What are the advantages/disadvantages to buying a home through an attorney rather than a realtor?
May 5, 2004 8:29 AM Subscribe
Buying a home without a realtor. My landlord wants to sell the place I am living in (he lives in the lower, me the upper) because he is using the money to buy a business. He wants to sell quickly as the business loan is contingent on his sale of the home. The only catch is that he wants to forgo using a realtor by using an attorney instead. Has anyone here ever bought a home this way? What are the advantages/disadvantages on my end? Any common mistakes to avoid?
Am I correct that you would like to buy this house? I bought my home from someone I knew using just a lawyer. I had a lawyer, he had a lawyer, we had a somewhat odd terms-of-sale and it went fine. You need to know a bit more about the home buying process to do it this way. I had to arrange all my own financing. I waived the home inspection [but I don't recommend any sane person do this with a house they do not know inside and out] and my lawyer did a title search, filled out the paperwork, and was present at the closing as my proxy. Motley Fool has this to say about the process. Upshot: usually the advantage to buying with a relator is that you get a really good idea of the market, homes available, prices and whatnot. If you've found a house you already like and want to buy, if there aren't realtors invovled you can likely pay less for your house.
posted by jessamyn at 9:02 AM on May 5, 2004
posted by jessamyn at 9:02 AM on May 5, 2004
the obvious advantage is no realtor's fee to pay. Beyond that, you *each* should have an atty representing your *own* interests in the transaction.
You might think you can save a few bucks by sharing an atty, but this is a recipe for someone's interests to be stepped on.
With each of you having your own atty, the only real issue is arriving at a fair market or better still (for you) sub market valuation for the property. You can accomplish this by interviewing a few realtors and surveying their assessment of the property's value.
Lastly, remember that you have the upper hand here. Your landlord is a classic example of a motivated seller, with time constraints bearing upon *him*. Use this to your advantage, since without you, he'll face sales fees and delays in the marketplace.
Don't let him rush you or persuade you to skip any due diligence. The delays are his problem and his problem to solve, potentially at his expense, but certainly not to your detriment.
posted by Fupped Duck at 9:02 AM on May 5, 2004
You might think you can save a few bucks by sharing an atty, but this is a recipe for someone's interests to be stepped on.
With each of you having your own atty, the only real issue is arriving at a fair market or better still (for you) sub market valuation for the property. You can accomplish this by interviewing a few realtors and surveying their assessment of the property's value.
Lastly, remember that you have the upper hand here. Your landlord is a classic example of a motivated seller, with time constraints bearing upon *him*. Use this to your advantage, since without you, he'll face sales fees and delays in the marketplace.
Don't let him rush you or persuade you to skip any due diligence. The delays are his problem and his problem to solve, potentially at his expense, but certainly not to your detriment.
posted by Fupped Duck at 9:02 AM on May 5, 2004
In my experience the realtor doesn't do much besides show you houses and hold your hand through the buying process. Just another person with stake in the cost of the home. You can get screwed just as easily with a realtor as without. Just make sure that this attorney has everyone's best interest at heart.
posted by trbrts at 9:05 AM on May 5, 2004
posted by trbrts at 9:05 AM on May 5, 2004
Response by poster: Good advice, thanks. Being my first home purchase and never having dealt with an attorney before, what is the easiest way to go about finding an attorney (to act on my behalf) that does these sort of things? I'm fairly certain I want to put an offer in on the property.
posted by sharksandwich at 9:11 AM on May 5, 2004
posted by sharksandwich at 9:11 AM on May 5, 2004
A good seller's Realtor gets the maximum price for the seller. All Realtors are seller's realtors. It should be to your advantage to bypass the Realtor.
I'd recommend working with the appraiser to make sure you are paying no more than the market value, and preferably less. You should definitely participate in the savings from no commission.
posted by theora55 at 9:21 AM on May 5, 2004
I'd recommend working with the appraiser to make sure you are paying no more than the market value, and preferably less. You should definitely participate in the savings from no commission.
posted by theora55 at 9:21 AM on May 5, 2004
I concur with everyone else, do not under any circumstances use the seller's lawyer. Get your own.
