Author Topic: Possible Rental/Living Purchase  (Read 15763 times)

mpbaker22

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Possible Rental/Living Purchase
« on: August 04, 2013, 04:18:23 PM »
I've been thinking of doing this for at least 6 months now, but have been looking for the right location and price before proceeding. 
I have a couple of options that I like after a simplistic analysis, and run a generic one through the forum.  Let me know if these numbers sound good.  I'm specifically looking for a 2-unit building so I can live in one unit and rent the other.

Price - $80K (I would shoot for less, hopefully 75K or even 70K.  It's been on the market for 2 months and came down from 85K recently)
Rent - ~$500/unit.  I don't know for sure, but I have a friend who lives in a comp across the street from the one I like most, and he pays $550.  I erred on the side of caution.
So, my best guess at the monthly rent is equal to 1.25% of the cost. 
Applying the 50% rule, the CAP rate is 7.5% (but i suppose it's redundant to calculate a CAP rate off a generic 50% rule when I've already used the generic 1% rule ... IE- CAP rate provides new no information).

I'm not sure how to estimate monthly expenses for things like repairs, but property taxes are ~$650/year (varies between 600 and 700 for the past 5 years).  I just submitted a few questions about the place to the seller, so hopefully I can answer questions that will come up here.

The last piece is living in it.  I currently pay $325/month in rent.  My friend across the street from the possible purchase has declared intention to move in when his lease runs up, so we could fill my unit (I'd charge him $200-$300).  So, that's a guaranteed $525-$625 for my side, plus whatever the other unit gets me.

Now for some philosophy on rental properties.  I've wanted to get into the rental game, and I see this as the safest and lowest-risk way to do it.  I can cut the vacancy rate in half by living in one unit.  Also, the risk of tenant damage gets cut in half, etc.  Plus, it gives me very easy access to the other apartment when repairs are needed, since I will live on-site.  It just seems to me like the best scenario for learning the ropes.

Finally, does anyone have any suggestions on literature and blogs.  I know y'all have posted them before, and I've looked through other posts.  There's just so many posts, it's hard to filter through.

arebelspy

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Re: Possible Rental/Living Purchase
« Reply #1 on: August 04, 2013, 04:25:06 PM »
Getting a multiplex, living in one unit, and renting out the rest is a great way to get started.

Have you looked at 4-plexes, rather than a duplex?  Often they aren't that much more, and the rent is about the same, meaning it your return pans out a lot better.
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mpbaker22

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Re: Possible Rental/Living Purchase
« Reply #2 on: August 04, 2013, 04:45:54 PM »
Getting a multiplex, living in one unit, and renting out the rest is a great way to get started.

Have you looked at 4-plexes, rather than a duplex?  Often they aren't that much more, and the rent is about the same, meaning it your return pans out a lot better.

Thanks for the quick response.  I have looked at 4-plexes, but this is a balancing act between where I want to live and where I can get a good deal.  Unfortunately, this area of the city has far more duplexes than 4-plexes, so the opportunity just isn't as high.  I was interested in a 3-plex.

There is a 26-plex for sale nearby for $730,000 ;)

arebelspy

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Re: Possible Rental/Living Purchase
« Reply #3 on: August 04, 2013, 06:58:54 PM »
Getting a multiplex, living in one unit, and renting out the rest is a great way to get started.

Have you looked at 4-plexes, rather than a duplex?  Often they aren't that much more, and the rent is about the same, meaning it your return pans out a lot better.

Thanks for the quick response.  I have looked at 4-plexes, but this is a balancing act between where I want to live and where I can get a good deal.  Unfortunately, this area of the city has far more duplexes than 4-plexes, so the opportunity just isn't as high.  I was interested in a 3-plex.

There is a 26-plex for sale nearby for $730,000 ;)

Have you looked into the numbers on it?  What's the cap rate and occupancy level?
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Another Reader

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Re: Possible Rental/Living Purchase
« Reply #4 on: August 04, 2013, 07:12:51 PM »
Arebelspy beat me to it!  At $28k a unit, it's worth asking....

