How not to appear like a babe in the woods -1st experience w/FSBO

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How not to appear like a babe in the woods -1st experience w/FSBO

Lynne MacFarlane
Realtor · Los Altos, CA · Member since 2018 · 52 posts · 20 votes

HI BP gang! 

Greetings and Happy Spring!

This is my first time posting and I am new to the BP community & new to real estate investing, but have enjoyed listening and reading about Long Distance Investing and everyone's posts here on the forum. I hope to make new friends here and looking forward to connecting with as many investors (near and far) & maybe someday we can meet IRL. Let's connect!

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I have been using the BRRR calculator and assessing various cities/states (because where I live, it's too expensive to make the numbers work) and finally found where the math works out. I found a listing on Trulia/Zillow as For Sale By Owner (FSBO) but "Please No Agents"...and "seller is related to a real estate agent" and "pre-approval and proof of funds is needed". Rather than tell my agent (because it said, "no agents", I called and wanted to learn more about the property (there was only one property photo & I wanted to learn about existing renter, inspections, etc.) What I got was the daughter/agent of the FSBO and she told me that if interested I had to put 35-40% down as non-refundable deposit, and if she were to do the paperwork/representing me as my agent she would require a 2.4% commission and a $599 Broker flat fee commission, "my team allows the $599. to be paid one time per year for investors." I have never heard of the buyer having to pay an "investor fee to the seller's broker" (she belongs to Berkshire Hathaway/Omaha's Elite real estate grp). I don't know if this sounds right and maybe I should ask that brokerage about this investor fee(?), but because I've never dealt with an FSBO I don't understand the process.

I really want this deal to work, but I feel I should get a realtor who can do an inspection for me (and represent me), but mostly my question here is, has anyone heard of a broker flat fee commission on top of a 2.4% commission? And if I don't have an agent writing the agreement up, do I write it up, and then have an Nebraska attorney check it over?

I feel I was getting scammed. Was I?  

Thanks everyone, 

Lynne

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Matthew Paul
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
8y

Tell them to pack sand .

4Reply
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  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    8y

    Tell them to pack sand .

    4Reply
  • Collin Schwartz
    Rental Property Investor · Papillion, NE · Member since 2017 · 398 posts · 1k+ votes
    8y
    35-40% non refundable is insane unless the potential profit is overnight 10x. If that was the case they would make that money themselves. No deal.
    2Reply
  • Marc Middleton
    Residential Real Estate Broker · Miami, FL · Member since 2014 · 214 posts · 106 votes
    8y

    This just screams shadiness! Another reason why FSBOs don't work. 

    If you are buying from the FSBO, then you pay the agreed upon sales price. You don't pay anyone's commission, otherwise its not a FSBO. You should be dealing directly with the owner or the owner's attorney, not the owner's agent.

    Always have someone representing you, either a realtor or an attorney (or both). Never give a non-refundable deposit, you need time to inspect the house. (Unless its a foreclosure with an illegal tenant and you are going to make a lot of money). 

    Otherwise, sounds like a total scam...sorry!

    1Reply
  • Steve Hannibal
    Rental Property Investor · St Peterburg FL and Omaha, NE · Member since 2015 · 37 posts · 12 votes
    8y
    I would highly recommend using a Realty who is familiar with the area. It won’t cost you any money. It will actually make you money. Just because the numbers work on the BRRRR calculator, doesn’t mean it’s a good purchase. The 35-40 percent non refundable seems like a mistake. If it is true, I would walk away from this one. All brokers charge fees, anywhere from $175 on up per transaction. However, as someone already said, if it’s a FSBO, then there shouldn’t be any fees or commissions paid. You can close a FSBO through a lawyer of just title company.
    1Reply
  • Brandon L.
    Real Estate Agent · Falls Church · Member since 2012 · 2k+ posts · 1k+ votes
    8y

    @Lynne MacFarlane my advice is to run away fast because you said "I really want this deal to work" 

    In my opinion, when you say those words it will be a flop because you are occupied trying to "make it work" instead of listening to the story the numbers will tell you.

    There are millions of properties out there. This one is not special. Find a true FSBO that doesn't have an agent trying to suck a commission out of the deal where the numbers work. Or if you choose to ignore that advice, at the minimum get representation of your own. FSBO almost always will cover the cost of a buyer agent when pressed. Here is a blog post i wrote that might help narrow down the choices for an agent:

    https://www.biggerpockets.com/blogs/5868/52724-im-...

