Do we really need a realtor in this situation?
September 28, 2006 8:07 AM Subscribe
Do we really need to use a realtor to buy this condo?
(Sorry this is so long, but the details of the situation are important to the question.)
My wife and I decided a few months ago that we would start looking to buy a place (our first home purchase) in early 2007, and that we would save money for a down payment in the meantime. About three weeks ago, we decided (more or less on a lark) to visit a soon-to-be completed condo conversion building right across the street from our apartment, and we were very impressed. After looking at the numbers, we realized that we are in a much better position to buy than we had originally thought, and that the very generous offers from the agency selling the condos would make a huge difference in our decision: $15,000 toward closing costs and one year paid HOA dues. We love just about everything about the condo (location, amenities, etc) and the price seems as reasonable as we are going to find in this market. We've been pre-approved for a mortgage and are comfortable with the financial aspect of the transaction.
The agent at the condo said that if we aren't using a realtor, she could get us even more in terms of special offers. Specifically, she mentioned an extra year of paid HOA fees on top of the one year she already offered (around a $5,000 benefit). We would of course get these offers in writing before starting the buying process, but this could be a very good benefit that we would lose if we used a realtor.
So, here's our question: given our situation, what specific benefits would we receive by working with a realtor?
When we mention to people that we might not use a realtor, they wig out and start listing off all these reasons why realtors are essential. However, most of the reasons they give (they give you access to more listings, they help you find a mortgage vendor, etc) do not apply to our situation. Moreover, because the unit is being sold by an agent for the entire building and not an individual seller, I wonder if there is much negotiation room for a realtor to make a difference with the price. We will, of course, have a lawyer look over any and all paperwork before signing, and I understand that having a lawyer look at documents is different from having an experienced realtor look over them and point out potential problems, so there is that concern. But my main concern is that the benefits of using a realtor in this specific situation do not outweigh the offers from the seller that we would lose by not using a realtor.
Should we decide not to buy this place and to a "traditional" house hunt, we will definitely use a realtor. So, I'm not asking about the usefulness of realtors in general, only about our specific situation as outlined above.
Any and all advice would be greatly appreciated!
(Sorry this is so long, but the details of the situation are important to the question.)
My wife and I decided a few months ago that we would start looking to buy a place (our first home purchase) in early 2007, and that we would save money for a down payment in the meantime. About three weeks ago, we decided (more or less on a lark) to visit a soon-to-be completed condo conversion building right across the street from our apartment, and we were very impressed. After looking at the numbers, we realized that we are in a much better position to buy than we had originally thought, and that the very generous offers from the agency selling the condos would make a huge difference in our decision: $15,000 toward closing costs and one year paid HOA dues. We love just about everything about the condo (location, amenities, etc) and the price seems as reasonable as we are going to find in this market. We've been pre-approved for a mortgage and are comfortable with the financial aspect of the transaction.
The agent at the condo said that if we aren't using a realtor, she could get us even more in terms of special offers. Specifically, she mentioned an extra year of paid HOA fees on top of the one year she already offered (around a $5,000 benefit). We would of course get these offers in writing before starting the buying process, but this could be a very good benefit that we would lose if we used a realtor.
So, here's our question: given our situation, what specific benefits would we receive by working with a realtor?
When we mention to people that we might not use a realtor, they wig out and start listing off all these reasons why realtors are essential. However, most of the reasons they give (they give you access to more listings, they help you find a mortgage vendor, etc) do not apply to our situation. Moreover, because the unit is being sold by an agent for the entire building and not an individual seller, I wonder if there is much negotiation room for a realtor to make a difference with the price. We will, of course, have a lawyer look over any and all paperwork before signing, and I understand that having a lawyer look at documents is different from having an experienced realtor look over them and point out potential problems, so there is that concern. But my main concern is that the benefits of using a realtor in this specific situation do not outweigh the offers from the seller that we would lose by not using a realtor.
Should we decide not to buy this place and to a "traditional" house hunt, we will definitely use a realtor. So, I'm not asking about the usefulness of realtors in general, only about our specific situation as outlined above.
Any and all advice would be greatly appreciated!
We bought our first house (a new townhouse in a development that was still in the construction phase) under pretty much the same circumstances as you, and had no realtor. We decided we wanted to live there, and the agent, who had an office set up in one of the sample homes, took care of everything for us - it was painless and easy. A realtor seems just another person to whom you have to feed a piece of the pie, in your particular instance.
posted by iconomy at 8:19 AM on September 28, 2006
posted by iconomy at 8:19 AM on September 28, 2006
In this case, a realtor really wouldn't add much value to your situation -- it would just add one more person to the process who acts like you can trust them when you really cannot.
