Using buyer's agent when buying with seller finance?

Question

Hi gurus,I wanted some advice on how I should buy some investment properties listed on MLS with the intention of using seller finance. I have looked at a few properties already with my buyer's agent with the intention of using conventional loans at the time, but my strategy has changed to find deals where the seller can finance. I figured both seller and buyer could save on the fees by cutting the middle men out. All the properties we've seen so far have been through my research. I read in a book that I should contact the owner directly and ask if he/she would like to work out a deal, but wait until their contract is up with the listing agent; however, I feel I could be losing on some deals by waiting. So my questions for you guys are:1) How do you go about viewing the properties listed on MLS if you don't want to use an agent, but still try to buy with seller finance? 2) If you have gone to see a property with an agent how did the agents get paid when you decided to do the seller finance route?Thanks in advance!TC

Mike Cumbie · Answer

Hi @Tam C.Essentially if it is on the MLS the seller has an agent (For the most part). So you can't get around that person by going right to the owner. Well you can but odds are good the agent is still getting paid, regardless. Unless you wait till it expires which as you stated puts you out of the running until everyone else got to look at it. In General terms (of course everything can be negotiated). The seller has made an agreement with a sellers agent for 6% (can be anything) and said "Hey put this on the MLS and offer a sellers agent 3% of that if they bring a buyer". So the agent puts it on the MLS and other agents find it. They find buyers and take them to the house for 3% if it sells. A buyer can't walk in and say "Hey throw out your 6% contract and take that off the price I am going to make an offer". If your offer is accepted odds are real good the 6% is still going to the listing agent after the sale. If you have an agent take you to a house you have essentially gone into contract with them that if you purchase that home, they make their percentage. It's like going into a restaurant and ordering a meal, having the waitress bring it to you, eating it and then walking to the owner and saying "I want to save on a tip so I am going to pay you directly".So for 1) You can get your license and get MLS access (Usually not to expensive and then you can do it all yourself). Or come to an agreement with an agent to get you that information, just make sure they know you are not using them for any transactions. Maybe a pay per listing or some such.2) They get paid by the seller either way. Now if you find a distressed property not on the MLS and find an owner, then discuss buying it through them, looking up their address and calling etc. Then you are good to go. There never was an agent involved, then sure figure out your pricing. Hope this helps and good luck in your investing!

Steve Vaughan · Answer

One of my seller-financed deals was through the MLS. All others have been off-market tired landlords. I wouldn't bother asking about seller-financing with OO property, especially if listed. This was an absentee-owned triplex.When I bought that one from the MLS, I was unrepresented. I offered via an LOI with 3 scenarios: all cash, terms with $x amount down, terms with $y amount down. The LA called and said they picked option 2. We then completed a formal PSA. I had to offer enough down to cover the commissions and enough for the seller to be comfortable. I think the DP was $22K on a $144k sale. If this was off-market, I would have saved 6% on the price AND 6% on the DP. Skirting the realtor won't work for the most part. There is a look-back period from the end of the listing if that listing 'procured' you. It's also short-sighted. Work with them, or find off-market, quiet deals which are always the best anyway. Good luck @Tam C.!

Tam C. · Answer

@Bill Gulley - Thanks for the advice. I realize how much more I need to learn. :)@Dev Horn - Thanks for the advice and for setting it straight. I will definitely think this over.

Tam C. · Answer

Hey all,Thank you all for the advice. I appreciate the time you've taken to respond. I have learned some things I didn't know before. However, after re-reading some of the responses I think i may not have described my intentions clearly when buying the properties and so got some shocking responses about my integrity. I think my excitement over posting my first question on the forum made me trigger happy and I did not clarify my original post.In no way did I plan to contact the seller personally on properties I've already seen. I thought the right thing to do was wait until the seller's contract was over, before going to see the property in person and then negotiating. But since I saw the property online through the hard work of the listing agent as @Bill Gulley and @Dev Horn mentioned, I see things in a different light. Thanks again for sharing your time and insight! TC

Dev Horn · Answer

I am not a licensed agent, but I work with an agent partner and have many associates who are licensed salespeople and brokers. The idea of trying to screw someone out of a commission just does not sit well with me. If you found a listed property on the Internet, it was because of the broker's marketing efforts. As Bill stated above: "if you found the property by the agent's efforts, listing or advertising, the agent is due the commission". We're all real estate professionals and we should treat each other the way we want to be treated. Integrity is everything if you are trying to make this your business/career.“You’re never wrong to do the right thing.” ~ Mark Twain

Bill Gulley · Answer

Well Tam, obviously the book you read had BS in it! A basic education in real estate will inform you of what is in a listing agreement between an owner and a broker as well as the obligations of each. You don't weasel in between an owner and their agent, you work with the agent. Now, if the grace period expires after the contract listing is up, often 6 months, then you might show that the agent was not the procuring cause of your sale, in other words, if you found the property by the agent's efforts, listing or advertising, the agent is due the commission over that "grace period". You need to have more knowledge in getting a seller financed deal off the MLS, it can be done, but usually, an agent will advise against it if the borrower lacks ability or knowledge, they are tryin to watch out for their client. Much easier with unlisted properties. Good luck :)

Tam C. · Answer

Thank you for the advice!

Jassem A. · Answer

If the seller agrees to carry the note then the listing agent will probably want a fee or their commission allocated from your down payment to the seller