Representing myself as a first time home buyer?

Question

I am a first time home buyer, and I am on track on obtaining my RE agent license by end of this year. I am planning to purchase a home in the suburbs in the first half of 2024, and to represent myself on the first purchase.

The instructor for the real estate class recommended me to refer my first deal instead of working it myself, but I am hesitant to do so because I would have to give away 80% to 90% of the commission. Another option is to work with a mentor, where I have to give up 20-30% of the commission, but I am not sure what value can a mentor bring considering I have been studying the market that I want to buy for past year and have a good grasp on the type of property that I am looking for.

I have spent hundreds of hours so far in real estate education & investing and am fairly confident that I can handle the transaction myself. But I wanted to hear from experienced member in this forum about the risks of representing myself in the first transaction, as well as any advise. Thank you so much!

Also I'm an Army veteran and planning to use VA loan for the first house as well if that helps.

Jason Campbell · Answer

Two ways to look at this.

1. Use the agent and give them the extra $$ on the commission BUT only if they agree to walk through the process with you and mentor you…Chock the lost commission up to educating yourself IRL.

2. Send It! As a fellow Veteran I have faith in you. If you would have said you just graduated high school and haven’t walked around in the real world, I would not say this. I came home from my first deployment and got my license and went to work.

I’ve used the VA loan and it’s a great product.  Go get em!!!

James Hamling · Answer

@Francis Choi I can not stress enough the importance of listening to @Russell Brazil, and hearing what he's trying to help guide.

What I hear in this is impulsivity. An impatience to get out onto the "battle field" and just run with things. Your effectively a Pfc of Real Estate, how well does it work out if a Pfc lands in theatre, says "ah, I don't need no Sgt/Lt" thinking "I've got a bunch of training time"....

It's just a fact, the unknown unknowns. You need to find your "Sgt of Real Estate" and learn learn learn, in a real world setting.

I get it, your hyper-focused on squeezing out every cent for yourself, ever hear pigs get fat and hog's get slaughtered? Your "hog" plan is a setup for failure.

Look, this is real estate, every transaction is measured in hundreds of thousands not hundreds so screw-ups, they come with a lot of 0's behind them. Understand it's a process of evolutions, your just starting, so get with a starting place brokerage/ team. Once ready, go the next step.

Russell Brazil · Answer

Well theres the benefit of learning and practicing on your own deals, so when you fuck up youre only hurting yourself and not a client.

But you should absolutely not be looking at brokerages based on a high split with little support when you are learning. You screw up certain things and you can end up with fines in the tens of thousands and criminal charges. When you're licensed, "I didnt know that" will not be a viable defense. Once you're licensed the government will presume you to be an expert in real estate and you will be presumed to know every law and regulation.

Russell Brazil · Answer

There's thousands of mistakes you could make. Literally an endless list.

Ill use 2 simple example though.

1) Forget to do a federal lead based paint form, and the EPA audits your records....the fine can be up to $100,000 and can incur criminal charges that result in jail time.

2) Simple fair housing violation, $16,000 federal fine on 1st offense. Plus any state fine and civil liability.

Im a member of the board in my state, and as part of that position I oversee ethics appeal hearings. The amount of people we find guilty for the dumbest screw ups is dumbfoudning.  Mostly good people with good intentions, who were just never trained to do their job properly.

Caroline Gerardo · Answer

Go work for a brokerage with a broker who sits in the office and help two friends with transactions before you do surgery on yourself.

Get a VA preapproval from an actual Underwriter and stick to under that sales price

Common Mistakes that come to mind based on what you said:

choosing a property that doesn't meet VA standards and losing your EMD

filling out the contracts wrong and getting sued

not understanding inspection or appraisal notes and not cancelling the deal before the contingency date, lose the EMD and maybe get sued

appraisal comes in low and not knowing how to arbitrate and negotiate, not having comps

signing something without understanding the future results

stating something false in writing

saying something that crosses Fair Housing laws

getting the numbers wrong, not being able to get insurance in CA, offering on higher price than you qualify for...

being busy at day job and not opening emails in time

Francis Choi · Answer

Thank you for the reply. Could you provide some examples of mistakes that newbies make in their early transactions?

Marcus Auerbach · Answer

@Francis Choi, please listen to @Russell Brazil. You are hung up on earning a commission you don't have to pay for as a buyer. Yes you could make a costly mistake, but frankly the most likely issue is that your inexperience will cost you money as a buyer. You may pick a property with a red flag you don't recognize (a UST for example) and think you are getting a great deal, you may not be certain on fair market value when you decide on your offer, you may be able to get a lower offer accepted by using terms other than price, you will not have a good handle on how many offers you are competing with, because you don't have the experience...

Experience is the reason why anyone should hire an agent. IMO anyone who does less than about 25 transactions a year should not be practicing without oversight. So when you do hire someone, make sure you get what you want - their experience.

Caleb Brown · Answer

Researching is different then doing your first deal. You will need help on it. It is better to be safe then sorry. If you miss a deadline you could cost you or your client $$. Being on a hands on brokerage or a team will be a great benefit. Once you get deals under your belt then you can go out on your own.

Account Closed · Answer

There are only a few things, valuable to be sure, but a limited number that an agent brings to the table in a transaction. One is the time it takes to find the right property. Another is getting the contract signed. Most states have uniform contracts so there isn't much work in that. Another is negotiating the price and terms. Then it gets sent off to Escrow. The lender orders the appraiser, the buyer orders the inspection. The agent is there to see to it that things don't fall apart. If there is only one agent, you can bet they will pick up the slack to be the transaction closes.So, if you can find the right house on your own, which you probably can, and if you are already an agent, you will have the contract. So, basically negotiating price and terms without getting emotional is the key element. I'd make the offer, and then keep in touch with the seller's agent to make sure things move along. No need for an agent on my side.

One other thing, VA loans have inspection reqirements for the property to pass financing. Make sure the seller's agent knows it a VA loan so they are prepared to fix a couple of things and so that isn't a last minute surprise.

Hamp Lee III · Answer

I'm active duty Air Force and went with a brokerage where I wouldn't be charged many fees AND one that was more "part-time" friendly as a cloud-based brokerage. They have a mentoring program that allows you to purchase a home while in the program, but not sell one (first 12 weeks).

If there's ever a time I'm buying or selling a house in the state I'm licensed, I'm the agent.

I hope this helps. Please feel free to reach out if you have any questions.

I wish you all the best.

Representing myself as a first time home buyer?

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