making a cash offer without a realtor

33 Replies

Hello everyone.

We have a great realtor that we work with, but we are also interested in making an offer for a house that is not currently on the MLS or up for sale even. I know that people do this everyday, but I wanted to hear your advice for making a cash offer on a property (in Pennsylvania, especially) using a real estate attorney or other approach. We know the neighborhoods pretty well and have information from the county websites as well as some experience, so we would like to try this approach on our next purchase. WDYT BP?

I do this all the time, but know the areas very well and know what the properties are worth. You said you'll be using a real estate attorney? 

Thanks for your reply, @Antoine Martel . Yes, we are thinking of doing the purchase with an attorney. We don't have a particular attorney in mind yet and are trying to learn more about how people go this route before we pick one. Can you describe your process a little bit? thanks

Originally posted by @Karen S. :

Thanks for your reply, @Antoine Martel. Yes, we are thinking of doing the purchase with an attorney. We don't have a particular attorney in mind yet and are trying to learn more about how people go this route before we pick one. Can you describe your process a little bit? thanks

We buy properties for all cash without an attorney or anything like that. We just find deals on the MLS or off market and work with the seller or sellers agent. No need to get an attorney involved in my opinion.

@Karen S.

You do not need either agent or attorney to make an offer in PA. I have my agents license but I often make offers for off the market properties without using my license. Also I'd say an attorney fees would be higher for a real etsate transaction that an agent.  Is there any reason you want to use an attorney for this specific deal? 

Hi Karen- I’m up in NE PA and closed on my second cash deal 2 months ago. The process was fairly simple and worked out great. The owner listed the property via newspaper and after reaching out to his Ad and taking an inspector through the building, we agreed on a price.
I then called the title company that did a previous deal for me (with a realtor) and told them I was buying a house direct from a seller without realtors.
They sent me a boiler plate sales agreement which I filled out and sent to the seller. He signed it and sent it back to me.
The rest was like any other closing, we ran title and 10 days later met at the title office. I provided my title company a cashiers check and they provided the owner with his check.
Done deal 😁
Is there anything specifically you were wondering about?

@Karen S. I don't know your local laws but in Colorado it's cheaper to use an attorney. In my case I was the seller. The lawyer drew up the offer to purchase ( around 500 dollars). Buyer paid for the appraisal, and we split closing costs at the tittle company. It was painless and easy. RR

In Pennsylvania, you don't need a real estate agent to make an offer. In PA, you don't need an attorney to make an offer.

You need a contract and a seller willing to agree to the offer you make with that contract. Take contract to your favorite title agent to handle settlement.

That's maybe a bit of an over-simplification but you don't see any mention of agents or attorneys. Now, that does not mean you can't use an agent or an attorney - just you aren't required to.

@Karen S.

A lot of folks already gave good advice. Here's what I would add: 

One other factor to consider is the difference between how you pay a realtor versus an attorney. Most realtors work on a contingency basis --- this means that they don't get paid until the deal closes. By contrast, most attorneys charge hourly --- this means that you have to pay the attorney even if the deal falls apart. Even attorneys that work on a flat-fee basis will often include limitations on how many transactions he or she will take a look at for the flat fee. 

The above means that your work style needs to change between a realtor and an attorney. This is critical to minimize both your legal fees and your attorney's willingness to work with you. 

Another factor to consider is the property price. Because realtors (and brokers) work on a commission basis, the amount that they get paid increases depending on the price of the property. That's not always true with an attorney --- while it is true that certain properties will cost more on legal fees, there is no inherent reason why a $1 million SFR is going to take more billable time for the attorney versus a $100k SFR. So it's not always obvious what option will cost more.

Finally, if you are interested in buying multi-family units, you will want to make sure that your attorney/realtor understands the due diligence required for buying a rental. It's interesting, for example, the number of new investors I meet that say that their attorney/realtor did not advise them of the possibility of getting a tenant-estoppel certificate. Now I'm not saying that you should never close a deal if you cannot get a certificate. But I do think that realtors and attorneys need to make their client aware of certain options that they can take to protect themselves --- in many ways, their job is to help you make an informed decision. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it as legal advice. Always consult with your attorney before you rely on the above information.

@Antoine Martel Hi - I am new starting out, what advice do you give for finding deals off market?

@Mike Dorneman - thats beuatiful, I wish I could do that, trying to learn as much as possible to get to that level, sounds like it went very smooth.

