Cash close...do I need a buying side realtor
Member since 2020 · 28 posts · 4 votes
Hello,
I'm going to purchase in full my next property essentially with cash (HELOC funds already available).
If I find the property myself, what benefit does having a realtor on my side provide?
Thank you.
@Jimmy Lin the selling agent getting both commissions is also what I was thinking about. Glad to know you've done this and it did make a difference.
The cost is the same either way. The difference is if you have no realtor, then nobody is representing you. There is nobody to negotiate on your behalf, because you are placing the offer directly with the sellers agent, who is representing the seller. They even have you sign paperwork acknowledging this.
A realtor really doesn't help with mortgage paperwork. The title company explains what you are signing. Even if you pay cash, there is paperwork to sign, although less of course. Since COVID, agents may not even show up at closing.
A realtor can help walk buyers through the mortgage process, but my realtor has nothing to do with my financing. I have done both cash and financed through my realtor.
The value I see with my realtor is they can help you find deals, estimate fair market value, write up offers, negotiate with sellers, work through inspection issues and negotiation, accompany you on a walk through and work through any closing issues. I have had issues at walk through several times that required last minute negotiations. My agent has gotten in heated discussions with sellers agents over things like covered-up carpet damage, dirty property, belongings left behind, etc. Even after deals are done, I have had to negotiate for covered up problems. I had a water heater go out right after closing. I had cat pee smell covered up. In all cases, my agent negotiated extra money for me. If you use the sellers agent, they will not fight for you like that.
Bottom line if you plan to do more than one deal, get an agent to build a relationship. If I contact my agent about a property for sale, they get me in to see it within a few hours. If I want to write up an offer, they will do it at 10PM at night. Relationships are everything in this business.
If you are always using different agents, the don't know you from Adam. They will gladly take your money and do nothing extra.
I guess getting the right forms together. If you've already found it and know what you're doing, then broker not much use at all.
You have title company to address those issues?
@Steve Morris I do not have a specific property in mind yet. My intent is to have the property inspected once I find something and also to pull the title info just to make sure there are not additional leans on the property. I'm not sure what else I would need to do. I'm not opposed to using a realtor, but I guess I thought they provided more use in a traditional mortgage purchase and not nearly as much use in a cash close. I know the stacks of paperwork I've had to sign with closing with a mortgage purchase and I've seen the couple pieces of paperwork that were required at a cash closing. Just looking for some insight either way what the realtor might provide or why having one may not be worth the added cost.
Hello,
I'm going to purchase in full my next property essentially with cash (HELOC funds already available).
If I find the property myself, what benefit does having a realtor on my side provide?
Thank you.
With a cash buy, you won't be getting an appraisal, so having a good grasp of property value is paramount.
Its not unlawful to not use an agent of course. If the property is listed, there usually isn't much benefit to going solo.
I buy solo off market all the time, but back when I was buying listed property I was more open to having representation. You may or may not get a better deal, depending on if the LA commission is fixed or not.
@Lance Thibault I think the whole point of getting a buyer's agent is for them to find you a property. You finding the property yourself defects their whole purpose. If you are keen on finding your own property, not having an agent is actually advantageous. If you are looking for properties on the MLS, Zillow, Trulia etc, typically there would be a listing agent on the Seller side already. The listing agent would have to sign a dual agent agreement with you for you to send an offer. You now have the Seller's agent doing your paperwork. Best of all, the agent will consider your offer much more since they will get both sides of the commission.
I have bought all my properties this way so far. However, I am planning to start networking with agents so the deals can come to me.