+1 on getting started with a partially owner-occupied 2-4 unit.  Buy another every year or two, and pretty soon you have a nice little portfolio.
« Last Edit: August 04, 2013, 08:34:33 PM by Another Reader »

mpbaker22

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Re: Possible Rental/Living Purchase
« Reply #5 on: August 04, 2013, 08:32:43 PM »
I'm guessing rents would be a minimum of $10K/month.  A maximum of $15,200 ($550/unit and $650 for 2-bedrooms).
So that is between 1.3 and 2.0%.

20 of the apartments are 1-bedroom.  The other 6 are 2-bedrooms.  My lowball assumes $350/month for the 1-bedrooms and $500 for the 2-bedrooms.  Maximum assumes $550 for 1-bedrooms and $700 for 2-bedrooms.
This is entirely guess work as the listing doesn't give any floor plans or pictures, so it's obviously hard to compare comps.  My friend pays $550 for his 1 bedroom, but it's a shotgun style, and it has 3 rooms that are the size of bedrooms.

The numbers work out to be decent, but I'm not sure I personally am ready to manage such a large complex!  It's actually two buildings that have 14 and 12 units.

mpbaker22

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Re: Possible Rental/Living Purchase
« Reply #6 on: August 08, 2013, 08:41:23 AM »
OK, I'm at the point where I'm 99% sure I want to buy this property.  How do people on here go about physically buying a place?  Everyone I know finds a cheesy real estate agent who shows them 5 properties, they pick the one they like the most.  The agent does everything for them.

I could hire a real estate agent, but since I have already found the building I want, I feel like that's half the work.  I'm really just wanting to protect myself legally.  Do you people go to a real estate attorney to draw up the documents, or do you use a normal agent?

I guess I just don't want to do what everyone else does as I know that's a bad way to do it, but I'm not sure what a better option is.

totoro

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Re: Possible Rental/Living Purchase
« Reply #7 on: August 08, 2013, 08:46:22 AM »
I'm in Canada so might be different? 

I never use a realtor (buying or selling actually).  I am comfortable with the process of looking and negotiating myself.  I make sure I know the market well first.  I make the offer subject to inspection and financing.

I have offered a reduced price because I am not using a buyer's realtor.  Here the seller's agent has to split the commission with the buyer's agent.  I benefited from this by about $10,000 on three occasions.  That is a big amount to lose just because you have chosen to use a "free" buyer's realtor.

I use a lawyer to convey the property - here you need this.

totoro

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Re: Possible Rental/Living Purchase
« Reply #8 on: August 08, 2013, 08:47:21 AM »
Arebelspy beat me to it!  At $28k a unit, it's worth asking....

+1 on getting started with a partially owner-occupied 2-4 unit.  Buy another every year or two, and pretty soon you have a nice little portfolio.

Another +1 to this strategy - used it three times now.  Made the best financial sense.

mpbaker22

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Re: Possible Rental/Living Purchase
« Reply #9 on: August 08, 2013, 08:54:21 AM »
That is a big amount to lose just because you have chosen to use a "free" buyer's realtor.

^This.
I majored in economics and math, so I have a pretty firm grasp on understanding that buyer's realtors aren't free at all.  If you aren't taking 3% of the sale for your realtor, you have 3% leverage for a better offer.  And that's why I ask. 
Of course, under certain circumstances, it might be better to hire someone who knows the market, but isn't that why I've been doing research on the market since I moved to St. Louis.  I doubt the typical realtor knows any more than I do.

Mr.Macinstache

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Re: Possible Rental/Living Purchase
« Reply #10 on: August 08, 2013, 08:58:23 AM »
What part of St. Louis are you looking to buy in?

mpbaker22

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Re: Possible Rental/Living Purchase
« Reply #11 on: August 08, 2013, 09:00:12 AM »
What part of St. Louis are you looking to buy in?

Near Tower Grove.  Slightly east, but not too far east ;)

and slightly south ... but not too far south ;)

Mr.Macinstache

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Re: Possible Rental/Living Purchase
« Reply #12 on: August 08, 2013, 09:02:25 AM »
What part of St. Louis are you looking to buy in?

