What would you recommend?

pachickDecember 10, 2011

Hi All,

I noticed that there is a great mix of real estate pros, DIYers, and sellers on this board. I was wondering if anyone could give me some advice.

Our background:

My DH and I are older (nearly 40) first-time homebuyers. We've been looking at home over the past three years, but only seriously within the last year. We worked with a great buyers agent since June, who showed us four houses, and gave us comps on the last one per our request in August. We did not sign anything with her- she said she would only have us sign once found a home.

It's been surprisingly hard to find a home that we would seriously consider. We are renting a great old farmhouse, and have not been in a hurry as rent was about 65% of a mortgage (the ratio has been getting more favorable as the "bubble" in this area has taken a long time to unwind). We haven't found anything that we like, in as nice an area, as our rental. We are in a rural area so we have a good handle on what's available and what has sold (and for how much.)

The situation:

A house is now available in my neighborhood. The elderly husband died, and the wife requires too much care to stay in the house. The daughter asked the neighbors if they knew anymore who might be interested; the neighbors introduced us.

We first saw the inside of the house in Sept; at that time, the daughter told us that they would want to sell "soon" but not yet. She told me that they planned to hire an appraiser to get the price and would be interested in selling to us directly, they would like to avoid listing if possible.

This week, the daughter emailed us to see if we were still interested, and let us the know the price they wanted.

We are very interested in this house. The price they want is well below the sold comps. We know this because only one other similar house has sold since we got the last set of comps in August- that sold house has the info listed on-line. All the similar (type, sq foot, BR/BA, lot type) comps since June have sold within $3000 of each other. They are asking for about 12% less than the comps. With our downpayment, the PITI will be just a little higher than rent.

We are first time buyers. We do not know what is next or what to expect. The sellers do not want to use a realtor- they have an attorney. I don't blame them- they already have possible buyers lined up- us, and I think there are other people who are also interested.

Our question:

Should we use our buyers agent to help us through the contract/closing process? And if so, how do we pay her? Should we ask the sellers to add 3% to the cost of the house and pay her from that? Is 3% reasonable, since we found the house on our own?

Should we forego the BA and just get our own real estate attorney?

We won't use an inspector; we'll use my FIL, who is a licensed contractor and makes his living rebuilding homes, so we will save a little money there. He is coming to look over the house tomorrow.

We have a mortgage broker who we were working with in the summer. This MB was recommended by our BA.

Can an attorney take care of the contract and title/lien insurancce?

What do you think? What would you do? What would recommend for a couple of newbies?

Thanks so muchc!

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cmarlin20

I would contact a local RE attorney to represent you in this transaction. It should be less than paying 3% to an agent.

Of course I don't know the details of your purchase, but a good attorney will look out for your interest.

Be certain the mortgage broker is your best way to get a loan, Have you contacted direct lenders? What does your broker charge, do you pay for him?

    Bookmark   December 10, 2011 at 10:59AM
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pachick

Hi Cmarlin20,

Thanks for the advice!

We haven't followed up much with the broker since the summer; we have a call in with him on Monday. We'll make some appts with our bank and credit union as well.

So a real attorney can help us with liens/titles, etc? My main concern is that we will miss something big that is beyond the scope of what an attorney will cover.

    Bookmark   December 10, 2011 at 11:30AM
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Sophie Wheeler

The issue is your experience level and your lack of confidence with the process. For a first timer, yes, I'd add the 3% to the home's cost and pay your agent to shepherd you through this. If the property is as great as you say, you may not ever need to do this again, so make sure thing go smoothly. An attorney is not going to be there to answer 6 different calls about the what is happening unless you pay them for their time. A BA will be there for as many possible questions as you might have for the whole process for a single flat fee. If your mortgage broker doesn't work out, she'll have other resources. If the seller's attorney puts you on the back burner, the BA will be the squeaky wheel to get things moving faster. Things will just go a lot easier for YOU if you have some help.

If you were an experienced buyer with a higher confidence level, I might advise sending some type of nice thank you gift to the agent and explain that you have found a private deal but appreciate the time she gave you and the contacts that she linked you with. Then, just have an attorney handle the closing process.

    Bookmark   December 10, 2011 at 12:47PM
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terriks

I don't live in an area where attorneys act as closing agents, so I can't really answer as far as what they do as far as title search, etc., but I can guarantee you that your lender will not loan on a house until a thorough title search has been completed.

The lender will have you pay for a title insurance policy to protect their interests, and you should also get an owner's title insurance policy.

I don't know the price of the home that you are interested in, but I don't think that you would need to offer the agent as much as 3% to hold your hand and handle the paperwork if you decide to go that route. I would talk to her about a flat fee, and have her also do a market analysis of the property.