As a Realtor for the last 10 years I can tell you that there is all kinds of reasons you need a good agent on your side. First, all the listing agents you might call to show you their listed homes (or off market properties they're wholesaling or whatever) are working for the seller, or themselves in the case of the wholesaler. If you're buying on market properties, your agent gets paid by the seller, but even if you're paying them for their service when using a wholesaler, it's well worth it. Let's say you get a list together of homes you want to see, you can spend your time calling them all and trying to get in touch with them all and getting them to meet you to show you the house individually, or you can have your agent make all those calls, figure out how to show them all to you and do it in one day, without your agent you wont see them all in one outing. Your agent knows things that a listing agent will not tell you, about the neighborhoods, and surrounding areas. Imagine you find several homes that seem to interest you. You have listing agents show them to you. Now you have no professional to discuss the various houses with to make an real informed decision on which one to buy, several seem like such good deals, what do you do??!!! With a professional fiduciary on your side, you can confidently make a much better informed decision. Not all agents are as good as others though, so if you're new into investing in real estate, find a good Realtor. I used to tell my high school students this and it is good advice for all of us at all times - 'You do not know what you do not know' which is why 'true wisdom comes in knowing you know nothing' - Socrates
@Steve Vaughan there is no requirement but I should have said that I will also still get it appraised. Thank you for brining that up.
@Jimmy Lin the selling agent getting both commissions is also what I was thinking about. Glad to know you've done this and it did make a difference.
@James Sutton in this specific case there are not that many properties that meet my criteria, so scheduling is not an issue. However, since I'm buying out of state the point about knowing the neighborhood is a valid one and something I'll have to consider. Between a friend who lives close enough to the area that he can tell me where I definitely should not buy and what I can find out online it just seems like I can learn enough to make an informed decision. It may not be perfect, but finding a realtor that gives me less then exceptional performance is also a risk.
I'm a realtor. The value that some realtors can bring you is off-market deals. Those are brokers that focus on the seller side however work with buyers as well. This is what I do and value provided would be properties that aren't listed online or on the internal database for brokers.
@Steve Morris I guess I thought they provided more use in a traditional mortgage purchase and not nearly as much use in a cash close.
Well, at best brokers can shepherd the transaction thru consummation and anticipate all the bumps and make it so you can focus on making the big decisions like "Is this property right for me and will it work".
At worse, they're parasites. Like I tell people NEVER sign a Buyer Rep agreement, since 90% don't do anything besides pop up at close with a commission demand.
In any case, get with title and have them explain the title exceptions. Even if it's cash, make sure you get an inspection. You're looking for anticipated CapEx/MajorRepairs/MoistureInvasion. Then do leg work on how you're going to get your upside once you own it (ie rent increases or cutting unnecessary expenses.)
Good luck, you'll learn somethings far more valuable that getting/owning a property.
I just do not understand the point in trying to do it without representation. Seller pays your agent so why would you not want your own agent? People are skeptical of an agent that will represent them and have duty to them, but not about the listing agent?? Do investors really have that low of an opinion of agents that they prefer to risk dealing with one that by law is representing the other side? You guys also realize there are plenty of listing agents that WILL NOT show you their homes, and WILL NOT do both sides of a deal, as they see it as unethical. Why would you not want an agent that will pick up the phone every time you call, and answer little questions when you're not in the midst of a deal. I agree, some agents are more like parasites, I am suggesting you spend a little time finding a good Realtor, that way you can save time later by having them do their job for you. If they turn out to be a parasite, find a new one, eventually you'll find a good one. To me that's a better mentality about it than just saying to yourself up front that having a buyer's agent is useless, no matter the circumstances. Look at it this way, if they save you ANY time at all, and they cost you nothing, should be worth it! PRO-TIP: The commission is only variable if the listing says that the commission is variable, so you know upfront if you can possibly get more off the price by not using an agent yourself, the vast majority of listings are not variable commissions. What the MLS says goes, an agent is not allowed to negotiate the commission offered by the listing broker, at least here in TX. Good luck on all your endeavors!!
@Jimmy Lin the selling agent getting both commissions is also what I was thinking about. Glad to know you've done this and it did make a difference.
The cost is the same either way. The difference is if you have no realtor, then nobody is representing you. There is nobody to negotiate on your behalf, because you are placing the offer directly with the sellers agent, who is representing the seller. They even have you sign paperwork acknowledging this.
