Real Estate Contracts

[Mazderati]

There are a few threads on real estate but I couldn't find one pertaining to contracts, specifically.

I'm looking to buy a property (condo) without going through a broker/agent in the next few months. Given the buyer's agent typically submits the real estate contract to purchase a property, what experience(s) do you all have regarding generic purchase contracts that can be found online? I realize there are quite a few states that require state-specific contracts, but assuming I found an online contract that is state-specific, are these contracts legit?

In particular, I'm looking at www.uslegalforms.com. The company has a BBB rating of A+ with three complaints in the previous three years. A sample contract is available at http://www.uslegalforms.com/samples/MS-HOME.pdf. Obviously, my purchase would be subject to approved financing, clean home inspection, and appraisal.

Basically, are the generic contracts going to cause more trouble than they're saving me money? Should I suck it up and hire a local attorney for his/her own contract?

[m01766]

I'm not sure about your state, but I've done a purchase in california without an agent.

The basic procedure was pretty easy, simply involved locating the standard california residential purchase agreement form and taking it to the title firm of choice. The escrow people know how it all works so they can help you out if you are unsure about anything.

Having said that, are you actually saving money by skipping the agent? if not you might as well get one and let him handle all the boring stuff.

[mock vomit]

For full disclosure, I've been a dirt pimp for 26 years now;

I assume you already have the specific place picked out? If so, I'll also assume you are likely buying from a friend, or friend of the family, or friends family, or etc. and that you've already settled on a purchase price with them? I'll also very much hope you've previously looked at 10 or 20 of other similar type units, including those of similar price ranges, sizes, locations BOTH in and out of that same complex? If not, you haven't seen enough yet to pull the to pull the trigger IMHO. If so, you might consider hiring an attorney to help with the forms and closing etc. In my area many charge a flat fee for assisting a FSBO buyer from offer to closing in the range of $500. Many medium and bigger metro areas also have a retail store that sells local legal forms... often the real estate sales contract with the federal and state mandatory disclosures and other addendums or forms that are required or customary in your area.

If I'm wrong, and you don't already have a specific unit where you already know the owner, I'll say you could also be making a hudge mistake trying to go it alone... pretty much all the best "deals" are on MLS these days, including especially foreclosures, short sales and relocations. Those days lots of the hold outs still going it FSBO are sellers who are unrealistic on price, and reject the local real estate agents suggestions on pricing... plus, people tend to start the selling process FSBO, at a time when their asking price is the highest. They then often later drop the price when they list with a broker. So, interestingly enough, FSBO's are often some of the worst deals out there... And if you are thinking you'll save half the commission by representing yourself buying a listed property, I'll clarify that the listing agent will just end up getting both sides of the commission.

Good luck, biggest thing these days is seeing LOTS of other places for sale to make damn sure you aren't overpaying...

[RootSkier]

I would tend to agree with Tim. That said, if you are sure you want to do this, some states have statutory broker representation wherein an agent is solely there to help put together a transaction and supply forms. He/she makes no representations to either party regarding anything. I would probably do this for less than an attorney would charge around here.

Something worth checking into.

P.S. If there is a seller's agent involved this is a HUDGE mistake on all levels.

[Mazderati]

Yessirs. I'm looking at a property that is MLS listed through an agent. Other than what I know about the seller through the agent, I have no affiliation with the seller.

The seller is offering a buyer/broker's commission and the plan is to write the savings into the contract.

I realize the seller would have representation in the form of an agent while I would not, but that doesn't necessarily scare me. If the property checks out through an inspection and appraises for loan value, what is there to fear about going forward without my own agent?

I actually don't mind paying someone set up the paperwork (whether it be an agent or attorney), but to pay a buyer's agent a significant share of the full commission when I've already done the legwork is unnecessary.

[smitchell333]

The seller is offering a buyer/broker's commission and the plan is to write the savings into the contract.

I realize the seller would have representation in the form of an agent while I would not, but that doesn't necessarily scare me. If the property checks out through an inspection and appraises for loan value, what is there to fear about going forward without my own agent?

1) IMO Dont buy a condo unless its a screaming deal. They are slower to come back from downturns, you typically pay stupid HOA fees, are subject to common assessment fee risks, and are harder to sell on average.