Near Tower Grove.  Slightly east, but not too far east ;)

and slightly south ... but not too far south ;)

Not a bad area if I recall. I lived in an older 4-plex near the Hill... those are great rental properties if you're ever lucky enough to find one.

honobob

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Re: Possible Rental/Living Purchase
« Reply #13 on: August 08, 2013, 01:35:14 PM »
OK, I'm at the point where I'm 99% sure I want to buy this property.  How do people on here go about physically buying a place?  Everyone I know finds a cheesy real estate agent who shows them 5 properties, they pick the one they like the most.  The agent does everything for them.

I could hire a real estate agent, but since I have already found the building I want, I feel like that's half the work.  I'm really just wanting to protect myself legally.  Do you people go to a real estate attorney to draw up the documents, or do you use a normal agent?

I guess I just don't want to do what everyone else does as I know that's a bad way to do it, but I'm not sure what a better option is.
If the property is listed with an agency you would have to have an agent to prepare and present  your offer. 

mpbaker22

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Re: Possible Rental/Living Purchase
« Reply #14 on: August 08, 2013, 01:37:57 PM »
OK, I'm at the point where I'm 99% sure I want to buy this property.  How do people on here go about physically buying a place?  Everyone I know finds a cheesy real estate agent who shows them 5 properties, they pick the one they like the most.  The agent does everything for them.

I could hire a real estate agent, but since I have already found the building I want, I feel like that's half the work.  I'm really just wanting to protect myself legally.  Do you people go to a real estate attorney to draw up the documents, or do you use a normal agent?

I guess I just don't want to do what everyone else does as I know that's a bad way to do it, but I'm not sure what a better option is.
If the property is listed with an agency you would have to have an agent to prepare and present  your offer.

Why is that?

honobob

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Re: Possible Rental/Living Purchase
« Reply #15 on: August 08, 2013, 01:40:11 PM »
OK, I'm at the point where I'm 99% sure I want to buy this property.  How do people on here go about physically buying a place?  Everyone I know finds a cheesy real estate agent who shows them 5 properties, they pick the one they like the most.  The agent does everything for them.

I could hire a real estate agent, but since I have already found the building I want, I feel like that's half the work.  I'm really just wanting to protect myself legally.  Do you people go to a real estate attorney to draw up the documents, or do you use a normal agent?

I guess I just don't want to do what everyone else does as I know that's a bad way to do it, but I'm not sure what a better option is.
If the property is listed with an agency you would have to have an agent to prepare and present  your offer.

Why is that?
Because that is in  the agreement the owner signed with the listing agent.

Mr.Macinstache

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Re: Possible Rental/Living Purchase
« Reply #16 on: August 08, 2013, 01:50:34 PM »
OK, I'm at the point where I'm 99% sure I want to buy this property.  How do people on here go about physically buying a place?  Everyone I know finds a cheesy real estate agent who shows them 5 properties, they pick the one they like the most.  The agent does everything for them.

I could hire a real estate agent, but since I have already found the building I want, I feel like that's half the work.  I'm really just wanting to protect myself legally.  Do you people go to a real estate attorney to draw up the documents, or do you use a normal agent?

I guess I just don't want to do what everyone else does as I know that's a bad way to do it, but I'm not sure what a better option is.
If the property is listed with an agency you would have to have an agent to prepare and present  your offer.

Why is that?
Because that is in  the agreement the owner signed with the listing agent.

That shouldn't mean the buyer needs an agent to purchase though. Although I think its a good idea, it does not come out of the buyer pocket. The listing agent has to split that commission with the seller. The buyer doesn't pay AFAIK.

honobob

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Re: Possible Rental/Living Purchase
« Reply #17 on: August 08, 2013, 01:53:46 PM »

I majored in economics and math, so I have a pretty firm grasp on understanding that buyer's realtors aren't free at all.  If you aren't taking 3% of the sale for your realtor, you have 3% leverage for a better offer.
How do you figure this?  The seller has a contract to pay the listing agent 6%.

mpbaker22

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Re: Possible Rental/Living Purchase
« Reply #18 on: August 08, 2013, 01:58:32 PM »

I majored in economics and math, so I have a pretty firm grasp on understanding that buyer's realtors aren't free at all.  If you aren't taking 3% of the sale for your realtor, you have 3% leverage for a better offer.
How do you figure this?  The seller has a contract to pay the listing agent 6%.