A realtor really doesn't help with mortgage paperwork. The title company explains what you are signing. Even if you pay cash, there is paperwork to sign, although less of course. Since COVID, agents may not even show up at closing.
A realtor can help walk buyers through the mortgage process, but my realtor has nothing to do with my financing. I have done both cash and financed through my realtor.
The value I see with my realtor is they can help you find deals, estimate fair market value, write up offers, negotiate with sellers, work through inspection issues and negotiation, accompany you on a walk through and work through any closing issues. I have had issues at walk through several times that required last minute negotiations. My agent has gotten in heated discussions with sellers agents over things like covered-up carpet damage, dirty property, belongings left behind, etc. Even after deals are done, I have had to negotiate for covered up problems. I had a water heater go out right after closing. I had cat pee smell covered up. In all cases, my agent negotiated extra money for me. If you use the sellers agent, they will not fight for you like that.
Bottom line if you plan to do more than one deal, get an agent to build a relationship. If I contact my agent about a property for sale, they get me in to see it within a few hours. If I want to write up an offer, they will do it at 10PM at night. Relationships are everything in this business.
If you are always using different agents, the don't know you from Adam. They will gladly take your money and do nothing extra.
Thank you Joe, many perfect examples of what I was talking about!
@James Sutton I'm not saying I definitely won't use an agent. I've reached out to realtors about getting my foot in the door for off market property. I've expressed to them that I know I'm not going to be their first call since I'm from out of state and a new name to them, nor do I have some real impressive real estate related resume that I can provide them to help ease their mind about calling me. It's no surprise I have not gotten a call yet. I have not signed any kind of agreement, but I have an agent now that send me listed property. The problem is that listed property is moving fast when it's even remotely close to a decent CAP rate. I was going to make an offer on single family home that popped up. I hadn't gotten it from the realtor yet. It had a CAP rate of little over 8% which is not great, but better then the other properties I had analyzed. It went from listed to pending with in the day and I never did get anything from my realtor. This weekend there were 3 properties close to what I was looking for, but none of them have a CAP better then 4%. When I find something I want to put an offer on, my thinking is now I have cash to close and if I didn't use another realtor, I may get some leverage I didn't previously have in terms of speed to close and by providing both sides of the commission to the sellers agent. If I can run the numbers to make my offer, schedule an inspection and appraisal and maybe learn something in the processes, what is the downside to the added leverage? Or is there no added leverage by giving the full commission to the selling agent? It's not that I have a low opinion of the buyer agents,...it's that I have a general trust in people including the selling agent.
To echo the thoughts of of the other agents, you are off base on what real estate agents do or provide value. Its certainly not the lending -- they are licensed to broker the sale of real estate, not financing.
The concept of getting extra "leverage" by using the listing agent is sort of perplexing... So you want to have an unethical, unscrupulous agent --- that you say you have a general trust? Its against the Realtor Code of Ethics for a listing agent to do what you are suggesting, put their commission before the interests of their client, who is primarily the seller. Dual agency isn't even allowed in some States for that reason. Its a huge reason why many people dislike / distrust the agents and the sales industry in general in my opinion.
Other than what you've mentioned, if you are experienced and savy enough to handle a real estate transaction, then perhaps you don't need an agent. Also, if you have the time. I assume you are busy with some sort of "day job." Well, as an agent (granted I do other stuff too), I am available during the day to make arrangements and run things down, even physically during this covid-19 days. Also, during the transaction process, the buyer's agent allows for that extra degree of separation, similar to the reason of having legal representation. Having that extra layer during any back and forth, not just price negotiations can be helpful.
Think about the "phases" of a real estate transaction. You've only presented the pre-contract activities. What about the post-contract activities?
Good luck.