I've purchased in a very similar situation and didn't have a realtor and it worked out better then other transactions when I did have a realtor, so don't sweat it.
DO have a lawyer who will look at everything you sign and will look out for your best interests.
posted by visual mechanic at 8:23 AM on September 28, 2006
I've purchased in a very similar situation and didn't have a realtor and it worked out better then other transactions when I did have a realtor, so don't sweat it.
DO have a lawyer who will look at everything you sign and will look out for your best interests.
posted by visual mechanic at 8:23 AM on September 28, 2006
Realtors will not reduce the price you pay. They do not help you negotiate. They may be able to give you prices of comparable properties which have sold recently, but they won't help you negotiate.
Indeed, since they're paid on commission, they're always working against you - they want the deal to be made, so that they can get paid and go home. They want the buyer to offer LOTS of money and the seller to demand VERY LITTLE money, because that closes the deal quickly.
But back to the commission. Traditionally, the two agents involved each got 3% of the purchase price, carved out of the money the seller received. Since this agency and the seller are basically one and the same, your not using an agent saves them 3% of the purchase price. Accordingly, they should be willing to discount the purchase price/offer further incentives of perhaps as much as 2.9% of the purchase price, and they'll still come out ahead, and so will you.
I don't see any benefit to hiring an agent in this case. You would just be paying your agent a whack of money for very very little work.
You should protect your interests in other ways - hire a lawyer (at a fixed price), perhaps a property inspector, etc. You should also be sure you're really getting a good deal - the bottom is falling out of the market in many places, so the actual price that a particular property may command today might be significantly less than you think. Negotiate hard, I would say.
For uncompleted condos, 99.999999% of the time they will NOT be finished on time and correctly. Your contract needs to include what remedies happen WHEN (not if) your unit is not completed, properly, by the planned date. You should NOT plan on moving in on the scheduled completion date.
posted by jellicle at 8:26 AM on September 28, 2006
Indeed, since they're paid on commission, they're always working against you - they want the deal to be made, so that they can get paid and go home. They want the buyer to offer LOTS of money and the seller to demand VERY LITTLE money, because that closes the deal quickly.
But back to the commission. Traditionally, the two agents involved each got 3% of the purchase price, carved out of the money the seller received. Since this agency and the seller are basically one and the same, your not using an agent saves them 3% of the purchase price. Accordingly, they should be willing to discount the purchase price/offer further incentives of perhaps as much as 2.9% of the purchase price, and they'll still come out ahead, and so will you.
I don't see any benefit to hiring an agent in this case. You would just be paying your agent a whack of money for very very little work.
You should protect your interests in other ways - hire a lawyer (at a fixed price), perhaps a property inspector, etc. You should also be sure you're really getting a good deal - the bottom is falling out of the market in many places, so the actual price that a particular property may command today might be significantly less than you think. Negotiate hard, I would say.
For uncompleted condos, 99.999999% of the time they will NOT be finished on time and correctly. Your contract needs to include what remedies happen WHEN (not if) your unit is not completed, properly, by the planned date. You should NOT plan on moving in on the scheduled completion date.
posted by jellicle at 8:26 AM on September 28, 2006
Here's what you'll lose in this situation:
* You will be out of pocket legal fees to draw up the purchase of sale agreement.
* You will not have somebody to hold your hand as you review the paperwork
* You will not have somebody tell you what to do next (hire inspector, contact escrow company, look over title insurance, tell you if you need lead paint or asbestos disclosures, etc).
* You will not have somebody making phone calls on your behalf
* You won't have somebody help you make negotiate with the builder if terms of the sale agreement are not agreeable or are not followed
The ability of the realtor to negotiate you a better price really depends on the skill of the realtor and the local market, which are variables I cannot speculate on. You also have to be willing to ignore the realtor sometimes. I told our realtor to bid $5k lower than his suggested price, and our offer was accepted.
Remember that realtors traditionally take 3% of the price. Is the $5k offer equivalent to 3%?
Anecdote: we were first time home buyers. Our realtor showed us exactly one house (used not new), and we bought it. We were happy to have used a realtor because we had no damn clue about the buying process. The mountain of paperwork is quite daunting. Of course, our realtor had flaws and next time we will use a better one, but I am glad we had somebody to hand-hold us.
posted by crazycanuck at 8:34 AM on September 28, 2006
* You will be out of pocket legal fees to draw up the purchase of sale agreement.
* You will not have somebody to hold your hand as you review the paperwork
* You will not have somebody tell you what to do next (hire inspector, contact escrow company, look over title insurance, tell you if you need lead paint or asbestos disclosures, etc).