I called around in town and found a lawyer that was comfortable doing real estate transactions and who had email [I was doing a lot of the purchase long distance]. I have literally never seen the man. I signed a contract with him agreeing to pay him what I owed and then he ran the rest of the show. Basically the title search makes sure that the person who is selling you the house actually OWNS the house [and does not, say, owe it to his ex-wife in lieu of child support] this can be an important protection for you. If you buy the house and it's not technically the sellers to sell, bad things will happen, mostly to you. Also a title search will tell you if there are rights of way or easements on the property. So, in my case, the power company has a power line running through the backyard and is allowed access to it. I bought this agreement with them when I bought my house, it's good that I know about it. My lawyer also represented me at the closing, and signed paperwork for me, and sent me the title to my house once it was mine [I think that this doesn't happen if you get a mortage, I know nothing about finanacing stuff, sorry]. All told, in 1996, it cost me $750 above and beyond the cost of the house to buy my house, again not counting any of the bank stuff.
posted by jessamyn at 9:35 AM on May 5, 2004
I called around in town and found a lawyer that was comfortable doing real estate transactions and who had email [I was doing a lot of the purchase long distance]. I have literally never seen the man. I signed a contract with him agreeing to pay him what I owed and then he ran the rest of the show. Basically the title search makes sure that the person who is selling you the house actually OWNS the house [and does not, say, owe it to his ex-wife in lieu of child support] this can be an important protection for you. If you buy the house and it's not technically the sellers to sell, bad things will happen, mostly to you. Also a title search will tell you if there are rights of way or easements on the property. So, in my case, the power company has a power line running through the backyard and is allowed access to it. I bought this agreement with them when I bought my house, it's good that I know about it. My lawyer also represented me at the closing, and signed paperwork for me, and sent me the title to my house once it was mine [I think that this doesn't happen if you get a mortage, I know nothing about finanacing stuff, sorry]. All told, in 1996, it cost me $750 above and beyond the cost of the house to buy my house, again not counting any of the bank stuff.
posted by jessamyn at 9:35 AM on May 5, 2004
Note that a lot of stuff that you should do--things like inspection, survey, title search, termite inspection, etc--are all things that your mortgage lender will probably require you to do, making a necessity out of a virtue.
posted by adamrice at 10:21 AM on May 5, 2004
posted by adamrice at 10:21 AM on May 5, 2004
All Realtors are seller's realtors. It should be to your advantage to bypass the Realtor.
That first part is incorrect. There are three types of agencies: seller's agents, buyer's agents and disclosed dual agents. In all cases, you as a buyer or seller want to square away right away whom the realtor is representing and it is a responsibility of the realtor to disclose whom they are representing immediately, preferably in writing, to protect everyone involved. Regardless, as a realtor, there is an obligation to present the property/buyer/seller honestly and not mislead, lie to either party.
In this case, a realtor isn't needed; it’s not automatically to the buyer’s benefit however. The lawyers can act on behalf of the clients' interests. Do make sure it's an attorney that specializes in real estate law.
Sharksandwich: I agree with what people have said about an independent appraiser of your own, (the mortgage company will send their own appraiser, as well as a lawyer, but they aren't going to help you out at all. they work for the lender) full home inspection (make sure it includes pest inspection), lead paint inspection (although I suspect since you’re in a rental unit in the property, it’s already been cleared for lead paint… check into it), title search, etc. Do not use the same lawyer, inspectors, appraiser, etc as the seller. Kindly decline to even use someone he/she recommends, out of conflict of interest. It may be difficult to find these professionals, and you may want to trust the seller because you have a current landlord/tenant relationship now... but go solo on this one -- its to your advantage.
