Buyer's agent = listing agent = home owner?

Question

Hi Everyone,

I'll explain this the best I can. I reached out to a listing agent in Indianapolis, and met up with to check out a duplex. We got to talking and he realized I'm 25 and looking to get into rentals, and he told me he is actually a full time agent/investor who owns 17 rentals in nearby Anderson, IN.

Last weekend he showed me a 2/1/1 he owns that needs new flooring, half the house painted, and a bathroom remodel. It's off-market, and he said he could better use the cash on a larger flip in ritzy Carmel, IN that he's working on. Water heater, furnace, roof and a/c were replaced earlier this year, and they have re-wired the electrical. Once completed, market rent would be $7-800. He's asking $25k, which I would pay in cash. He predicts $6-8k in rehab, and the house is smaller so I think that's pretty accurate.

I bought my personal residence in Chicago (currently house-hacking via two roommates), and on that property my agent sent me an offer letter to sign, she presented it to the seller, yadda yadda. How would this work when this guy is my agent, the seller, and the listing agent all in one? Does he still send me an offer letter that I just send back to him? How would the contingencies (like inspection period) work?

Thanks for reading,

- Derek

Mike Knowles · Answer

Indiana is not an attorney state so you don't necessarily need one here. The Title Company will handle all the legal aspects (title search, doc prep, etc.) I used to live in Chicago and own property there so I know what you're used to...it's different here.Buying a property off market is as easy as deciding on price and terms with Seller, writing up a short contract, then submitting it to the Title Co. They'll open escrow and take care of the rest. If you're paying cash, you don't even need a wet ink signature...you can print, sign, and scan it all back to them.You should have an inspection contingency in your contract so you have an out if something comes up.Those are mechanical process items. I'd also recommend you talk to someone more familiar with $25k duplexes in Anderson. That's not an asset class I would touch with a 10-foot pole.

Lee Smith · Answer

@Derek Luttrell As @Mike Knowles stated(Hi Mike!), You don't need an attorney in Indiana.. Title company will handle everything. Things to watch out for: Who pays closing fee($300~)Who pays title insurance($400~)Who pays taxes.. Make sure you get this prorated to date of closing. In Indiana we pay property taxes a year in arrears.. SO November 2017 tax bill is paying for latter half of 2016.. So if you don't prorate to closing date you could be paying almost a year and a half of his taxes.

Mike Knowles · Answer

Just realized you said Seller was an Agent. After you have a verbal agreement, he can write up the offer using the standard contract. That's probably best for both of you.

Christopher Giannino · Answer

@Derek LuttrellPersonally, I would 100% use a RE attorney in a FSBO situation but you have to determine that for yourself. I'm sure there's going to be pros and cons to hiring a RE attorney but just remember if you don't have a RE agent and then you don't hire a RE attorney, you won't have anyone to represent you besides yourself. That could cost you more in the long run then just hiring a RE attorney from the get-go. In my situation, I called the seller a couple of days after a seeing the place even though I knew from the beginning I was going to offer on the property. I took a couple of days to offer because I didn't want to seem too eager. Basically, I offered a low but reasonable price for the property and he said he needed about 30 mins. to decide on whether he would accept. He ended up accepting my initial offer and he had not countered (he was very motivated to sell and unload the property immediately which I had become aware of early on.) From the moment he accepted and forward, my attorney pretty much took care of everything else.

James Bausch · Answer

As a licensed agent in Indiana here are my thoughts. By law he has to disclosed that he's licensed. If you don't feel comfortable with him representing you-- you don't have to agree to it, but it might cost you otherwise to go elsewhere. I agree with some of the other comments, like Jeff said, "due diligence like you normally would on any other transaction, but there is nothing in particular to be afraid of in the situation you described." And yes we typically do not use attorneys except to draft the deed.

Jeff Copeland · Answer

This is not an unusual situation. Most states allow a real estate agent to act as a transaction broker on both sides of the deal (see http://www.in.gov/pla/files/IREC.2011_EDITION.pdf for Indiana, chapter 10). Otherwise, there's very little difference between this and any other transaction - except he obviously isn't going to negotiate a better price, repairs, or concessions on your behalf. Most states have a standard contract template that realtors use, which will cover the inspection and other contingencies, and (as already stated above), your title company will handle the legal details and issue title insurance to protect your interest in the property.I've been in this exact situation as a realtor; acting as the seller, listing agent, and buyer's agent (in the capacity of a transaction broker), and it worked out fine and actually ended up being very beneficial to the buyer...there were multiple offers, but they couldn't really compete with him since I was able to avoid paying a buyer's agent commission in his case. So...do your due diligence like you normally would on any other transaction, but there is nothing in particular to be afraid of in the situation you described.

Derek Luttrell · Answer

@Mike Knowles thanks for chiming in. My cluelessness goes as far back as "write up a short contract"--I feel like that is something best left to the legal professionals. Have you ever drafted your own contract? I should have clarified, but this $25k property in Anderson is 2/1 SFH with detached garage. I quickly realized that my $100k budget for a duplex in Indy would put me in parts of town I am not ready for.

Derek Luttrell · Answer

@Christopher Giannino especially if your attorney took the reins after you got your offer accepted, I'd have to agree that their service would be worthwhile here. I'll start looking for one in the Indy area. Thank you!

Derek Luttrell · Answer

@Christopher Giannino would you suggest still going through a real estate attorney for something like this? Will the attorney be the one drafting my initial offer letter? When you were negotiating with the seller, was this just done over text/email, and then you agreed on a price? I used an attorney for my primary residence, but wasn't sure if the $5-700 fee was necessary for this one. Good point about knocking down the price since there aren't any agents but him. While 3% of $25k is only $750, every dollar helps in a cash deal like this.

Christopher Giannino · Answer

From my understanding of the situation you have explained above, it would be considered a "FSBO" deal. It just so happens that the seller is also an agent. I just went through the process of buying a FSBO here in NJ and basically it was the same process as buying with an agent with the only difference being I had to do the initial negotiation with the seller and then my lawyer advised me on certain things opposed to an agent. One suggestion for you is if you end up buying this property that is not being listed on the MLS, try to get a discount on the property. The thought process here is since he doesn't need to pay an agents commission, he should discount the property a little because he will still be netting more on the sale.