* You will not have somebody making phone calls on your behalf
* You won't have somebody help you make negotiate with the builder if terms of the sale agreement are not agreeable or are not followed
The ability of the realtor to negotiate you a better price really depends on the skill of the realtor and the local market, which are variables I cannot speculate on. You also have to be willing to ignore the realtor sometimes. I told our realtor to bid $5k lower than his suggested price, and our offer was accepted.
Remember that realtors traditionally take 3% of the price. Is the $5k offer equivalent to 3%?
Anecdote: we were first time home buyers. Our realtor showed us exactly one house (used not new), and we bought it. We were happy to have used a realtor because we had no damn clue about the buying process. The mountain of paperwork is quite daunting. Of course, our realtor had flaws and next time we will use a better one, but I am glad we had somebody to hand-hold us.
posted by crazycanuck at 8:34 AM on September 28, 2006
It's actually pretty common to work without a realtor when you are buying a brand new property direct from the builder. That is how I purchased my new home last year and am still confident that we got a good deal (based on what similar homes in the area go for). If you were looking to purchase an existing (preowned) home a realtor may be of use to you in coming up with a number of listings to view in your desired price range that you may not have the means to discover on your own, but since you've already picked the place you want, I just don't see what additional services a realtor could provide besides taking a chunk of the purchase price for very little work.
Also, when you purchase a new home a lot of the formalities that the realtor would otherwise arrange (home inspection, final walkthrough, etc.) are already part of the purchase process through the builder (at least it was in our case).
Keep in mind, it is not in the interest of your realtor to help you negotiate a lower price - they get paid a % of the final purchase price so the higher the better.
posted by The Gooch at 8:43 AM on September 28, 2006
Also, when you purchase a new home a lot of the formalities that the realtor would otherwise arrange (home inspection, final walkthrough, etc.) are already part of the purchase process through the builder (at least it was in our case).
Keep in mind, it is not in the interest of your realtor to help you negotiate a lower price - they get paid a % of the final purchase price so the higher the better.
posted by The Gooch at 8:43 AM on September 28, 2006
I want to second what everyone else has said. Realtors:
1. Help you find a place (you've got this covered)
2. Take care of paperwork (you're already willing to do this)
3. Take your money (I will do this for you if you want)
Do it yourself. Then become a realtor and take everyone else's money.
posted by blue_beetle at 9:24 AM on September 28, 2006 [1 favorite]
1. Help you find a place (you've got this covered)
2. Take care of paperwork (you're already willing to do this)
3. Take your money (I will do this for you if you want)
Do it yourself. Then become a realtor and take everyone else's money.
posted by blue_beetle at 9:24 AM on September 28, 2006 [1 favorite]
What CrazyCanuck said. Basically, you are paying a Realtor to make sure everything is done correctly and legally. Unless your lawyer is a specialist in real estate law (in which case, why doesn't he have a real estate license?) chances are there are things he doesn't know about how The System works. The condo agent is probably a very decent human being, but the fact is that she is paid to be the condo's agent, and therefore their interests will always be put ahead of yours. A realtor you hire is your agent and is legally obligated to serve your interests. It might be worth looking into discount realtors, who will save you a couple percent of purchase price. We did this with no ill effect.
That being said, I know of 4 realtors living within a quarter mile of me. There are probably more, it's just that I don't know them personally! If you take blue_beetle's advice (do it yourself then get licensed to do it for others), you might want to wait a couple years till the jittery hands shake out of the business.
posted by ilsa at 9:55 AM on September 28, 2006
That being said, I know of 4 realtors living within a quarter mile of me. There are probably more, it's just that I don't know them personally! If you take blue_beetle's advice (do it yourself then get licensed to do it for others), you might want to wait a couple years till the jittery hands shake out of the business.
posted by ilsa at 9:55 AM on September 28, 2006
Where I think an agent could be helpful in this situation is providing you with comps to make sure you're paying the right price. If you've been watching the market for awhile though, you might already have a good grasp of where prices are.
I would definitely hire a real estate attorney to review and explain any contract you would sign. I would also recommend educating yourself quickly on standard procedures in buying. I like the buying and selling forum at That Home Site.
If you're really apprehensive about buying on your own, I'd look into an a la carte realty service that can provide particular services, like comp research, contract review, etc., at set fees. You could also look to finding an agency that refunds a portion of the commission back to you.
I bought and sold property this year using only a flat-fee agency and an attorney. It worked out absolutely fine.
posted by Sully6 at 10:38 AM on September 28, 2006
I would definitely hire a real estate attorney to review and explain any contract you would sign. I would also recommend educating yourself quickly on standard procedures in buying. I like the buying and selling forum at That Home Site.