Because you aren't bringing in a realtor of your own, you are saving the seller the cost of paying a percentage of the sale price in commission. (The buyer, unless pre-arranged with his agent, does not pay the realtor’s commission/fee. It is figured out of the sale price of the home, paid for by the seller). Skipping the realtor saves the seller some cash, where are your benefits? IANAR (yet), but if you are bypassing the agent in the deal (and that's so totally fine), you may want to see if the seller will pick up (some or all) of any closing costs, or your inspection/legal/appraisal costs when you pass papers.
As far as finding a realtor of your own... talk to trusted people in your community, talk to family members if they are in the area, or see whom your friends/co-workers can recommend.
I'm in the process of finding my first house too. Here's a book I started reading before I went to real estate school.
And some home inspector trade associations... to help you locate some in your area. Contact them and get some info. Their services should be thorough.
American Society of Home Inspectors
American Institute of Inspectors
It's exciting and scary and confusing now, but this first-time buyer process is for everyone I think. I wish you many happy years at your home. :)
posted by jerseygirl at 10:31 AM on May 5, 2004
That first part is incorrect. There are three types of agencies: seller's agents, buyer's agents and disclosed dual agents. In all cases, you as a buyer or seller want to square away right away whom the realtor is representing and it is a responsibility of the realtor to disclose whom they are representing immediately, preferably in writing, to protect everyone involved. Regardless, as a realtor, there is an obligation to present the property/buyer/seller honestly and not mislead, lie to either party.
In this case, a realtor isn't needed; it’s not automatically to the buyer’s benefit however. The lawyers can act on behalf of the clients' interests. Do make sure it's an attorney that specializes in real estate law.
Sharksandwich: I agree with what people have said about an independent appraiser of your own, (the mortgage company will send their own appraiser, as well as a lawyer, but they aren't going to help you out at all. they work for the lender) full home inspection (make sure it includes pest inspection), lead paint inspection (although I suspect since you’re in a rental unit in the property, it’s already been cleared for lead paint… check into it), title search, etc. Do not use the same lawyer, inspectors, appraiser, etc as the seller. Kindly decline to even use someone he/she recommends, out of conflict of interest. It may be difficult to find these professionals, and you may want to trust the seller because you have a current landlord/tenant relationship now... but go solo on this one -- its to your advantage.
Because you aren't bringing in a realtor of your own, you are saving the seller the cost of paying a percentage of the sale price in commission. (The buyer, unless pre-arranged with his agent, does not pay the realtor’s commission/fee. It is figured out of the sale price of the home, paid for by the seller). Skipping the realtor saves the seller some cash, where are your benefits? IANAR (yet), but if you are bypassing the agent in the deal (and that's so totally fine), you may want to see if the seller will pick up (some or all) of any closing costs, or your inspection/legal/appraisal costs when you pass papers.
As far as finding a realtor of your own... talk to trusted people in your community, talk to family members if they are in the area, or see whom your friends/co-workers can recommend.
I'm in the process of finding my first house too. Here's a book I started reading before I went to real estate school.
And some home inspector trade associations... to help you locate some in your area. Contact them and get some info. Their services should be thorough.
American Society of Home Inspectors
American Institute of Inspectors
It's exciting and scary and confusing now, but this first-time buyer process is for everyone I think. I wish you many happy years at your home. :)
posted by jerseygirl at 10:31 AM on May 5, 2004
Around here, realtors charge 7% of the first $100000 and a few percent on the rest.
$7000+ for showing a home around seems to me to be a little too frickin' steep.
posted by five fresh fish at 11:01 AM on May 5, 2004
$7000+ for showing a home around seems to me to be a little too frickin' steep.
posted by five fresh fish at 11:01 AM on May 5, 2004
jerseygirl - I agree with the statement:
All Realtors are seller's realtors.
in that all realtors are paid based on the selling price of the house, so while in theory they are the 'buyer's agent' their motivation comes, at least somewhat, from getting the seller a good price. I'm not saying this is always the case, just that the statement isn't entirely inaccurate.
posted by drobot at 11:19 AM on May 5, 2004
All Realtors are seller's realtors.