So you don't think avoiding a buyer's agent offers any new leverage to change the percentages?  I believe it's pretty common for a seller to take a smaller percentage(since he's not giving away 3%) in these situations, though the situations themselves might be uncommon.

The point being, the seller's agent can always cut the contract and take 4.5% if both parties agree.  Don't you think if a sale was lined up, and I asked for 1.5% if the agreed price in exchange to the selling agent taking 4.5% he would gladly take the 1.5% on top of the 3% commission?
« Last Edit: August 08, 2013, 02:02:47 PM by mpbaker22 »

honobob

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Re: Possible Rental/Living Purchase
« Reply #19 on: August 08, 2013, 02:08:38 PM »

So you don't think avoiding a buyer's agent offers any new leverage to change the percentages?  I believe it's pretty common for a seller to take a smaller percentage(since he's not giving away 3%) in these situations, though the situations themselves might be uncommon.
The seller has a contractual obligation to pay the listing agent 6% of the sales price.  He CANNOT pay less just to give you a "deal".  The listing agent will have to do the work of the selling AND the buying agent.  Yeah, sure you promise that you will do the buying agents job but a selling agent would be a fool to jeopardize the sale on YOUR doing what a licensed agent would be doing.  Now maybe the listing agent would be willing to do ALL the work at a reduced commission and I know that it has been done but generally a good realtor will not. 

mpbaker22

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Re: Possible Rental/Living Purchase
« Reply #20 on: August 08, 2013, 02:11:06 PM »

So you don't think avoiding a buyer's agent offers any new leverage to change the percentages?  I believe it's pretty common for a seller to take a smaller percentage(since he's not giving away 3%) in these situations, though the situations themselves might be uncommon.
The seller has a contractual obligation to pay the listing agent 6% of the sales price.  He CANNOT pay less just to give you a "deal".  The listing agent will have to do the work of the selling AND the buying agent.  Yeah, sure you promise that you will do the buying agents job but a selling agent would be a fool to jeopardize the sale on YOUR doing what a licensed agent would be doing.  Now maybe the listing agent would be willing to do ALL the work at a reduced commission and I know that it has been done but generally a good realtor will not.

Go back and re-read my post, and comment on MY post, not YOUR idea of my post

honobob

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Re: Possible Rental/Living Purchase
« Reply #21 on: August 08, 2013, 02:21:27 PM »
You edited your post after I replied.   My response to YOUR post remains the same.  What do you think I missed?

mpbaker22

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Re: Possible Rental/Living Purchase
« Reply #22 on: August 08, 2013, 02:25:10 PM »

So you don't think avoiding a buyer's agent offers any new leverage to change the percentages?  I believe it's pretty common for a seller to take a smaller percentage(since he's not giving away 3%) in these situations, though the situations themselves might be uncommon.


The point being, the seller's agent can always cut the contract and take 4.5% if both parties agree.  Don't you think if a sale was lined up, and I asked for 1.5% if the agreed price in exchange to the selling agent taking 4.5% he would gladly take the 1.5% on top of the 3% commission?
The seller has a contractual obligation to pay the listing agent 6% of the sales price.  He CANNOT pay less just to give you a "deal".  The listing agent will have to do the work of the selling AND the buying agent.  Yeah, sure you promise that you will do the buying agents job but a selling agent would be a fool to jeopardize the sale on YOUR doing what a licensed agent would be doing.  Now maybe the listing agent would be willing to do ALL the work at a reduced commission and I know that it has been done but generally a good realtor will not.

Mr.Macinstache

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Re: Possible Rental/Living Purchase
« Reply #23 on: August 08, 2013, 02:31:02 PM »
Just get an agent to protect yourself in the purchase. You're not paying more. The cut comes out of the sellers agreement to pay 6%. The agents split that, you don't pay for it. You pay the purchase price.

mpbaker22

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Re: Possible Rental/Living Purchase
« Reply #24 on: August 08, 2013, 02:36:32 PM »
Just get an agent to protect yourself in the purchase. You're not paying more. The cut comes out of the sellers agreement to pay 6%. The agents split that, you don't pay for it. You pay the purchase price.