2)This commission strategy MIGHT work, especially in a slow market. The thing to understand is that the commission agreement is between the seller and their agent. The agent is under no obligation to do this unless it is written into their contract with the seller and typically the arrangement is such that if there is no buyers agent then the sellers agent keeps either the whole commission or a reduced but larger than 1/2 part. I have seen buyers try this and get rebuffed by sellers agents. From the sellers agent perspective they effectively are taking on 2X the liability vs a sale with a buyers broker, so why would they do it for 1/2 the commission unless they can't sell the property otherwise.

3) That said I'd still recommend that unless you are familiar with the contract and the RE sales process where you are you should either have an attorney or broker work on the contract with you. There are multiple variables, deadlines, obligations, implications, decisions, etc. in a real estate contract that you should understand before you write it and during the contract execution. It is likely that the sellers will counter offer with some changes to the contract. Depending on how the contract is written you could risk losing your earnest money, "actual damages," or specific performance - ie they could legally force you to buy the place, if you somehow mess up the contract.

4) As an alternative you could engage a buyers broker on the condition that they rebate a % of the commission to you at the closing table. Say they give you 2/3 of the commission back to you. Then you can apply this to the cash you need to bring to the deal for downpayment, loan fees, title fees, etc. You'd have to get this cleared with your lender, but typically as long as its not over a couple % they will allow it. For example say its a 200K purchase price and you need to bring 5% down + 2K in fees = $12K cash. If the buyers commission is 3% or $6K you could get a rebate of $4K so you're cash to bring becomes $8K.

Compare this to a price reduction of $6K - You still have to bring $11.7K to the table. You do get the $6K in equity with the reduced price, but you still need to bring most of the cash.

[Snow Dog]

Up here the seller pays 100% of the commission and might pay a little less if it's a single agent transaction (no commission splitting). As a buyer there's no upside to going it alone.

[sar13]

I was about to write pretty much what Smitchel333 said but he did it so well I will just say:

See above^

[Mazderati]

1) IMO Dont buy a condo unless its a screaming deal. They are slower to come back from downturns, you typically pay stupid HOA fees, are subject to common assessment fee risks, and are harder to sell on average.

2)This commission strategy MIGHT work, especially in a slow market. The thing to understand is that the commission agreement is between the seller and their agent. The agent is under no obligation to do this unless it is written into their contract with the seller and typically the arrangement is such that if there is no buyers agent then the sellers agent keeps either the whole commission or a reduced but larger than 1/2 part. I have seen buyers try this and get rebuffed by sellers agents. From the sellers agent perspective they effectively are taking on 2X the liability vs a sale with a buyers broker, so why would they do it for 1/2 the commission unless they can't sell the property otherwise.

3) That said I'd still recommend that unless you are familiar with the contract and the RE sales process where you are you should either have an attorney or broker work on the contract with you. There are multiple variables, deadlines, obligations, implications, decisions, etc. in a real estate contract that you should understand before you write it and during the contract execution. It is likely that the sellers will counter offer with some changes to the contract. Depending on how the contract is written you could risk losing your earnest money, "actual damages," or specific performance - ie they could legally force you to buy the place, if you somehow mess up the contract.

4) As an alternative you could engage a buyers broker on the condition that they rebate a % of the commission to you at the closing table. Say they give you 2/3 of the commission back to you. Then you can apply this to the cash you need to bring to the deal for downpayment, loan fees, title fees, etc. You'd have to get this cleared with your lender, but typically as long as its not over a couple % they will allow it. For example say its a 200K purchase price and you need to bring 5% down + 2K in fees = $12K cash. If the buyers commission is 3% or $6K you could get a rebate of $4K so you're cash to bring becomes $8K.

Compare this to a price reduction of $6K - You still have to bring $11.7K to the table. You do get the $6K in equity with the reduced price, but you still need to bring most of the cash.

I would much prefer home ownership, but a condo is the only choice in the area I'm looking. Getting into a single family home would start around $1.5m.

The commission agreement information is very helpful. Though, if i were an agent, I couldn't imagine holding up customer's sale because I wanted a bigger slice of the pie.

In the hypothetical purchase, the minimal change in cash at closing doesn't bother me. I'm more concerned with saving on the total purchase price.

Up here the seller pays 100% of the commission and might pay a little less if it's a single agent transaction (no commission splitting). As a buyer there's no upside to going it alone.

The seller is also responsible for the real estate commission in this locale. However, my potential upside is keeping the buyer/broker portion of the commission. The seller would still pay a full commission; half to her agent and half to me. I would probably just ask for a price reduction in the amount of half the commission and have that written into the contract.