@Isaac El , search the site for blog and forum posts talking about Driving for Dollars, Craigslist, and using Direct Mail.  You can also use a wholesaler.

@Karen S. you can use an attorney or a title company to handle the closing. You will just want a purchase contract drawn up by a lawyer that covers the contingencies that you'd like. 

You'll also just want to make sure that your buyers agency contract with your agent represents that you can buy properties off market and that they are not due a commission. You don't want someone trying to claim a commission on something where you did all of the work (even though I don't think that most would). 

@Jody Schnurrenberger thank you Jody, I have started driving for dollars, I know a lot of people buy lists, but I was thinking of making my own list, not sure if thats stupid or smart, but every week adding 50 - 100 properties it will get big quick, but atleast not wasting money sending mailers on waste, thinking this way it will be a leaner list, and better than industry average of 1 - 2%, again I have never done a direct mail campaign and have been getting lots of helpful information here, anything you can give me for advice, greatly appreciated.

I would find a good title company that you plan to use for the title work on the transaction.  They may have someone in house that could work on a purchase agreement for you or refer you to a professional who could draw one up for you.  I have done this before in my area and it was easy and relatively inexpensive.  I would not recommend creating an agreement yourself without consulting legal guidance.  You want a strong purchase agreement that will protect both parties in the event that anything goes wrong with the transaction.

Most title companies in my area will give you a free FSBO purchase agreement that you can use. Not sure if your area is similar, but hit the phones and call a few to see if they have one. I agree with most of the other comments in that you don't need to involve an attorney until you get the property under contract.

This discussion seems to be about two different aspects of a transaction:

1. A real estate agent will help you find, research, and negotiate the purchase of, a property.

2. An attorney or title agent will handle the closing of the transaction, collection of taxes and fees, and disbursement of funds, regardless of whether you use a realtor or not

Since you've already found the property, you don't need help with the finding part. So the question becomes: How are your research and negotiation skills?

I'm a firm believer that a great real estate agent will usually more than pay for the cost of their commission by providing you with market knowledge, data to inform your negotiating position and offer terms, negotiating a better purchase price/terms, and often, advising you which deals you should walk away from. (Granted, I'm biased because I'm a licensed agent myself, in addition to being an active real estate investor and property manager).

Note that I said a "great" real estate agent. I'll be the first to admit that (just like any other profession), not all realtors are great, especially when it comes to analyzing investment properties and understanding investors' needs. 

But, I assure you, once you find a great agent, you'll never even think about going it alone again...there's just no reason to. 

On a related note, I hear all the time (and see posted above), "Just work with the listing agent...that way the seller will save on commission and you can negotiate a better price". This is not always true.  The seller has already agreed to pay the listing agent's commission (often 6%) when they signed their listing agreement. 

So guess what: If there is no cooperating brokerage (i.e. buyer's agent), sometimes they just keep it all*, rather than splitting it up with the buyer's agent!

This financial incentive, combined with the fact that the listing agent is contractually, legally, and ethically bound to represent the interests of the seller and get them the highest price possible for their property, gives them very little incentive to get you a better deal and save you money as an unrepresented buyer! 

It's kid of like getting sued and then saying, "Nah, I'm not going to hire an attorney...I'll just let the plaintiff's attorney handle my case, that way the other party will save on attorney's fees and settle for less".

*There are certainly exceptions to this rule - An agent can legally and ethically can handle both sides of the deal in most states with a limited form of representation (typically called a transaction broker, as opposed to a single agent for the buyer or seller), or by continuing to represent the seller and having no agency relationship with the buyer.

And in some cases, a listing agent will have a variable commission structure, where they agree to one commission rate if the buyer is represented (6% for example, 3% for each side), and a different commission structure (5%, for example) if they find the buyer themselves - creating a win-win scenario (seller pays less, listing agent earns more). As a buyer, this tends work out if you're already working with a buyer's agent, and he/she happens to have a listing you're interested in.

The moral of this story being: Be an informed buyer, understand the different types of agency relationships, and understand what relationship the agent has with you and the seller. Never assume they are looking out for you (as the buyer) if they are the listing agent, and don't just assume negotiating without a buyer's agent will automatically save you money.

