Off Market Purchase - Seller Requested No Realtors

10 Replies

Hello everyone. My wife and I have been looking for our first flip in Denver and it has proven to be a challenge to find a good deal. We have recently come across a potential deal with a neighbor that is looking to sell their home, as is, for a big discount. I have used the BP fix and flip calculator to determine it is a good deal and definitely worth pursuing. The seller has requested that no Realtors be used, for the obvious reason of saving a few bucks. We are prepared to purchase it as is and we have already had our contractor (whom we trust very much) walk through the property and determine it is likely a lipstick rehab. I have read several old forum posts about purchasing without a Realtor and I have noticed many real estate agents caution against it for one reason or another and then it seems investors, particularly experienced ones, say its no problem to purchase without a Realtor. 

I have a few questions:

  1. 1. What are the major concerns in not using a Realtor on either side of the transaction and is there any way to help avoid them?
  2. 2. What are the necessary steps from the buyer's perspective in this type of situation?
  3. 3. Is there a good place to find purchase contract templates to use?
  4. 4. Do you have personal experience in a similar situation that you could share with us?

As always, thank you in advance for your insights!


-Cole

Hi Cole,

The purpose of a real estate agent in Colorado is to have representation in the transaction from someone with with familiarity with the process and applicable laws.  For more experienced investors, one could argue that the benefits and agent provides is diminished.  Even for an experienced investor though, an agent handle the transactional details that take the burden off of the investor and allow him or her to focus on other more crucial aspects of the business.  

Since you're new, I'm sure there are several benefits to having an agent represent you in the transaction.  If you want to hire one and pay the agent yourself, maybe the seller wouldn't mind going along with that?  Just a thought.  

That pretty much answers question 1.  For items 2 and 3, check the Colorado Division of Real Estate website (do a search for colorado division of real estate forms).  You can find a purchase contract and other useful forms there.  To be clear, agents are required to use these forms, but you are not.  You are free to use any purchase contract form/language you and the seller agree to use.  That said, I wouldn't recommend drafting your own purchase contract without getting some expert and/or legal advice first.  As with any legal document, you can get yourself into a mess of trouble if you not careful.  

@Jason Richards , thank you for the reply. That is very helpful information. We have used a great Realtor in the past and we certainly understand the value, but we are hoping to negotiate a good price and this seems to be a sticking point. I love the idea of paying the Realtor ourselves, that's worth considering further. 

Thanks so much for taking the time to share your insight. 

You can take what I say with a grain of salt, since I'm an investor/realtor, but I hear stories like this pretty often. Essentially- "I don't want to pay a realtor, they're worthless, but I don't know what I'm doing, so can someone help me do what a Realtor would have done, except for free?"

A realtor (at least a good realtor) does more than protect you and push papers. A good realtor will find you leverage where there is none. They'll protect your interests and make sure the transaction closes smoothly, legally and in the way and within the terms that you agree upon. What would you do if you get a couple days before closing and the seller changes their mind? How would you protect your interests? What if you discover a body in the crawlspace or an easement through the front yard?

If you and the seller have already agreed to terms and you aren't sure how to proceed, honestly, you need a Realtor in some capacity. I'd ask friends and family for recommendations and see if you can find a quality realtor who will take care of all of the paperwork and transaction management for you for a flat rate. Maybe you pay it out of pocket, maybe you split it with the seller. It certainly doesn't have to be a 6% commission, but there is value in those services- that's why you are asking this question in the first place. 

Food for thought- I work with lots of very wealthy investors. They don't think twice about having representation in a deal- they have a team that they trust to do their jobs and take good care of them. I also talk to lots of tire kickers who think they can handle everything, but most of them never really get anywhere because they don't build and value their team. 

In any occasion, best of luck, hope you get yourself a great deal here!

@Corby Goade thank you so much for the input! I would honestly much prefer to use a Realtor but I’m just trying to understand the options because this was the first thing the seller communicated. Just in the first two comments on this post I have gotten some great info. I just don’t want to miss out on what I believe to be a great deal because of some aversion to a Realtor.

The overwhelming recommendation from forums and books has been to use a Realtor because the value much outweighs the cost. I certainly agree, but I’m trying to learn. You don’t know what you don’t know so I am thankful for the info!

wholesalers close deals without agents every single day. All you need is a good purchase agreement and a good title company/closing attorney. The title company/closing attorney can provide you the purchase agreement and walk you through or take care of the transactional details needed. 

Originally posted by @Cole Leonida :

@Duane Alexander thanks for the other side of the coin. Anything I should look for in a good title company/closing attorney?

If you’re in a good local Facebook group for real estate investors, your local reia may have a group, ask them for recommendations for a good title company or attorney. The people that come up multiple times, that’s who you want to talk to. Good luck and congrats on your deal.

@Cole Leonida depending on your experience and understanding of the process (and the sellers) a realtor may be worth the money, or may not. You can offer a transaction broker that would cost half (or a fraction of) agents on both sides.

The transaction and process is not rocket science. Everything is good until it isn't, and you are left holding the bag. Agents shepherd the transaction and protect your interest. Just today I was at a property inspection for a client. She had no idea to do a sewer scope; I had her do one. We found a broken line that will be about a $6k repair. The seller is stroking that check instead of her.

While touring another off market property with a buyer, I noticed the tell tale signs of meth. My buyer had no idea, but wanted the deal. Well it tested hot. The mitigation alone could have bankrupt him if he bought it without knowing. 

You are an FA. What do you think about the robin hood app and people investing in meme stocks? Sure people can click the button, but do they really know enough to protect themselves? Buying a home is the largest transaction most people make. Why take a risk at that level?