@David M. Who said anyone was "unethical, unscrupulous"...I know I didn't, so don't say I did. I also never asked the agent to put the commission first. Your words, not mine. The selling agent can provide all the info to their client. Are you saying all closings that didn't involve a buyers agent are unethical? If client accepts the offer the closes fast for them and happens to benefit the agent more then another offer, then it sounds like I gave the client the best deal.
Talk to me about the post contract activities. What actions do I need to consider post inspection and post appraisal?
Again, not saying I won't use an agent. Trying to weigh the pros of using one against the potential pros of not using one.
This seems to come up often, but I'll reiterate and leave it at that...
you concurred with Jimmy Lin's post which included "Best of all, the agent will consider your offer much more since they will get both sides of the commission." with your comment: "the selling agent getting both commissions is also what I was thinking about. Glad to know you've done this and it did make a difference."
You also posted: "Or is there no added leverage by giving the full commission to the selling agent? It's not that I have a low opinion of the buyer agents,...it's that I have a general trust in people including the selling agent."
Like I said, it is against the Realtor Code of Ethics for the agent to put their financial interests ahead of their clients. So, using the listing agent as your agent to try to get your offer accepted instead of potentially another better offer is really looking for a professional unethical act. You also mentioned your "...general trust in people..." which I am pointing out appears contradictory to me. Unless this is a philosophical point that you trust people to follow their own self-interest instead of the rules laid out by the trade association that they are supposed to follow to better the industry and service to the clients.
And just to reiterate, creating a dual agency arrangement, if allowed by your State, also can limit the service you get from the agent. It does in my State.
I'll leave it at that. Good luck with your investing.
@David M. to your first couple statement; I'm learning as people reply and doing my best to reply accordingly.
Regarding the ethics, I'm not asking the sellers agent to put their financial interest ahead of their client. You keep reading more into what I've asked then what I've actually said. I'm also not asking that they only show my offer or show my offer before another offer. But if they present the facts of all offers, maybe me not having an agent and closing with cash gives me an advantage over other potential buyers. Maybe the seller and realtor are friends or family. If presented similar offers, maybe the seller opts for the one that allows his friend or family member to benefit more vs the other offer, given that the seller is getting similar results either way. I don't know. Maybe the seller will assume I can be taken advantage of without an agent and will opt to accept the offer over one presented by a buyers agent. There are probably several others reasons that can be made that don't have anything to do with the selling agent having to violate the Realtor Code of Ethics.
If you were in a state that allowed it, would you turn down a cash buyer, with a good offer, without an agent that came to a property you were the agent for? Or do you think you could be an ambassador for the profession and represent your client while presenting the facts of that offer, and if the seller accepted, also make sure the buyer knew what needed to be done to get to the closing on time? I think you could do that without violating any laws or ethics standards. Are you saying you couldn't do that?
@Joe Splitrock I do agree that if you can find a good realtor and build a relationship with them, they can help you find good property deals before you even know they are there. This particular case for me is likely going to be a one off scenario.
I've been working with a realtor since December and I'd say he's been above average so far. Having said that, I already mentioned the one property where I didn't get anything from him and yesterday I found another. I waited till late morning today then I sent it to him. A short time later I got a good response and shortly after that I got back neighborhood videos and more information. Which is all helpful, but who knows if I ever would have gotten it if I didn't send him the property.
You mentioned your agent getting into heated discussions with the sellers agent. Did he/she do this without a prompt from you? Asking because that would be awesome if they did, but my assumption is you had a conversation with your agent and they in-turn had a conversation with the sellers. So I guess why not just have that same conversation directly with the seller or the sellers agent? Why is it better if it comes from another agent? I'm not trying to be argumentative; I genuinely don't understand.
@Lance Thibault
Agents would not make money if we sat around skimming the MLS looking for properties any number of clients would like. The depth of the buyer consultation with your agent will help prevent being sent properties that don't really match what your looking for.
I won't beat a dead horse here as many great points have been raised. What i will add is that you will end up with an agent representing you UNLESS you buy a for sale by owner. Therefore, you may as well enlist a buyer agent to help cover your ***.