That's the entire point.  You DO pay more, but is 1.5-3% worth the hassle?

honobob

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Re: Possible Rental/Living Purchase
« Reply #25 on: August 08, 2013, 02:43:29 PM »
My response remains the same.  Why would an agent give you a deal?  As the seller, if I saw this i'd say hey how about a deal for me.


Mr.Macinstache

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Re: Possible Rental/Living Purchase
« Reply #26 on: August 08, 2013, 02:46:42 PM »
Just get an agent to protect yourself in the purchase. You're not paying more. The cut comes out of the sellers agreement to pay 6%. The agents split that, you don't pay for it. You pay the purchase price.

That's the entire point.  You DO pay more, but is 1.5-3% worth the hassle?

To protect yourself with such a large purchase, I would say yes. As honobob said, the seller is under contract with their agent, and the changing that contract willy nilly on demand is unlikely.

Who's going to prepare your contract anyway? I sure as heck would not want that seller agent playing both sides.

mpbaker22

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Re: Possible Rental/Living Purchase
« Reply #27 on: August 08, 2013, 03:01:10 PM »
Just get an agent to protect yourself in the purchase. You're not paying more. The cut comes out of the sellers agreement to pay 6%. The agents split that, you don't pay for it. You pay the purchase price.

That's the entire point.  You DO pay more, but is 1.5-3% worth the hassle?

To protect yourself with such a large purchase, I would say yes. As honobob said, the seller is under contract with their agent, and the changing that contract willy nilly on demand is unlikely.

Who's going to prepare your contract anyway? I sure as heck would not want that seller agent playing both sides.

That's why you would pay a lawyer on an hourly basis (or some other fee schedule).
Ultimately, there are pros and cons to this situation, but to act as if there is no money to possibly be saved by foregoing the buyer's agent is silly.  But is the saved money worth the risk is the intent of my original question.

totoro

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Re: Possible Rental/Living Purchase
« Reply #28 on: August 08, 2013, 03:05:05 PM »
This strategy works well when a home has been on the market for a bit.  The realtor is eager to get their commission and the seller wants the sale. 

The first time I did not even ask.  I was unrepresented and offered lower than the seller was willing to accept and the place had been on the market a while.  The realtor voluntarily offered half the commission to get the deal done.  That's how I found out about the strategy.  Second time was me asking and it was successful. 

This strategy won't work when there is hot competition BUT you will be put to the top of the list by the seller's agent because they know they will get to keep 100% of the commission!

totoro

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Re: Possible Rental/Living Purchase
« Reply #29 on: August 08, 2013, 03:06:30 PM »
Saving $10,000 or $15,000 - it was totally worth NOT being represented.

arebelspy

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Re: Possible Rental/Living Purchase
« Reply #30 on: August 08, 2013, 03:17:36 PM »
I disagree with Bob.  It is very common to get a reduction if you do not use an agent to buy.
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Re: Possible Rental/Living Purchase
« Reply #31 on: August 08, 2013, 03:35:49 PM »
The point being, the seller's agent can always cut the contract and take 4.5% if both parties agree.  Don't you think if a sale was lined up, and I asked for 1.5% if the agreed price in exchange to the selling agent taking 4.5% he would gladly take the 1.5% on top of the 3% commission?

If you buy the property for $80k and save 1.5% you're only saving yourself $1200 - and you still have to pay the lawyer out of that. For a first home purchase I would strongly recommend working with a buyer's agent. If the savings were greater, perhaps the risk/reward would be more favorable, but for a few hundred bucks it's not worth going unrepresented your first go-around.

Mr.Macinstache

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Re: Possible Rental/Living Purchase
« Reply #32 on: August 08, 2013, 03:41:38 PM »
The point being, the seller's agent can always cut the contract and take 4.5% if both parties agree.  Don't you think if a sale was lined up, and I asked for 1.5% if the agreed price in exchange to the selling agent taking 4.5% he would gladly take the 1.5% on top of the 3% commission?

If you buy the property for $80k and save 1.5% you're only saving yourself $1200 - and you still have to pay the lawyer out of that. For a first home purchase I would strongly recommend working with a buyer's agent. If the savings were greater, perhaps the risk/reward would be more favorable, but for a few hundred bucks it's not worth going unrepresented your first go-around.