I just bought a house without agent or lawyer, I am close friends with the seller, fact I am buying a house I managed. That was huge I was able to knock off 12K because of no agent he agreed to my wholesale price on a grade A home.

I think with today’s internet amount of good info is out there. Most seasoned investors can easily buy without an agent, lawyer.

Thank you so much everyone for your comments. We are seasoned buyers and in fact, we are pretty good at inspection. The low cost of the properties we are interested in, together with the desire to make offers on off market properties, led us to this strategy. Some custom software we developed is helping us identify the prospects (typing for dollars, I guess). We are ok at negotiation-- possessing the most important skill which is the willingness to walk away. I think we are going to give the non attorney non agent off market real estate purchase a try. off to locate a good title company...I guess i will be lurking through BP!

one additional question..we have in the past had a buyer's agency agreement with a realtor. I don't think it was an indefinite agreement, I will have to look at the paperwork. How long are those agreements typically written for, BP friends?

I'm selling 2 FSBOs right now.  To anyone that thinks having a buyer's agent is free, I can tell you it isn't.

My price is fair at $226k and I know I could have listed it for $239-$249 but didn't want it tied up with a listing agreement this time of year.  I just want a buyer to take care of their own smalls because I'm busy and don't want to do it anymore.

In my CL and Zillow ads I said - 'if you have a realtor, you get to pay for them.  Need closing costs?  Just add your extras to the price, there's room and it should still appraise fine.

I gave interested buyers the standard PSA (with the seller stuff and parcel # filled out) and the seller's disclosure as required in WA.  

My buyers went and got an agent and want $5k in closing costs, so they offered $236,500.  The agent submitted the exact same form I gave them the day before.  The place needs a new roof in a year or 2.  Instead of having money for that, they are paying their agent $6,000.  

It will take them a few years to pay down their mortgage the $6k they paid to have their hand held.  Nothing else is different because they are using an agent whatsoever.  Hand holding is expensive these days!

Not many FSBOs will price their property right or have the proper paperwork and disclosures ready to go, but if they do, save yourself some money and buy solo once you have some experience.   I would rather have given the buyers some equity or help with the roof, but it was their choice.

@Isaac El , when you get to the direct mail portion of your plan, maybe this will help...

http://www.biggerpockets.com/renewsblog/wp-content/uploads/2015/06/UltimateGuidetoDirectMail.pdf

@Karen S. - an exclusive buyer's agency agreement should either be property specific, or have an expiration date. A few months to a year is probably typical. But there can also be a protection clause after the agreement expires... So you are correct that you need to review your paperwork carefully (ideally before you sign it ☺).

Good luck with this acquisition. It sounds like you have a sound game plan.

Originally posted by @Mike Dorneman :

Hi Karen- I’m up in NE PA and closed on my second cash deal 2 months ago. The process was fairly simple and worked out great. The owner listed the property via newspaper and after reaching out to his Ad and taking an inspector through the building, we agreed on a price.
I then called the title company that did a previous deal for me (with a realtor) and told them I was buying a house direct from a seller without realtors.
They sent me a boiler plate sales agreement which I filled out and sent to the seller. He signed it and sent it back to me.
The rest was like any other closing, we ran title and 10 days later met at the title office. I provided my title company a cashiers check and they provided the owner with his check.
Done deal 😁
Is there anything specifically you were wondering about?

 Perfect advice right there. All you need is a written agreement and a title company. You don't even technically need a title company, but in 99% of cases it's a good idea and makes the most sense.

Haha @Jeff Copeland. I agree completely...will get that agreement out. I know I read it and I can't believe I would have signed anything indefinite. I am 99% sure it was for that property only, but could have been for a short period of time. It's been more than 6 months and I think it's over but will make sure before making a move. Looking for a title company now! I have a couple of properties in my sights..but as so many here at BP say...letting myself be held back by fear. planning to overcome that fear in the next couple months.

Hi @Karen S.  !  We send unsolicited, real cash offers to homeowners.  We pull homeowner data from the County Assessor (I've used both RealQuest and Data Tree) for the type of properties in the areas we want and send ALL owners an offer.

We scrub out the properties with a mortgage and spend a considerable time on pricing.  We explain in our offer letter to sellers that we are serious, not agents/brokers, we pay cash, and are prepared to close in as soon as x days. We enclose a Purchase Agreement as well.  Then we sit back and wait for the serious, motivated sellers to call us.

Works like a charm!

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