Can I use a buyer's agent to purchase an FSBO?

Question

I found a property on Craigslist that seems like a good BRRR candidate. It is FSBO. I drove to the property tonight and I liked the neighborhood and would like to learn more.

I have an agent I was planning to work with, but aren't most FSBO sellers seeking to avoid paying agents? Do I just email the listing and negotiate with the seller directly?

Thanks!

Kayla V. · Answer

@Matthew Rollo Good to know- I'll contact my agent and have them reach out.

@Chris Mason Awesome feedback- I really appreciate it. Since it's in fairly rough shape, I'm not sure I'll be able to get financing on it anyway. But I hadn't thought about just paying the realtor commission myself. It's listed for only $44K, so it wouldn't be a huge amount of money.

Greg Jeanfreau · Answer

You could split the commission with the seller and add 1.5% to what they are willing to pay to pay ONE side of the commission. Or you could ask the seller (or have your agent ask the seller) to bump it up to 2% and and you pony up 1-2% to bring it closer to 4. You are correct that when the FSBO seller says they "protect agents" and are even willing to pay 3-4%, it ultimately ends up becoming a dual agency level of work for the agent without the luxury of getting paid accordingly. Of course, it also depends on the price point for the agent.

Chris Mason · Answer

Hi Kayla V.,

Here is the problem and/or series of conversations you are likely about to have. Warning, block of text incoming. :)

• Seller thinks they are clever and bla bla bla, and doesn't want to pay your agent the full 3%. They want to pay, at most, 1.5%. You already know they think they know-it-all and/or are really cheap; they self-selected into that group.
• Your agent points out, correctly, that her taking a pay cut is backwards because FSBO deals are typically about twice as much work for the agent as standard transactions. So your agent may want 4% even if 3% is normal in your area, which honestly is the fair price IMO considering what pains in the butt typical FSBO people are (note: 'typical' and 'all' are not the same thing... but you have no way of knowing until you get into it).
• Frequently, the FSBO seller is also delusional about price, difficult to negotiate with, etc.
• If your lender is someone like me, they may simply refuse to do it all together unless there is at least one agent involved to do all the agent-ey stuff that isn't my job (and that my license does not cover), or unless you are a seasoned REI that's got a half dozen transactions under your belt (yup loyalty is a thing), or unless you ask really really nicely. 
• If the seller isn't willing to pay the agent's fair market commission, you may have to come out of pocket to cover it. Which brings us to "oh why don't we skip having an agent."
• IRL example of FSBO no-agent-anywhere transaction issues: On one FSBO deal a while back, it took them a month and a half to get me a basic contract that was valid and fit for underwriting. Do I start telling them how to write the dang contract like I've seen it done 1000 other times (an activity my license technically doesn't cover), do I start selling the terms and conditions of the transaction and the house so they stop with this back and forth BS over $250 (two things that my license REALLY doesn't cover), or do I start extending the rate lock at a cost of 0.125% of loan amount per week until they figure it out via trial and error (I'm licensed to do this, but it sucks)? Every option for me there is a bad one. And the contract is literally the simplest part of a real estate transaction!
• Even experienced REI that never use a buyer's agent, from what I've seen, almost always use a listing agent. It's worth having at least one agent, no matter who brings that agent to the transaction, I don't care what the FSBO person read on a conspiracy theory blog.
• You can effectively finance the agent's commission, if you like. $100k / 0.97 = $103,092. If that's the contract price and the agent is paid 3%, we take 3% of $103,092 and arrive at $3092. Oh, look, we're back at $100k as the 'net' sales price that the seller gets. But give the appraiser plausible deniability, make the contract price read a nice round number like $103k or $104k (the typical FSBO personality will want to use this opportunity to bump you up to $110k...).

Matthew Rollo · Answer

@Greg Jeanfreau I was thinking the same thing but it has been a long day and I was to tired to type all of that hahaha good call though

Matthew Rollo · Answer

Have your agent reach out to the FSBO. Whenever I call a FSBO I always let them know up front that I am a realtor representing a buyer and if they are willing to pay the 3% commission. From my experiences they normally say, "if you have a buyer with an offer I will pay it"

Good luck!

Can I use a buyer's agent to purchase an FSBO?

Most Popular Reply