That is my take too, except I would get my own agent to avoid a conflict of interests.

honobob

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Re: Possible Rental/Living Purchase
« Reply #33 on: August 08, 2013, 04:52:01 PM »
I disagree with Bob.  It is very common to get a reduction if you do not use an agent to buy.

That doesn't make you right, just disagreeable. ;)  But, if a property is listed with an agency YOU are using an agent.  As a seller I want market price.  If the agent is going to rebate some of the commission I'd want that rebate to ME.  If they are rebating that to the buyer I'd be concerned that the deal closes.

One purchase I walked away from because the seller wanted more that market.  My realtor called me later and said they could make the deal.  She and the listing agent worked the commission to make the deal.  I've purchased over a million dollars in real estate from this agent.  I did not and would NOT ask them to discount their services and expect to get full service from them.  My agent is knowledgeable and brings the deals to me.  Why be penny wise but pound foolish? 

honobob

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Re: Possible Rental/Living Purchase
« Reply #34 on: August 08, 2013, 05:01:43 PM »


That's why you would pay a lawyer on an hourly basis (or some other fee schedule).
Ultimately, there are pros and cons to this situation, but to act as if there is no money to possibly be saved by foregoing the buyer's agent is silly.  But is the saved money worth the risk is the intent of my original question.
I do realize there are states where lawyers handle MOST real estate transactions and they are called real estate lawyers.  In other states they are called deal killers.  If you pay to have them draft a contract to purchase 99% of listing agents will refuse to present it in that form.  They will require to make the offer on the form vetted by their professional organization that THEIR lawyers have vetted.  They would be placing their license in jeopardy otherwise. 

totoro

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Re: Possible Rental/Living Purchase
« Reply #35 on: August 08, 2013, 05:04:42 PM »
I have no idea what works for you but this strategy works for me and I intend to continue following it. 

With the age of everything on the internet and the ability to evaluate a deal myself I see no advantage to using a buyer's agent for me.  I have also purchased a FSBO without the use of an agent at all. 

The next time I sell I also have no intention of using an agent.  If I have trouble selling for some reason, although I intend to wait for a seller's market, then I would consider this option - but with a discount realtor.

Here standard commissions are 7% of the first $100,000 and 3.5% thereafter.  That is $19,000 on a $500 000 home (less than the average price around here).

honobob

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Re: Possible Rental/Living Purchase
« Reply #36 on: August 08, 2013, 05:27:59 PM »
I have no idea what works for you but this strategy works for me and I intend to continue following it. 

With the age of everything on the internet and the ability to evaluate a deal myself I see no advantage to using a buyer's agent for me.  I have also purchased a FSBO without the use of an agent at all. 

The next time I sell I also have no intention of using an agent.  If I have trouble selling for some reason, although I intend to wait for a seller's market, then I would consider this option - but with a discount realtor.

Here standard commissions are 7% of the first $100,000 and 3.5% thereafter.  That is $19,000 on a $500 000 home (less than the average price around here).

I'm not saying it's a bad strategy but you have to be reasonably knowledgeable.  Here's my experience with a discount agency that I've posted before.

My recent 2008 experience with a cut rate MLS company was horrible.  They had a listing in a building I already had a unit in and I was willing to pay market price.  They were at $459,000 too high and through the building grapevine I heard they rejected a $440,000 offer which was about market at the time but the market was falling.  They reduced to $435,000 and I contacted one of their agents about similar properties.  I did not want him to know I was only interested in their unit.  Although their listing matched my parameters to a "T" he presented all other properties EXCEPT theirs.  Guess what?  All the properties he wanted to show me paid him considerably more.  They seemed to be using their listing to get buyers for full commission properties. I finally forced an offer on their property at market value and they did not counter saying they'd rejected an offer for $10-15000 more.  The market was still falling and I anticipated 5-10% drop but was still willing to pay todays market to lock the property for me.  I told my regular realtor about this and said I did not want to bother her for a cut rate commission but she offered to present a contract for me (their salesman had since left the company).  I offered a little over $400 and they would not even counter.  i told them I would pay whatever market value they could support but they only had comps from much better buildings that of course sold higher but it was comparing apples to oranges.

