I am in a situation that unfortunately, I have no knowledge of. The home we are very interested in is for sale by owner. We have made an offer for selling price w/ seller paying 3-4% closing costs. My problem is they want nothing to do with a realtor and broker fees. So if I go without a realtor into this I am assuming she wants to work with a real estate attorney. Is this expensive? Will I have to pay all of those costs for that in closing? Is this something that I should negotiate fees with her on? I have just never considered this scenario any help appreciated. We are now going FHA so we don't have to wait for our tax transcripts will FHA have any issues with this?
There aren't simple answers to this, at least without more information. But here is some general advice.
There are numerous reasons that homeowners choose to sell themselves without a broker/agent. Sometimes the reason really is to save money by not having to pay fees. Sometimes that is the stated reason, but the real reason is different, such as they want to try to avoid disclosure of problems they know about, or they think their home is worth more than what brokers/agents are willing to try to sell it for, or they want to discriminate in an illegal way that a broker/agent isn't willing to risk losing a license over. All of these motives, and many more, are common, but it is also common for their actual motive to be their stated motive. It's usually not possible to tell for sure what the real motive is, and that adds some risk for a buyer, especially a buyer without prior experience in such things.
If you are not in a good position to be able to absorb risk, then you should make sure you have competent and honest representation of your interests, whether by a good broker/agent or an attorney. In either case, if you can afford to do so, you can pay someone to represent you as the buyer, even though that isn't customary in most places, so the seller doesn't have to (directly), and ajdust your offer price accordingly. Ultimately, if the seller isn't willing to accept or negotiate a price and terms that are fair for you, involving the right representation to protect you from risks beyond what you can afford to take, then there isn't anything wrong with you walking away and looking for a better opportunity. There also isn't anything wrong with the Seller walking away. It's just as fair for them to hold out for a buyer that will give them what they want, whatever extra risks there may or may not be.
Probably the most important thing overall is to avoid looking at this as winning if you get a deal and losing if you don't. Winning can be either getting a GOOD deal or not getting a BAD deal. Losing can be getting a BAD deal or not getting a GOOD deal. Start with looking honestly at your own interests, priorities and vulnerabilities. Then decide what level of help and representation you need in order to not compromise those. If the seller will not cooperate with that, then another better opportunity will come along.
If you're not an experienced or skilled negotiator, you might also be surprised how powerful walking away can be to ultimately getting what you want. It may or may not happen, but if you walk away without burning a bridge (don't call the seller names, be courteous while being decisive and firm), the Seller might come chasing after you if they realize that they overplayed their hand. They just might find some rationalization to be ok with some fees if it will get their house sold.
Keep looking while you're trying to make this one work, and if you are more comfortable doing it with a broker/agent than without, make sure you are working with one who is honest and a skilled negotiator, not just a random one. You can't judge those qualities by how many houses they've sold, or how long they've been in the business, or how many fancy designations they've earned (by taking classes and paying fees). Ask people you know well and trust, who they have worked with more than once on home sales and purchases and would work with again in the future, for referrals, and interview them rigorously. Don't worry about making them uncomfortable by asking too many integrity and skill based questions, and ignorring their quantity based answers. The really good ones will love it, and the bad ones are the ones who will get uncomfortable. Once you find a truly good one, he or she may very well give you advice that will help you with your for sale by owner purchase effort, even if he or she isn't going to get paid, because they know you will trust them in the future, and refer them to your friends for their integrity and selfless help. There are a small minority who are that good, and they're worth trying to find.
Good luck! I hope you are able to really win, whether or not that involves purchasing this particular home.
I sell all of my homes "for sale by owner". I had a real estate license 30+ years ago and I have many freinds that are agents, brokers and loan officers.
As for real estate agents and brokers, I could never understand why they should share 6% (18k on a $300k sale) for shuttling you around to different houses, call your offier into the other agent, then giving you an application to fill out for a loan and then passing that on to the lender for approval, then calling an escrow company to open a file. They would then wait around until the deal closes. Yes, there may be a few calls for additional information in between. But those can just as easily be handled by the lendor and title officer. I am not paying for the little amount of "negotiating" they will do for me, or for telling me if a property is valued correctly. The only valuation opinion that will matter is the appraiser. Now you have the internet to show you comparable sales as well.