    As to the numbers:

    A. The commission is always negotiable

    B. It's not an investor fee, it's a doc fee that it charged by the broker to maintain your transaction files for a period of years set by the state, or something similar. Every agent I know will cover it if the buyer fusses since they would rather not lose a commission over 300-500 dollars 

    1Reply
  • Lynne MacFarlane
    OP
    Realtor · Los Altos, CA · Member since 2018 · 52 posts · 20 votes
    8y

    Wow, thank you everyone. Yes, I'll definitely take everyone's advice here! 

    0Reply
  • Joe Lambert
    Omaha, NE · Member since 2017 · 50 posts · 29 votes
    8y

    Sounds kind of shady.  I think I would report it to Berkshire Hathaway Omaha CEO, Vince Leisey.  It doesn't seem like a practice that he would appricate. 

    https://www.linkedin.com/in/vinceleisey/

    1Reply
  • Chris Egan
    Real Estate Agent · Omaha, NE · Member since 2016 · 43 posts · 46 votes
    8y

    @Lynne MacFarlane Did you go on to Zillow and while the house was pulled up you hit the request more info tab or contact agent tab? Then the agent contacted you? The agent then said what their fees are to represent you? I see this a lot and it causes a lot of confusion. Zillow will list agents next to a FSBO and when you request information it will go to the agent not the owner. I don't know about the 30%-40% down that seems odd, but from what you described that is what it appears happened. I would suggest getting a good local Omaha agent to help you identify good properties if you are looking to invest here.

    0Reply
  • David Neese
    Developer · Bellevue, NE · Member since 2015 · 41 posts · 19 votes
    8y

    The add on of $599 is an Omaha realtor thing.  There is a very well known team, top in units sold in Omaha, that adds 1,000 but they often lower their listing commission.  My personal feeling is the fee isn't right but it is super common in Omaha.  Some only charge 299.  The seller and buyer get hit with these.  I am sure Omaha isn't the only market that does this but where I invest in TN that is not a practice.  

    The 35-40% non refundable deposit sounds pretty bizarre and I would look elsewhere for a deal.  

    A lot of FSBO non-investor sellers have just weird ideas about how real estate deals should work. I have had people thinking since I am a cash buyer that I was going to bring a big bag of cash and we were gonna sit around and count it out like we were doing a drug deal.

    3Reply
  • Lynne MacFarlane
    OP
    Realtor · Los Altos, CA · Member since 2018 · 52 posts · 20 votes
    8y

    @David Neese Hah~ Yes, I like that analogy "Drug deal sitting around with a bag of cash"... lol~ ridiculous, but this realtor really did have an attitude (and I suspect she let it slip that she belongs to Berkshire Hathaway/Omaha's Elite real estate since her email signature was also on her personal email to me, perhaps it was her (expired?) workplace. Her photo is still up on their website. 

    @Collin Schwartz Yep, definitely no deal... plus, she wasn't polite (minus points!) It's amazing how just being kind can go a long way! I've met several great folks at my Meetups but she probably viewed me as someone she can scam (without consequence) because I'm remote. The great thing about online is there is transparency.

    @Matthew Paul I like that expression, but I've never heard of that one - does that come from the Indiana Jones, 'switching sand bags' as weights in replacement of a gem stone/chalice scene? (Maybe I'm mixing movies and it was Monty Python Holy Grail)

    @Steve Hannibal If it's a true FSBO then she shouldn't misrepresent herself this way.

    @Marc Middleton Thanks, yeah... slim shady business, non-refundable deposit... would you ever do that? Must be tough in Florida! :) 

    @Chris 

    @Chris Egan I contacted the homeowner (from Zillow) using the phone number, and the owner's daughter/agent was the one who told me should could represent me on this deal (and others). Why would any agent tell their prospective client that they will be paying for their brokerage chair fee - ridiculous. She wasn't professional, and thank you @Joe Lambert I was thinking of writing her a Google review (I did call Berk Hath office and left a message), but she just wasn't professional.  

    0Reply
  • Account Closed
    Downers Grove, IL · Member since 2017 · 366 posts · 165 votes
    8y

    Sounds like the seller is a moron, hiring idiotic offspring to represent them and than pretending to be FSBO. I am hearing RE license law violations in gross. As my old my old boss use to say, people are entitled to be stupid, and you should not attempt to deprive them of their stupidity, accept them for who they are. I would run also.

    1Reply
  • Bjorn AhlbladPro Member
    Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
    8y

    @Lynne MacFarlane FSBO typically have stuff going on.............overpriced, under disclosed, often unprofessional. There is a reason it was not listed with a realtor. How and where we spend our time largely determines our success. Time to find a real deal. This one has all the hallmarks of a time waster. All the best!

    1Reply
  • Thomas Manning
    Real Estate Agent · Bonita Springs, FL · Member since 2016 · 63 posts · 22 votes
    8y

    NEXT!

    1Reply
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