They never sold it, the owner listed with a full commission agent and sold for $370,000 about 9 months later.

totoro

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Re: Possible Rental/Living Purchase
« Reply #37 on: August 08, 2013, 05:59:26 PM »
I don't know about the us, but here the realtor is legally bound to present all offers to the owner.  If they are rejected it is only because the owner rejects.  The failure to present the property in question would lead me to contact the owner directly to be honest - likely a breach of the realtor's duty of good faith which might allow you to break a contract.

As far as being a "discount realtor" problem, I would say... maybe... but maybe it was a realtor problem.  I have had a very very negative experience with a full rate realtor and I happen to know a truly excellent "discount" realtor.  The discount realtor is a business associate who is very successful, and will likely grow a lot more, because he is lower rate yet provides excellent service.  He is independent so he doesn't pay big commissions to his firm - he is his firm.  He is also up front and informed about his commission, costs and the market. 

Just like anything, you need to ask around and do your due diligence.

honobob

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Re: Possible Rental/Living Purchase
« Reply #38 on: August 08, 2013, 08:22:43 PM »
I don't know about the us, but here the realtor is legally bound to present all offers to the owner.  If they are rejected it is only because the owner rejects.  The failure to present the property in question would lead me to contact the owner directly to be honest - likely a breach of the realtor's duty of good faith which might allow you to break a contract.
This is so overstated.   A realtor would be under NO obligation to present an offer from an unliscensed person. If some idiot realtor wrote a preposterous offer the "presenting" might be a quick phone call to the seller "hey I have an offer from little Donald Trump.  I'll be filing it in the round file unless you want to mess with em"

mpbaker22

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Re: Possible Rental/Living Purchase
« Reply #39 on: August 08, 2013, 09:03:37 PM »
The point being, the seller's agent can always cut the contract and take 4.5% if both parties agree.  Don't you think if a sale was lined up, and I asked for 1.5% if the agreed price in exchange to the selling agent taking 4.5% he would gladly take the 1.5% on top of the 3% commission?

If you buy the property for $80k and save 1.5% you're only saving yourself $1200 - and you still have to pay the lawyer out of that. For a first home purchase I would strongly recommend working with a buyer's agent. If the savings were greater, perhaps the risk/reward would be more favorable, but for a few hundred bucks it's not worth going unrepresented your first go-around.

Thank You AJ, this is the sort of advice I am looking for as opposed to the 'It can't be done' when I know that is blatantly incorrect.

That's what I was wondering too, but I didn't want to lead someone into it.  I'm used to investment fees being <1%, and since this is an investment, I think of it as losing 3% at purchase and 3% at the sale.  Of course you're going to 'lose' some money no matter how you go about the purchase.  But as long as you make those percentages back ... and when you have a reasonable holding period, it can be done.
« Last Edit: August 08, 2013, 09:07:24 PM by mpbaker22 »

totoro

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Re: Possible Rental/Living Purchase
« Reply #40 on: August 08, 2013, 09:05:28 PM »
Um, I'm in Canada and realtors are legally required to present all offers unless they have  specific instructions, for example, to reject anything under a certain amount.  Offers from unlicensed individuals are included in this.  Perhaps your system is different.

Of course ridiculous offers will be rejected, as ridiculous responses are on this forum.

Another Reader

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Re: Possible Rental/Living Purchase
« Reply #41 on: August 08, 2013, 10:15:20 PM »
When you buy or sell a stock, the process is very easy.  Every share of stock is exactly the same.  Thousands to millions of transactions of the shares occur 5 days a week in recognized places of exchange.  Price discovery is easy.  Nothing has to be compared or adjusted.  Financing is usually cash or the seller comes to the table with financing (margin) in place so it's the same as cash.  There is no long escrow period in which all the parties wait around for financing and inspections to be completed.  The price for the exchange service is less than $10.00 in most cases and the transaction occurs in a few seconds.  A mutual fund company may employ people to decide which transactions will make the most money in their view, and add a fund management fee but that fee is spread out over thousands of clients and millions of shares.