If you're really apprehensive about buying on your own, I'd look into an a la carte realty service that can provide particular services, like comp research, contract review, etc., at set fees. You could also look to finding an agency that refunds a portion of the commission back to you.
I bought and sold property this year using only a flat-fee agency and an attorney. It worked out absolutely fine.
posted by Sully6 at 10:38 AM on September 28, 2006
Realtors do indeed seem to take money for doing not a whole lot. But if you know nada about real estate and real estate law -- you're first time buyers, right? -- they do 3 very important things:
They prevent you from royally fucking yourself; going broke; and getting divorced.
Believe me, I think realtors are mostly scumbags and vampires -- but I think that about all agent-types. They're a necessary evil. If you've never bought a house/condo before, you probably have no clue about stuff like inspections and title insurance -- and even if you've read a Robert Irwin book, you don't have knowledge of the local market, re both negotiation and the reputation of the seller/builder.
Realtors do indeed help you negotiate -- but like any agent in your employ, you have to be the one in control. You tell them how much of a discount you want, they tell you what the traffic will bear, and you choose to ignore their advice or not.
And guess what? You're still using an agent! The person selling you the condo has a real estate license. So basically, you're using the seller's agent to be your buyer's agent. She gets a double commission (hence the "discount"), and you get screwed. (Rule #1 in any first-time home-buyer's book: Don't use the seller's agent as your own!)
Consult a local agent, at least. There's no charge to talk to someone. (Get a reccommendation from a trusted friend -- not from anyone associated with the condo building.) Maybe they'll agree to knock down their commission for you, since you've done a lot of the legwork. Again, you're in control.
And good luck!
posted by turducken at 11:10 AM on September 28, 2006
They prevent you from royally fucking yourself; going broke; and getting divorced.
Believe me, I think realtors are mostly scumbags and vampires -- but I think that about all agent-types. They're a necessary evil. If you've never bought a house/condo before, you probably have no clue about stuff like inspections and title insurance -- and even if you've read a Robert Irwin book, you don't have knowledge of the local market, re both negotiation and the reputation of the seller/builder.
Realtors do indeed help you negotiate -- but like any agent in your employ, you have to be the one in control. You tell them how much of a discount you want, they tell you what the traffic will bear, and you choose to ignore their advice or not.
And guess what? You're still using an agent! The person selling you the condo has a real estate license. So basically, you're using the seller's agent to be your buyer's agent. She gets a double commission (hence the "discount"), and you get screwed. (Rule #1 in any first-time home-buyer's book: Don't use the seller's agent as your own!)
Consult a local agent, at least. There's no charge to talk to someone. (Get a reccommendation from a trusted friend -- not from anyone associated with the condo building.) Maybe they'll agree to knock down their commission for you, since you've done a lot of the legwork. Again, you're in control.
And good luck!
posted by turducken at 11:10 AM on September 28, 2006
Unless your lawyer is a specialist in real estate law (in which case, why doesn't he have a real estate license?)
There are many lawyers who specialize in real estate law. Just make sure that yours specializes in residential real estate, not commercial (very different animal).
ilsa, having a real estate sales license is unrelated to having a law degree and experience in real estate law. Two completely distinct professions.
By the way, Realtor™ is a brand name. You want to know if you need a real estate agent (whether a Realtor™ or not). The answer is no. Get a good attorney, before the bid, ideally someone with a reputation for being a good negotiator. Let 'em bid hard and low on your behalf. Enjoy the new home!
posted by nakedcodemonkey at 11:18 AM on September 28, 2006
There are many lawyers who specialize in real estate law. Just make sure that yours specializes in residential real estate, not commercial (very different animal).
ilsa, having a real estate sales license is unrelated to having a law degree and experience in real estate law. Two completely distinct professions.
By the way, Realtor™ is a brand name. You want to know if you need a real estate agent (whether a Realtor™ or not). The answer is no. Get a good attorney, before the bid, ideally someone with a reputation for being a good negotiator. Let 'em bid hard and low on your behalf. Enjoy the new home!
posted by nakedcodemonkey at 11:18 AM on September 28, 2006
Just a side warning from an ex-condo owner: be sure to investigate the details of the condo association's rules and how they work in practice. My wife and I loved our condo but the association was deeply fucked up (there was never a quorum at meetings, so money couldn't legally be appropriated to do necessary repairs, the price of which kept rising as the delays continued for years), and we were grateful to get out when we did.
posted by languagehat at 12:46 PM on September 28, 2006
posted by languagehat at 12:46 PM on September 28, 2006
The average real estate agent is no wiser than you are. Most states require a minimum number of hours to hold a real estate license - NJ, which is considered one of the more stringent, requires only 75 hours of training. In addition, I'm sure that you buy whatever book they use for training online.