Thanks for everyone's input.

[XXX-er]

Up here I have heard several instances of friends getting an agent and paying them a K to act for them, a good one should know how to write a contract and make sure you don't get phucked

[mock vomit]

Sorry to tell the OP, that IF you've ALREADY SEEN THE UNIT WITH THE LISTING AGENT, or even just the owner themselves without any agent present... that Listing agent has a nearly foolproof lock on being "procuring cause" and getting BOTH the Listing side (dealing with Seller) and Selling side (buyer's side) of the commission NO MATTER WHAT YOU DO at this point. If you bring in a Buyer's Agent, that Listing agent can still rightfully claim 100% of the commission Seller is paying, and YOU are very likely to have to pay the Buyer's agent fees YOURSELF. I've been slinging dirt for 26 years, and the Realtor's Code of Conduct, which is matched by the State's licensing regulations in most cases, is quite clear on this.

All this ^^^ said another way easier for the public to digest, is that the commission is NOT earned by just writing the sales contract... instead the right to claim the commission is based on variables starting with things like; who first introduced the buyer to the property, MOST IMPORTANT: who first showed property to buyer, who followed up and answered questions buyer had... etc. You can think of this process of "procuring cause" as an unbroken string of events leading from the first time you knew property existed, to the closing. If one agents starts the process and is still involved, another Agent is basically forbidden from being able to step in and break that first agents chain, and try and claim the commission.

-If you saw a MLS/internet listing for the property, an add in the paper, or a sign in the yard to learn property was for sale... the Listing agent owns this beginning point.

-If you called the listing agent, and went and viewed it the first time with them there to let you in... the Listing agent owns this MOST IMPORTANT item in procuring cause.

-If you asked ANY questions of the listing agent, whether there at showing... or later via phone, email, etc... they can claim the follow up part.

The system is set up this way for a couple reasons; obviously the "work" done before you actually write the offer (advertising the property, finding the buyer, meeting buyers at places, answering questions and concerns of buyer, etc) that moved you to make a "buying decision" is probably the most important (and hardest) part of the process. Plus, if Buyer's could just approach a different agent after they've already made that buying decision, the slimiest tendencies of the public AND AGENTS would be involved and both the practices and reputation of real estate agents would be VERY negatively influenced.

You are very unlikely to be able to get anything, unless as mentioned above... the Listing agent is either just nice or desperate, and agrees to give the Seller some sort of commission discount for a "double pop" (he/she being both sides of transaction) even though they are not required to. Also, even if the Listing agent HAS a lower commission amount owed if they double pop it, don't you think the Seller will want that savings?

Good luck... ask away if you have any questions.

[mcsquared]

In my experience, from both the buyers side and the selling side of deals, what you are trying to do rarely amounts to any savings and is really only adding layers of bullshit onto the process. Get an agent, with this agent offer the price you want to pay. The seller will know what they will net at the end of the deal. And if that isn't enough let them negotiate it all out with agents. You are essentially trying to pre-negotiate the arrangement with seller and their agent. Any savings you realize by acting without an agent will mostly be a placebo effect. When at the closing table you will pretty much pay the same amount and the seller and the agents will have to figure out all the rest.

[MakersTeleMark]

What state?

[RootSkier]

Yeah, what state? In these parts it is illegal to negotiate commissions in a Buy/Sell.

But really, listen to the smart people and get a buyers agent. There is absolutely zero upside to not doing this. No offense, but the very fact you are asking these questions indicates the listing agent is probably not even going to give you a courtesy lick before the fisting commences.

[mock vomit]

OPs link to forms was for Mississippi...

[Big Snowballs]

ALWAYS HIRE A LAWYER. The savings is not worth the trouble. False information and fraud is what you Lawyer is suppose to protect you from. Don't just hire the cheapest guy or gal you can find but ask around and do your research on the Net.
Caveat Emptor...Buyer Beware
Good Luck

[Buke]

I've bought a few houses in the last year, none of which were listed on the MLS or closed in the normal way (none had real estate agents), but I'm by no means an expert. There are more ways than one to save money on a purchase. Writing your own offer is only one way and it might not work out as simply as you think for the reasons already mentioned. If the buyer agent's commission is 3% and you write an offer that is 3% below asking price on your own, it is highly likely that the seller will pay the full agreed amount (seller and buyer commision) unless they negotiate with their real estate agent.