Compare that to the real estate transaction process.  Agents, brokers, title companies, loan brokers, bankers, inspectors, underwriters, appraisers, and insurance agents all have a part in the transaction.  The property has to be valued to make sure the price is reasonable and the property has to be in good enough condition to lend on and insure.  Peoples' emotions are involved, so agents have to navigate their clients through that as well.  In the end, all the fuss is over one piece of property.  The transactions are therefore going to cost a lot of money.

As a seller, I would be upset with an agent that did not present all offers.  That does not mean telling me that he or she got a phone call from an unknown person asking if the seller would accept some ridiculous number.  Any serious offer should be backed up in writing or at least should be complete if made verbally.  I don't know what the law says, but I'm pretty sure the code of ethics requires all offers to be presented, as long as they have the elements that constitute an offer.

totoro

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Re: Possible Rental/Living Purchase
« Reply #42 on: August 08, 2013, 10:18:39 PM »
Yes, you are correct.  Offers in writing must be presented - from anyone.  Verbal offers do not have to be presented because they are not worth the paper they are not written on most of the time.

mpbaker22

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Re: Possible Rental/Living Purchase
« Reply #43 on: August 08, 2013, 10:55:15 PM »
Another Reader - the point is that it is a simplification, but it's still a fact that losing 6% immediately requires a 6% better return over time.  I would prefer to do the house-finding and loan process on my own, as I am probably going to be more knowledgeable than any realtor I will probably use.  That's what makes me question using one even more. 

However, given the points made by a few posters, it seems like a good idea to use one here.

honobob

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Re: Possible Rental/Living Purchase
« Reply #44 on: August 08, 2013, 10:57:42 PM »
Yes, you are correct.  Offers in writing must be presented - from anyone.  Verbal offers do not have to be presented because they are not worth the paper they are not written on most of the time.
No sense arguing but I know a lot of people believe it to be true in America and are wrong.  If true in Canada just another reason to be proud to be American!  Hell, realtors don't have to show you a property or even write up your offer.

totoro

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Re: Possible Rental/Living Purchase
« Reply #45 on: August 08, 2013, 11:18:36 PM »
Hasn't stopped you yet despite the fact that I have pointed out I am in Canada.  If you are really interested you should stop arguing and start googling.  Might be a better use of your typing time.

honobob

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Re: Possible Rental/Living Purchase
« Reply #46 on: August 08, 2013, 11:46:03 PM »
Hasn't stopped you yet despite the fact that I have pointed out I am in Canada.  If you are really interested you should stop arguing and start googling.  Might be a better use of your typing time.
hey, I'm the one that said it wasn't worth arguing about.  I don't care about stupid Canadian laws but you are making the  claim.  Use your google skills to support for those that may care. 

totoro

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Re: Possible Rental/Living Purchase
« Reply #47 on: August 09, 2013, 12:12:32 AM »
I generally research before posting something if I am unsure... just because, you know, it seems like a good thing to do.  I did in this case to make sure.  I also happen to have a degree in stupid Canadian law.  Comes in handy with stupid law interpretation.

honobob

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Re: Possible Rental/Living Purchase
« Reply #48 on: August 09, 2013, 12:17:24 AM »
I generally research before posting something if I am unsure... just because, you know, it seems like a good thing to do.  I did in this case to make sure.  I also happen to have a degree in stupid Canadian law.  Comes in handy with stupid law interpretation.
.........and the case law is...........

Another Reader

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Re: Possible Rental/Living Purchase
« Reply #49 on: August 09, 2013, 07:03:19 AM »
There are lots of situations where unethical agents do not present all offers.  A big problem for the last few years has been short sale fraud.  The listing agent takes a short sale listing and has the unknowledgeable seller sign a contract with a friend of the agent's for a below market price.  The listing is input into the computer as active and a few minutes or hours later it's marked pending.  Pictures are often added after the listing is moved to pending.  The listing agent has a supply of low comps to give the BPO agent in hopes the servicer's asset manager will accept the sale. 

In numerous cases since 2008, my agent has called on new short sale listings for various clients.  He has left messages stating he has an offer to present.  The calls are never returned and the listing is marked pending with no response.

There have been debates in numerous states about whether this is legal.  There has never been a debate about whether it is unethical, which it clearly is.