In your situation, a qualified and experienced attorney should serve you well. They also will not have conflicting interests in the same way a real estate agent would.
Comparable sales will be a useful tool for you to use when negotiating your price. An agent is certainly not the only resource for this information though. Here are a few other places you might find comps:
- Zillow.com, trulia.com and a plethora of other sites
- The condo developers on-site agent (it doesn't hurt to ask)
- The gov't entity who records property deeds in your area (this would only be available if others have actually closed on their condo purchases in your bldg. - but this would be an invaluable resource)
- Ask other owners in the bldg...perhaps you could get their name under the pretext of discovering how other property inspectors/owners evaluated the construction/integrity of the building.
Good luck, and if you're willing to put in a little extra effort, you'll benefit far more than if you were to use a real estate agent.
posted by Jhaus at 10:18 PM on September 28, 2006
In your situation, a qualified and experienced attorney should serve you well. They also will not have conflicting interests in the same way a real estate agent would.
Comparable sales will be a useful tool for you to use when negotiating your price. An agent is certainly not the only resource for this information though. Here are a few other places you might find comps:
- Zillow.com, trulia.com and a plethora of other sites
- The condo developers on-site agent (it doesn't hurt to ask)
- The gov't entity who records property deeds in your area (this would only be available if others have actually closed on their condo purchases in your bldg. - but this would be an invaluable resource)
- Ask other owners in the bldg...perhaps you could get their name under the pretext of discovering how other property inspectors/owners evaluated the construction/integrity of the building.
Good luck, and if you're willing to put in a little extra effort, you'll benefit far more than if you were to use a real estate agent.
posted by Jhaus at 10:18 PM on September 28, 2006
I was in a similar situation where I found the house I wanted but also was thinking about a realtor. What I did was hire one on an hourly basis to look over the contract, etc. It ended up costing me about 1% of the purchase price.
In your situation, I would be very tempted to say to the realtor, "If you represent us in this purchase, we'll give you 50% of any extra money you can get us over our current deal, and that will be your entire fee." That's a win/win for you.
posted by underwater at 10:17 AM on September 29, 2006
In your situation, I would be very tempted to say to the realtor, "If you represent us in this purchase, we'll give you 50% of any extra money you can get us over our current deal, and that will be your entire fee." That's a win/win for you.
posted by underwater at 10:17 AM on September 29, 2006
Points that were mentioned above that I can emphasize or restate:
- In the typical real estate transaction, there are two realtors involved that split the commission (averages from 5 to 7 percent depending on your region of the country) on the home sale. The commission is negotiable, or course. Your "discount" comes from the fact there is only one agent involved. So they can easily claim to benevolently give you only a 2.5% to 3.5% commission as a token of genorosity. You should be getting that anyway.
There is nothing wrong with working with a seller's agent, as long as you realize that they owe their allegiances to the seller, not to you. Thus, you should never discuss your bottom line or disclose any other information which you wouldn't want the seller knowing to this agent.
Get an inspection of the property too, and find out what other units in the condo went for recently. Also, to avoid surprises, find out what the historical rates of HOA fees are. If they've skyrocketed from $29 a month in 1999 to $199 a month now, perhaps you'd reconsider. If nothing seems awry after that, then make an offer.
posted by paulino636 at 6:34 AM on October 3, 2006
- In the typical real estate transaction, there are two realtors involved that split the commission (averages from 5 to 7 percent depending on your region of the country) on the home sale. The commission is negotiable, or course. Your "discount" comes from the fact there is only one agent involved. So they can easily claim to benevolently give you only a 2.5% to 3.5% commission as a token of genorosity. You should be getting that anyway.
There is nothing wrong with working with a seller's agent, as long as you realize that they owe their allegiances to the seller, not to you. Thus, you should never discuss your bottom line or disclose any other information which you wouldn't want the seller knowing to this agent.
Get an inspection of the property too, and find out what other units in the condo went for recently. Also, to avoid surprises, find out what the historical rates of HOA fees are. If they've skyrocketed from $29 a month in 1999 to $199 a month now, perhaps you'd reconsider. If nothing seems awry after that, then make an offer.
posted by paulino636 at 6:34 AM on October 3, 2006
This thread is closed to new comments.
None.
Watch out for that fire sale on the condo. If they're desperate enough to waive $10k in fees, they must really, really need to sell. Bid low and hard - if this were poker they just flinched at the cards.
posted by unixrat at 8:16 AM on September 28, 2006