A bigger reason to always use an agent is that you have them or their broker as a liable party to making sure things are done correctly...an extra layer of protection that is free since on-market properties compensate from the seller.
If your agent requires a buyer rep agreement AND YOU LIKE & TRUST the agent, go ahead and sign it BUT make sure there is a simple cancellation clause if you decide you aren't a good fit anymore. (Some states mandate buyer agency agreements)
I'm on my phone and not desktop so it's a short response but there are a lot of reasons an agent will protect you...if your in a multiple offer situation and you DONT have an agent, that's a negative because you have no professional guiding you through the transaction. I would pick FHA loan with agent over cash without an agent...
@Kevin Kohler what do you mean you would pick the FHA with an agent over cash without. Are you saying you as a seller? It's my understanding that you as an agent have to present all offers to the seller. Am I wrong?
Either way...why the offer with an FHA (I'm assuming pre-approved and not contingent on approval) and an agent over cash and no agent all other things being equal?
@Account Closed If fully means 100%, no I'm not fully confident in anything I do, including the things I'm really good at. Do I think I can find what I'm looking for without an agent, yes. Do I think I'll be able to get the property under contract without forfeiting my EM? I think I can. No doubt this would all be a learning process for me. I thought it might be worth it. I don't use an agent when buying a car or anything else for that matter and the car dealers certainly don't have me best interest in mind but we get to the finish line.
Because this is an out of state purchase, the odds are in favor of me using an agent; but not 100%. If I was making a local purchase, I'd probably just go for it myself.
I still think the selling agent can be an honest broker taking both sides of the commission while keeping the sellers best interest in mind. We'll see if I feel this way down the road.
@Kevin Kohler what do you mean you would pick the FHA with an agent over cash without. Are you saying you as a seller? It's my understanding that you as an agent have to present all offers to the seller. Am I wrong?
Either way...why the offer with an FHA (I'm assuming pre-approved and not contingent on approval) and an agent over cash and no agent all other things being equal?
Hey Lance, I am saying if I were the seller. A listing agent must present every offer and we do present them. If I know I have another agent across the transaction working with me on behalf of the buyer to successfully get buyer and seller to the closing table, it is more comforting than thinking I could be dealing with an amateur buyer or worse a dishonest buyer that doesn't know what needs to happen. Granted you could know every detail and step, but the seller and the listing agent could never know your qualifications correctly before making a decision.
@Joe Splitrock I do agree that if you can find a good realtor and build a relationship with them, they can help you find good property deals before you even know they are there. This particular case for me is likely going to be a one off scenario.
I've been working with a realtor since December and I'd say he's been above average so far. Having said that, I already mentioned the one property where I didn't get anything from him and yesterday I found another. I waited till late morning today then I sent it to him. A short time later I got a good response and shortly after that I got back neighborhood videos and more information. Which is all helpful, but who knows if I ever would have gotten it if I didn't send him the property.
You mentioned your agent getting into heated discussions with the sellers agent. Did he/she do this without a prompt from you? Asking because that would be awesome if they did, but my assumption is you had a conversation with your agent and they in-turn had a conversation with the sellers. So I guess why not just have that same conversation directly with the seller or the sellers agent? Why is it better if it comes from another agent? I'm not trying to be argumentative; I genuinely don't understand.
Good question. The issues were raised at my prompting. You asked "Why not have the discussion with the seller or the sellers agent?" One word, emotions! If you put a buyer and seller together, it turns ugly, people dig in their heels and no agreement is reached. Having two realtors in the middle adds impartiality, creates separation and results more easily in compromise. If you are trying to negotiate with the seller or the sellers agent, neither is on your side. Your agent can play "good cop" with the sellers agent and leave you in the background as "bad cop". Also keep in mind good realtors are skilled negotiators. They work through problems all the time and know how to find suitable and reasonable solutions.
If you are already working with an agent, it is really best to keep them in the deal. Even if you didn't sign an agreement, it is ethically the right thing to do.