Regardless, you asked about contracts, not the inner workings of the real estate industry. The Washington state bar (I'm in Washington) has a lot of basic forms on their website (http://www.wsba.org/info/lpo-forms.htm) that you can download for free. I would assume that other bars associations have the same thing. I bought a house a month ago with a much more informal contract than you'll find there. Contracts should be well written and airtight but the contract is only important if one person doesn't follow through with what they've agreed to. You're on the right track, the contract should specify that you have the right to back out of the deal if you can't obtain financing or if you aren't happy with the inspection.

My only advice is this, make sure you have title insurance, you close through escrow and you get a warranty deed. Other than that, you're right, not being represented by an agent isn't that big of a deal if you've done your homework on the property and are sure that you want it. If you are financing it with a mortgage company then they will make sure that you have title insurance, a warranty deed and it's closed properly through escrow and it's an even "safer" transaction.

[mock vomit]

Post up an update when it's all played out for those curious ones among us...

[Snow Dog]

The seller is also responsible for the real estate commission in this locale. However, my potential upside is keeping the buyer/broker portion of the commission. The seller would still pay a full commission; half to her agent and half to me. I would probably just ask for a price reduction in the amount of half the commission and have that written into the contract.

You're playing a fool's game. It's like trading a car, the salesman will always offer top dollar (it's always the nicest he's ever seen) and will adjust the new car price accordingly.

Just make an offer you're happy with and see how it goes. The asking price is just the asking price. You can offer anything you think is fair. Being will to walk away is the best bargaining position.

[fomofo]

1) IMO Dont buy a condo unless its a screaming deal. They are slower to come back from downturns, you typically pay stupid HOA fees, are subject to common assessment fee risks, and are harder to sell on average.

Plus, now this...

Bay Area condo owners can’t find affordable insurance policies
Try browser reader view if you get paywalled

Sorry to tell the OP, that IF you've ALREADY SEEN THE UNIT WITH THE LISTING AGENT, or even just the owner themselves without any agent present... that Listing agent has a nearly foolproof lock on being "procuring cause" and getting BOTH the Listing side (dealing with Seller) and Selling side (buyer's side) of the commission NO MATTER WHAT YOU DO at this point. If you bring in a Buyer's Agent, that Listing agent can still rightfully claim 100% of the commission Seller is paying, and YOU are very likely to have to pay the Buyer's agent fees YOURSELF. I've been slinging dirt for 26 years, and the Realtor's Code of Conduct, which is matched by the State's licensing regulations in most cases, is quite clear on this.

So that was the deal in 2010. Have these proposed new rules made it through the courts yet?

Realtors agree to make commission changes - Los Angeles Times
Try browser reader view if you get paywalled

[XXX-er]

I met LHutz esq on a level 1 avalanche course and he told me the drug store purchase contracts have holes in them you could drive a truck thru

SO if I bring him a FSBO deal he would write the purchase agreement for free and he would still get all the other RE disbursments a lawyer would normaly get up here anyway

the deal went down pretty much just like any house purchase I've ever done with an RE agent except it was L Hutz was in control, so IME using a lawyer was a good idea

[m2711c]

and iffen ya can’t trust L. Hutz, who canya?



fact.

[XXX-er]

I always tell buddy he is a fire fighter with a Lawyering problem

I wonder if he got deployed out east to Jasper ?

[Core Shot]

If you don’t use a lawyer you are a fool.
As I retired lawyer I still pay lawyers when I buy. You want clear title and someone to sue if shit goes wrong. Legal fees for a closing are minimal. Decades ago I probably cleared title and closed 300 properties.

PS. The link to that contract doesn’t work. I would give an armchair dentist opinion not state specific if I could read it.
In general if you have enough outs for inspection and financing it should be fine.
I do write my own offers to purchase. But close with a lawyer who still laws.

PPS. Surely you know a realtor if it’s mls. Throw them a bone and ask for a kickback. If you don’t use a realtor the seller is getting dicked for full commission no matter what your offer.

[XXX-er]

well up here the vendor pays the RE commission, the buying and selling RE agents split the $$$$ but if vendor doesnt use an RE agent he doesnt pay.

the guy i bought from used the FSBO.ca web site either paying 199$ or 499$ and i seen his the lawn sign out on the highway

And Hutz wrote the purchase agreement which was a good thing cuz half way thru the deal the vendor wants to wank around with possession dates to save money on his mortgage payment to which I said NOPE you signed a contract so its already set in stone with the lawyer, the vendor instantly went flacid