Agents used to be the gatekeepers for the MLS (Multiple Listing Service) that allowed different agents to see what others had listed (think old school zillow). Well the internet pretty much got rid of that. As a seller you do yourself a disservice if you don't list on the internet now days.
I do all my transactions direct through the title escrow company. Here in California there are still a ton of disclosures that have to be filled out and you as the buyer must still do your due dilligence and have inspections done. It is your confidence in the inspections that will help you make a decision, not an real estate agent. They are just messengers.
Where I still find value in real estate agents is in buying a business. That is still a narrow market even with the internet.
@addison I agree! The homeowner has been in real estate so why should they have to pay. I understand them not wanting to pay for my agent as well. I have decided to write up the contract myself using the FarBar which is mostly self-explanatory and covers me for anything that should go wrong. They know an appraisal/inspection has to be done as I'm going FHA. If the home was in need of repairs I may be somewhat leery however the home has been updated even as far as the metal roof/drain field/siding/AC/Heat about 2016. I see no issues with it passing inspection. The appraisal was my only worry because there very many homes to comp from selling recently there is only one and it has none of the updates mentioned and is also about 100 sq ft smaller but is similar at the same selling price.
My only battle now is the closing costs which the seller will only pay $3500.00 towards my LO says that will leave me paying way too much out of pocket however she is also wanting to use her realtor to negotiate with them. Unless FHA adds some horrendous closing cost figures I'm not aware of I don't see us paying any more than just over 1k more. Which we're comfortable doing for the home. I'm just scared this LO will throw more closing costs in to hike it up so I will use the realtor.
I don't really see what the realtor is going to do for you. Is he going to negotiate with the lender? Unless he has some pull with the "Underwriter", or the broker/lender is going to waive some fees to be nice the Real Estate agent has no pull with a lender.
Remember, a loan agent is not the underwriter. It is usually the case that the underwriter gives the pricing of the loan. The loan agent just passes on the information like a real estate agent does.
Occasionally there are opportunities by local non-profits that are approved by FHA or HUD that help with down payment assistance. I don't know if there are any available for you but you could do a search. I don't know if I can mention it here but there was one named the National Homebuyers Fund. I don't really know if it is still around, but things like that may help you.
I could not have said this better. Thanks Puppetmaster for providing OP with a detailed response so he/she can make an informed decision.
@Addision Yes, I agree I finally told the realtor today that there is really nothing more to be done here the owner has negotiated to their limits and all the realtor is doing is going to anger her. She has no pull w/ lender or the UW she just works as an affiliate. Unfortunately most down payment assistance, I have looked at we don't qualify for the LO had a few we didn't qualify for because of household income. I really appreciate all of your advice!
Puppetmaster your advice is well taken. I believe this seller when she says they're just trying to save a buck. The home isn't extremely valuable so they're trying to get every dime they can in their pocket which I understand I would like to do the same! They put a lot of money into updates very recently so I can't blame them for holding their ground.
Did they give you the list of owner disclosures?
If you've never owned a home and don't have a Buyer's Agent then you don't really know what you are missing. In a standard purchase transaction the seller would pay your Buyer's Agents' commission or fee--typically 3% as already mentioned.
Have you had a licensed home inspector conduct a home inspection on your behalf? If not, you should do so immediately. Go with him on the inspection and take notes.
Have you ordered and completed the appraisal yet? If you are obtaining an FHA loan, at least you will be protected (if you don't have an Agent) with the FHA Amendatory Clause that MUST be signed by you and the Seller which protects your offer in the event of a low appraised value.
DPA $ comes at a cost and if you are the type of consumer that has your own money to invest as part of your minimum required investment then you are going to be better off because your interest rate will be lower than the one on the loan with the DPA $ and therefore you should be happier in the long run.
Just my $.02
All appraisal and inspections will be done as there is an FHA addendum on the contract. The contract also states they have to provide the disclosure. The FarBar contract leaves little to be missed.