Making offers without an agent?

14 Replies

I'd love to hear from investors who make offers without using a real estate agent. Did you just find a basic offer contract that you fill out and submit? Any pitfalls to making offers without an agent?

I have a real estate attorney who co-owns a title company, so I have closing covered. I'm just feeling the frustration of trying move quickly while having to work through a middle man. My agent is quite responsive, but I know I could be faster if I could cut out the middle man.

I should also mention that I'm definitely considering becoming an agent myself eventually.

@Megan Greathouse  

If those are your feelings, you may want to consider getting your license and representing yourself. There's a pretty long list of reasons why being an unrepresented buyer is a bad idea, at least in my state of California. You may be thinking purely of the property-finding aspect, but there's a lot more to consider.

First off, as an unrepresented buyer, the only sellers who will take you seriously are usually going to be FSBO's, who may not know any better, or scumbags who know they can take wild advantage of you - any listing agent worth their salt is going to see an unrepresented buyer as a tremendous liability and amount of work for themselves and their seller.

From a liability perspective, you probably would have little to no idea what you're doing, which isn't anything against you; most people, sometimes even seasoned investors, don't either. They can crunch numbers and make logical decisions pretty well, but their knowledge on risk management, the contract, and covering their own backside is usually pretty terrible, especially when it comes to technically tricky issues and problems arising within an escrow.

Now, granted this may be 100x bigger of an issue in my highly litigious state compared to yours, but I still think it's important wherever you go.

Additionally, getting rid of your "middleman" might sound appealing, but - assuming you have a sharp agent - it's often about as smart as getting rid of your attorney and representing yourself in a lawsuit, or performing a surgery on yourself. Everything may seem straightforward... and in some cases, it actually may be! But when things go wrong, do you have the skill set and expertise to foresee far-reaching consequences, make the right calls, problem-solve, and protect yourself?

Again, this all comes out of a Southern California mindset, but I think it's pretty valid in any market. I, by the way, don't have a super great opinion of most agents, or attorneys for that matter - I'm referring to the minority within each profession that truly are experts in their field.

Hey @Megan Greathouse I believe @Nick G. hit the nail on the head. 

In any market it’s not about taking the person that you believe is the middleman out of the transaction, or cutting someone out of the deal because you can be more efficient without them. 

The argument lies within thewhy using an agent, surgeon, lawyer, CPA, or financial adviser gets you the leg up in any event. These professionals can be cut out, but then you leave yourself open for lawsuits and a large loss of money! 

When I type professionals I mean these people know details of their chosen profession that their clients don’t, because they are experienced in a vast majority of different scenarios that clients are not.   It’s as if you went to law school graduating at the top of your class and then first day going into court as lead defense for a murder trial, you would lose because you are out the experience and field knowledge.

Also, the big item that I mention above is lawsuit and loss of money. At least in California the real estate professional has insurances and backing from having their license verse another person, which saves them a lot of money if they were to submit a bad contract. These insurances and backing protect agents and not just normal Joes from performing real estate transactions. This is California, but if you perform here without a license it could bit you as a huge loss financially. 

I would suggest a route of completing the classes and taking the test for becoming your own agent to protect yourself and your assets. If that is what you are ultimately passionate about and wanting to do! 

Investors that often think they are building a better mouse trap already find themselves in the mouse trap without even knowing it............... : )

Either the listing agent will be your agent, 85 percent of the time, since 85 of homes sold are listed. 

Or if you do a fsbo, depending on the area, escrow will help you draft the escrow instructions or an attorney. But that is after you get am accepted offer. Am offer cam be written up as a Letter of Intent, very basic, and just going over the major terms. I can send you a sample if you want just message me. 

@Nick G. and @Peter Mckernan ... thank you both for your thoughtful responses. While I can't say I agree that submitting offers without an agent is on the same level of risk as performing surgery on myself, I understand your perspectives here. :) And I feel compelled to mention that, in most cases, I do fully appreciate the benefits of working with professionals. So your comments make me think that perhaps I should speed up my timeline in getting my own license.

@Brian Pulaski , I am looking at some FSBO options and planning to start some direct marketing, so these are certainly areas where I'd like to be ready to make an offer without an agent. How have you made offers on FSBOs? Just a letter of intent?

@Oscar Pinto , I'd definitely appreciate seeing the sample. I'll message you directly. Thanks!

Get your license, doors open for you. As far as skipping your current buyers agent, so long as you don't have a contract with him, you can. Then go directbto the listing agent, ask him or her to write the offer and double end the deal, but cut the commission by a point and reduce the price by a point. Create a slightly larger spread at purchase until you get your license and can self rep. 

I don't get some of these responses. Yeah, I get that they're from California, which is basically insane about everything, but nearly every state has a standard real estate contract form.

I submit offers without an agent all the time. Now, I'm fairly experienced, but I wasn't in the beginning. I did have a good title company (similar to you having a good attorney) that I knew could help me if I really didn't understand some legality somewhere.

However, here's the my state, agents can represent both buyer and seller, and fees come out of the sales price, so there's no real incentive to not use a buyer's agent unless you get some discount out of it. (It looks like Missouri has dual agency as well, but that's just based on a quick web search.) So what I typically do is call the listing agent and tell them I'm an experienced investor, that I'll be submitting an offer, and that I'll do all the work on my side, but if they want to technically work both sides, I want a 2% kickback on the (typically 3%) buyer's agent commission. If they don't want to do that, I'll run it thru some other agent. Most listing agents would rather get 4% on a deal than 3% for basically the same work, so agents typically agree. However, you'll also find that there are lots of really lazy listing agents out there who don't even return calls, so I do also have a friendly agent who'll kick me back 2% at closing if I do all the work and she just has to submit the offer for me. 

@Will Barnard , great thoughts. Thank you! I have already purchased a home through my current agent, so it would just be about not re-engaging in the future. I'm mostly interested in finding off-market deals at this point, but I'm definitely seeing the benefits of just jumping in and getting my license.

By the way, I enjoyed your podcasts!

@Michael Hayworth. Hi Michael. Could you please bullet point the main work items/tasks you are talking about when you tell listing agent "I'll do all the work on my side", for those of us who haven't used this approach before? Thanks for adding so much to this discussion, btw! 

Originally posted by @Jeff Kelly :

@Michael Hayworth. Hi Michael. Could you please bullet point the main work items/tasks you are talking about when you tell listing agent "I'll do all the work on my side", for those of us who haven't used this approach before? Thanks for adding so much to this discussion, btw! 

 Keep in mind that in many states, if not most, getting a "kickback" from an agent without being licensed yourself is illegal for that agent to do. Rather than a "kickback", this method is more properly accomplished by stating to the listing agent, I will come in unrepresented saving your buyer that 2.5% or 3% commission and in return, your seller is to lower the price by that amount. This makes it legal for both sides.

I have done this many times, now granted I am experienced and knew the contracts better than most agents did, however, that is a whole other story. So if you are not experienced, you can do this and simply pay a RE attorney to go over your contract and any addendums to make sure you have not overlooked anything. This should only be an hour or so charge for your attorney to review.