    Bookmark   December 10, 2011 at 1:13PM
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chisue

Might the buyer have some additional protection by using a realtor, should the house prove to be 'not as represented'? Does that apply only to listing agents? (The house in question is not listed.)

It sounds like the buyer has confidence in the realtor they've used. *I* would keep her the job for this deal -- in part because the seller is offering such a 'bargain'. (IS it a bargain?)

My experience with a 'one deal' commission was as seller. A neighbor/realtor knew we would be selling within the year and brought us a potential buyer. We had a low-commission contract with her for that sale/that buyer only. We sold for top dollar for our neighborhood without having to show the house, and the buyer was OK with a delayed closing while we built our new home.

    Bookmark   December 11, 2011 at 1:08PM
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jboling_gw

I don't see any reason to involve the real estate agent in this transaction. A real estate attorney can handle all the upcoming paperwork and a good one will act in your best interests. This will cost you much less than trying to work out some sort of commission for the agent, unless she would agree to the same flat fee that the attorney requires. I've never had a problem bringing a deal to a successful conclusion by using an attorney and not an agent, both as a buyer and a seller.

    Bookmark   December 11, 2011 at 4:07PM
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pachick

Hi All,

Thanks so much for your thoughts and advice!

The house is a good deal, but not a steal. I am confident in the comps; I was inside all but one of the similar homes that have sold since June (not very many- only 5). We like the house, the location, the neighbors, etc too much to risk it by low-balling.

We are going to look at financing this week and will price out the attorney.

I have emailed my BA to see if she's available for a flat-fee, and if so, I asked for an estimate of how much. My DH and I really like our BA, so we'd like to go with her if possible.

We saw the house again, today, this time with my FIL. He gave it a good review- solidly built, roof good, heater good, all systems go. Will need some cosmetic updating but the bones are great.

We just love it. We love our neighbors (all 8 couples), we've been living on this quiet road for 4 years and know all of its pluses and minuses- we just really hope this works out!

We really appreciate everyone's input and will update so you know how it all turns out!

    Bookmark   December 11, 2011 at 5:25PM
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terriks

A real estate attorney can handle all the upcoming paperwork and a good one will act in your best interests.

I should hope so, since that is their legal and ethical obligation!!

    Bookmark   December 11, 2011 at 6:45PM
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jane__ny

Just wanted to wish you good luck. Sounds like a perfect fit.

Jane

    Bookmark   December 11, 2011 at 9:31PM
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jboling_gw

Terriks, many professionals have legal and ethical obligations, but as we know, not all abide by them. The good ones do. I'm not sure why my cautionary advice to the OP elicited such a reaction from you.

    Bookmark   December 11, 2011 at 10:02PM
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montel

For my first home purchase I used a highly recommended RA Attorney and things went great. In your situation it would work out very well I think to go that route.

I have found that in our area many real estate agents aren't quite up to speed on the legal side of the RA business and writing up a contract beyond the standard MLS state required forms isn't something they are schooled to do much of.

You have the perfect opportunity to avoid the real estate agent side of the business and use a good attorney to help you. If you were dealing with a sellers agent and a listed property then the BA would be more beneficial.

Our last property purchase we did use a Buyers Agent, and while he did help us out in some cases - mostly getting us in the door as soon as possible for newly listed homes, I found that I knew more that he did at times regarding transaction details and contract terms

We ended up buying a lot that I knew about prior to working with this BA. In addition to the BA getting his 3% commission (from the seller in this case) I still paid my attorney to go over the purchase contract, the title report, and the neighborhood association rules etc...

    Bookmark   December 14, 2011 at 2:24PM
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wanj

If you have done your price/value research, I agree that a RE agent should not be needed, a RE sttorney should be cheaper than the 3% fee you are paying for an agent.

    Bookmark   December 26, 2011 at 11:55AM
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berniek

"If you have done your price/value research, I agree that a RE agent should not be needed, a RE sttorney should be cheaper than the 3% fee you are paying for an agent."

That is assuming that the seller will reduce the sales price by 3% and the buyer still has to pay a minimum of $250 to $300/phr for an attorney.
I'd have a good agent negotiate the purchase price including some closing costs for me, where you probably will do better in the end.

    Bookmark   December 26, 2011 at 5:47PM
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wanj

It depends on the state.
In my old state of NJ where a RE lawyer is required for any RE transaction, they charge a flat fee of around $500. And the RE agent fee does not have to be 3%, it could be 1% because it is a sure sale.

    Bookmark   December 26, 2011 at 6:52PM
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