pay for last month?"

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  • Alexander FelicePro Member
    Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
    11y

    @James Wise is probably right. Using no agent won't save them any money and you're giving up a free asset. I always use an agent when buying MLS.

    Techincally the selling agent COULD give up his commission, but that benefits only you, not him. That's not really how capitalism works ;) 

    GL!

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  • Linda WeygantPro Member
    Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
    11y

    Usually an agent's contract with the seller will have a clause that indicates if a buyer comes in and is not represented by an agent, the listing agent becomes a transactional agent, representing neither the buyer nor the seller and receives the full commission.

    I've seen some sellers that won't accept a contract from unrepresented buyers because the whole entire reason they decided to use an agent is so their best interests would be represented.  When an agent becomes a transactional agent, they'll no longer give advice to the seller on how to negotiate inspection objections, for example.

    At least, this is how I've seen it work in Colorado.  Other locations may vary.

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  • Eric P.
    OP
    South Jersey, NJ · Member since 2014 · 154 posts · 50 votes
    11y

    It benefits him if hes keeping a large portion. 

    Example:

    1) Me asking $395k and $8000 in closing @6% commision = $24,000 in commission minus $8,000 closing cost = $16,000 profit for listing agent.

    2) Buyer 2 asking $415k and no closing costs but using a buying realtor only keeps half commission = $12,500 profit for listing agent.

    So by going with my offer $20,000 lower and offering $8,000 toward closing the listing agent is still walking away with $3,500 more than if someone offered $415k through an agent.

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  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    11y

    @Eric P. I will echo what others have said on here.  I don't think there is any benefit in this situation to you not using an agent.

    I grew up in Parlin/Old Bridge by the way.  Nice to see other people from the area here on BP.

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  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    11y
    Originally posted by @Eric P.:

    It benefits him if hes keeping a large portion. 

    Example:

    1) Me asking $395k and $8000 in closing @6% commision = $24,000 in commission minus $8,000 closing cost = $16,000 profit for listing agent.

    2) Buyer 2 asking $415k and no closing costs but using a buying realtor only keeps half commission = $12,500 profit for listing agent.

    So by going with my offer $20,000 lower and offering $8,000 toward closing the listing agent is still walking away with $3,500 more than if someone offered $415k through an agent.

    Let's just forget about the agent giving up their commission for now because that's just not going to happen.

    Your offer is a net offer of $387k. The other offer is 415k.  The agent has a fiduciary responsibility to the seller to get them the most money for the home. So for that reason alone your offer does not work.

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  • Eric P.
    OP
    South Jersey, NJ · Member since 2014 · 154 posts · 50 votes
    11y

    Does my logic not make sense?

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  • Al Wilson
    Investor · Daphne, AL · Member since 2014 · 1k+ posts · 242 votes
    11y
    I would very definitely use my own agent under this scenario. You need someone to look out for you and it does not cost the seller anything.
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  • Alexander FelicePro Member
    Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
    11y

    Eric, what you're suggesting is that the seller take a lower price, and the agent take a lower commission so that overall the agent will make a higher net profit. 

    This assumes that: A. the seller will take a lower price at the benefit of the agent commission (read: things that won't happen) and B. the agent will take a smaller split (read: things that won't happen).

    Here is what will happen, someone else is going to come along and offer a higher price, and a full split. The seller, the listing agent, and the buyer agent will all win. The reason I know this is what will happen is because this is how real estate business is conducted every single day. 

    You aren't dealing with an off-market property or distressed owner. Get a buying agent, negotiate the deal, and let everyone win. 

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  • Eric P.
    OP
    South Jersey, NJ · Member since 2014 · 154 posts · 50 votes
    11y
    Originally posted by @Alexander Felice:

    Eric, what you're suggesting is that the seller take a lower price, and the agent take a lower commission so that overall the agent will make a higher net profit. 

    This assumes that: A. the seller will take a lower price at the benefit of the agent commission (read: things that won't happen) and B. the agent will take a smaller split (read: things that won't happen).

    Here is what will happen, someone else is going to come along and offer a higher price, and a full split. The seller, the listing agent, and the buyer agent will all win. The reason I know this is what will happen is because this is how real estate business is conducted every single day. 

    You aren't dealing with an off-market property or distressed owner. Get a buying agent, negotiate the deal, and let everyone win. 

     The property has been on the market 120 days with no offers and they are "motivated sellers".  Everyone is winning..  The sellers are selling their home finally yes not at the price they want but it's been 4 months with no offers, the agent is making more than he would if I was using an agent, and I'm saving $..  Why bring in another person to get in the way of that?  

    And nothing is "free". Youre paying for an agents commission on the back end.  

    The buying agents commission would be like $12,000 so what if we all just split that?  

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  • Alexander FelicePro Member
    Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
    11y

    You seem convinced. Just try to do it and then adjust from there. 

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  • Linda WeygantPro Member
    Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
    11y
    Originally posted by @Alexander Felice:

    You seem convinced. Just try to do it and then adjust from there. 

     Agreed.  You asked for advice, but seem disinclined to take it.  Therefore, go with your gut.

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  • Eric P.
    OP
    South Jersey, NJ · Member since 2014 · 154 posts · 50 votes
    11y

    Sorry I don't want it to sound like I'm being thick headed.  But c'mon nothing in this world is free.  As the buyer, my agents commission would have been figured into the sales price.  Just like when you buy something with "free shipping" someone is paying for that shipping, and its usually YOU paying an elevated price on the product.  

    I 100% agree that my thought here wouldn't work if there were other offers on the table or this was a new listing.  But as I'm looking now, the home was first listed for sale August of last year, listing was removed first of this year and added back on a month later.  So really this has been on the market for 8 months.  Which is why I think this particular situation would work and benefit everyone without bringing in a 4th party to take $12,000 of "someone's" money.

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  • Eric P.
    OP
    South Jersey, NJ · Member since 2014 · 154 posts · 50 votes
    11y

    Anyone have some crow I could eat?  

    Negotiations went how I hoped.  We got down where we were hoping and did get an extra $6,000 toward closing so that is great.  I can't be 100% sure if that had anything to do with not using an agent or if they were just willing to come down that low, but either way I'm happy with it.  

    With that said..  Buying a house is stressful, the agent is being very helpful but at the end of the day I feel like hes working for the seller and I don't really have anyone on my side.  Its really a toss up, but I can totally see how agents add value.  maybe not $12,000 worth of value on a home I found on my own.. but value just the same.  

    I research like crazy and like to know as much information as possible, there is still a ton I don't know so I rely on the selling agent and my lawyer but wish I was enjoying the process a bit more..  

    Now I just need mortgage rates to chill out!  3.6% when I started looking, I'll be lucky to lock 4.1% now.

    Hope this thread helps someone else make a decision!

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  • Eric P.
    OP
    South Jersey, NJ · Member since 2014 · 154 posts · 50 votes
    11y

    Been living in the house a month now.  We locked 4.1 which stinks now that rates are dropping, but hey what are you gonna do.  Very happy overall.  

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    11y

    Curious, look at the HUD, and tell us how much the seller paid in commission?

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