Buying Off Market Without an Agent?
So I found an off market deal on a duplex. It is being marketed basically as a turn key deal...they purchased a foreclosure, did the reno, placed tenants, and would do the property management. The numbers on it look good and the asking price is a fraction below market price.
The seller is a licensed agent and is adamant that we do not use a buyer's agent since this is an off market deal and they will not pay commissions. However, I am getting nervous about all the details that I am not familiar with. For example, the purchase and sale agreement template they sent me did not include a financing contingency. I don't know even know what else to look for.
Can I hire an agent to simply draft the purchase agreement? Can I negotiate a price with the seller and then offer to pay more to cover the agent commission? What would you do?
Why don't you find a real estate attorney to help you with the purchase? In my area they will assist with the process for a flat-fee.
Thanks @Andre P. I will reach out to my attorney. I'm afraid they will charge hourly. I also am not sure if my offer is accepted so I don't want to pay a high attorney fee for nothing. One nice thing about an agent is that the commission is only paid if the deal is closed. I may try to negotiate a reduced commission fee and cover that as part of the purchase price.
I second talking to a local RE attorney, you can have them look at the contract and or provide you with one. Or, you can do the research yourself. There are plenty of contract examples on BP or the internet that people use all the time, whatever you feel comfortable with. You probably want a financing and inspection clause in there. As to your question on offering to pay more for an agent; I don't think you need to do this unless you want to and see value in it. It's going to cost you at least 3% of the purchase price to do so. I would probably make sure to get an inspection on the house for major repairs, understand the market value of the house (agents can help with this for free as a way to incentivize you to work with them, or you can do it yourself using redfin recent sales). Also have a title company perform a title search. You can find title companies who will provide this service for free, again, to incentivize you to work with them to close the deal.
Thanks Michael Lucero ! Would you be willing to send me a contract that you like? I have not found anything online for free that I liked yet.
Nicholas, you need someone on your team, locally, who can watch out for possible pit-falls for you, in my opinion. An Attorney does not typically to look at the property. Besides, on the west coast we use realtors, not Attorneys to represent us for transactions, unlike in Wisconsin. Realtors are going to go check out the property for you, draw up an agreement that protects you with all the appropriate contingencies, etc. The only problem here is that YOU would be responsible for paying the agent. Looks like the Seller does not want to compensate a Buyer's Agent. I always say, "Buyer Beware", when a seller (especially a rehabber) is telling you not to have an agent represent you. All too often Buyers get taken advantage of in these situations when you do not have someone in your court looking out for you. If this is a group you have worked with previously, or you know someone who has had a good experience with them, then I would possibly consider it. Your nervous feelings are probably your gut speaking to you, telling you there might be something not quite right. I always recommend the buyer write the contract that meets THEIR NEEDS on THEIR TERMS!
It's not unheard of for Sellers (Wholesalers) to not want to pay the commissions, but perhaps talk to someone who works with these sellers on a regular basis.
Another good tip, if you do not work with a Realtor, is be sure you have a really good Title Company to work with. Make sure it's someone who is working for you and taking good care of title searches and ALWAYS BUY TITLE INSURANCE on any property you buy.
Good luck! If you'd like to chat live, call me.
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Real Estate Agent NV (#S.0177579)
- Fathom Realty
Originally posted by @Nicholas Q.:
The seller is a licensed agent and is adamant that we do not use a buyer's agent since this is an off market deal and they will not pay commissions. However, I am getting nervous about all the details that I am not familiar with. For example, the purchase and sale agreement template they sent me did not include a financing contingency. I don't know even know what else to look for.
So basically a professional seller of coins/baseball cards/cars/trinkets/gold/jewelry is demanding that you do not have your own professional to evaluate the deal? If you think it works and you want to pay your own agent that is fine too, if he is still against it, then run away.
As far as those that say have a lawyer do it, everyone I have dealt with made it clear they were not making a determination on the value just the language. I will fully admit that lawyers in Seattle may run comps, go through inspection reports, place value on extra square footage and make determinations on rents and forecast growth in an area. I just don;t know because I do not live there. They may know and help you to determine if that price is solid or if one sold down the street at 75% 3 days ago. I don't live there so that could be the case. If all you care about is the language of the contract and the rest is solid, then go for it.
@Nicholas Q., although the selling agent is insisting you not use a buyer's agent because they don't want to pay fees, that doesn't mean it's in your best interest.
Hire an Realtor with an ABR designation to represent you in the transaction. It sounds like it's one of your first ones. The ABR is (Accredited Buyers Representative). They've put in additional time and received training on representing buyers. If you can find an ABR that specializes in investment property, all the better.
You can always increase the purchase price slightly to accommodate the increased expense. It's a good way of protecting yourself.
If the house is in the WA area, direct message me and I'll give you a referral to a great Realtor who also is an investor. She would be a great resource.
It is understandable why Investors flipping a duplex would not want to give a realtor a 6% cut off the top. They are expecting to sell to investors, who typically are fairly sophisticated, as opposed to a first time buyer. A lot of the property management firms do sales internally. A real estate broker is typically prohibited from practicing law, so they must use standard contracts pretty much only altered in filling the blanks. Our state has a tax funded site with the standard 1-4 family property purchase agreement on it. A buyer would typically make an offer using that contract. You could have an attorney help you fill it out, explain it to you and make sure the financing contingency is "filled in" correctly and provide wording (if it isn't already there) for an inspection contingency. You do need to know who usually pays what in your area...does the seller provides title insurance and survey? A realtor might walk you through it for a flat fee, the ones around here are very protective of "their" 6% but one with foresight might see future business and work with you.
Nicholas.
Just like @Andre P. said. I would hire a real estate attorney to take care of that for you. He will have your back and protect you. Yes it is going to cost you a chunk of change but you should be conservative and play it safe. There are plenty of deals out there. If you are nervous and your gut tells you something is off. Pass on it and on to the next one.