in that all realtors are paid based on the selling price of the house, so while in theory they are the 'buyer's agent' their motivation comes, at least somewhat, from getting the seller a good price. I'm not saying this is always the case, just that the statement isn't entirely inaccurate.
posted by drobot at 11:19 AM on May 5, 2004
You are not dependent on him. Get your own realtor, and use him/her as a buyer's agent. Their job is to look out for YOUR interests. And since this is a simple deal, you can negotiate with the realtor to take less of a percentage of the sale. But there are so many ways of running afoul of laws and getting screwed when it comes to real estate that you need to be careful. At the very least get your own lawyer and your own home inspector.
FFF, my husband is a realtor, and he earns every dime. Helping his buyers get financing, rescuing deals, making sure paperwork gets to and from appraisers, lawyers, inspectors, etc., knowing which homes are good and which ones are dogs, I could go on and on and on.
Drobot, a buyer's agent is legally obligated to get the best deal for their client or they can be SUED. Quite a bit of real estate school is involving how to stay out of legal trouble.
posted by konolia at 12:39 PM on May 5, 2004
FFF, my husband is a realtor, and he earns every dime. Helping his buyers get financing, rescuing deals, making sure paperwork gets to and from appraisers, lawyers, inspectors, etc., knowing which homes are good and which ones are dogs, I could go on and on and on.
Drobot, a buyer's agent is legally obligated to get the best deal for their client or they can be SUED. Quite a bit of real estate school is involving how to stay out of legal trouble.
posted by konolia at 12:39 PM on May 5, 2004
Once you contract a broker/salesperson to represent you in writing, via a mandatory disclosure agreement or similar documentation, by law (at least here) "The broker owes the buyer undivided loyalty, utmost care, disclosure, obedience to lawful instruction, confidentiality and accountability. They must put the buyer's interest first and negotiate for the best price and terms for their client, the buyer."
In order for the realtor to specifically represent you, you have to contract them in writing as such. Once that's signed, it's a legally bound contract. Not all realtors are seller's realtors and once contracted by a buyer, they aren't allowed to get the seller the best price, no matter the motivation.
Violations of such agreements open the realtor up to legal action, fines and/or suspensions by their local governing registration board.
posted by jerseygirl at 12:56 PM on May 5, 2004
In order for the realtor to specifically represent you, you have to contract them in writing as such. Once that's signed, it's a legally bound contract. Not all realtors are seller's realtors and once contracted by a buyer, they aren't allowed to get the seller the best price, no matter the motivation.
Violations of such agreements open the realtor up to legal action, fines and/or suspensions by their local governing registration board.
posted by jerseygirl at 12:56 PM on May 5, 2004
Sure, Jerseygirl/Konolia. And nobody abuses escalation clauses. Just kidding - I totally appreciate what you're saying and have had some great realtors, but a buyer should IMO always be aware that what motivates a realtor isn't some altruistic desire to help people find houses, but by money, which they get when they find their buyer a home. And the amount of money they get is based on that selling price - so all I'm saying is buyer - beware, your realtor might not always have your best interests at heart.
(sorry for the derail)
posted by drobot at 3:16 PM on May 5, 2004
(sorry for the derail)
posted by drobot at 3:16 PM on May 5, 2004
I understand what you're saying, drobot.
posted by jerseygirl at 3:37 PM on May 5, 2004
posted by jerseygirl at 3:37 PM on May 5, 2004
Title search may not be required, especially if title insurance is mandatory in your location. I recently sold my house in Wisconsin, and was surprised I had to buy title insurance, which I had not needed when I bought it. I was not happy about that as I had read the abstract and knew there was nothing of concern.
posted by Goofyy at 11:29 PM on May 5, 2004
posted by Goofyy at 11:29 PM on May 5, 2004
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Furthermore, since he's saving so much cash by skipping the realtor, you may want to try to jawbone the cost down a bit.
posted by Kwantsar at 8:58 AM on May 5, 2004