All Forum Posts by: Michael W.

A little new to this so sorry if these questions don't make sense or if I don't use the right terms.

My "Buyer's Agent", who I like very much, sent me an agreement to review & sign. Reading it closely it appears that is more an agreement with the agent's broker and not as much the agent (I assume this is normal but don't really know)...

For reference, the agreement is titled "Residential Buyer/Tenant Representation Agreement" apparently created by the "Texas Association of Realters" and has Form ID: (TAR-1501) 4-14-06.

I had a few questions around what is normal/customary:

Section 8 Intermediary choosing between 8A (Intermediary Status) or 8B (No Intermediary Status):
They already checked 8A before sending me the form. We have already seen all available property listings and at this point none of them are from this Broker. I don't really feel comfortable with Intermediary status in general and certainly don't think it is needed. Is it more normal for Buyer's agreements to be "Intermediary" or "Not Intermediary" or are both about equally done? Is there any reason why I shouldn't tell them that I want 8B checked instead (No Intermediary Status)?

11 Broker's fees: (11.A - Commission): I think there is a typo saying 66.000% and believe they meant to put 6.000% of gross Sales price. I am confused as I understood it to be 3%. Is 6% typical on the buyer's agreement or is 3%? Is this 6% because they choose 8A for me and/or would it 3% for 8B? Bottom line is that I am not comfortable with 6% because I believe it basically says I am liable for this if the seller, &/or Seller's Agent, &/or Seller's Broker doesn't pay the 6% or 3%.

As a point of reference for both of the above question areas, in my inexperience I frankly may have muddied the 'Procuring Cause' waters with 2 of the potential properties as I went to see them without an buyer's agent with me and the seller's agents may try to claim "Procuring Cause" because they told me about the individual property. This is a real concern since one of the seller's agents, when I tried to introduce my agent to him, already tried to force me to use him as a broker & that he would assign me a buyer's agent (or reassign someone else as the seller's agent). I politely told him he was never hired and I frankly didn't agree with anything he said and that he has a clear conflict of interest. If either of those 2 ends up being the property we buy I think we will likely, in the end, be OK on all grounds (both abandonment & estrangement with Seller's agents who told me about the respective property before I found my agent, the fact that neither seller's agents were actually present when I visited the properties (neither actually showed me their property), I have a witness that can attest that I asked/confirmed they were the seller's agent & that I said that I explicitly did not want them to be my buyer's agent due to their conflict of interest & that I was looking for a buyer's agent separately, the only written agreements will be with my agent, all due diligence (comps, research, site visits, etc) have been done with this agent, and the actual offer/procurement will be from/through this agent). All that being said I realize that, even with all my ducks in a row, things could go against me and am prepared for 3% but certainly not 6%.

Section 11.F Broker's Fees in addition to commission:
- Service Providers: Basically sounds like they are reserving the right for referral fees from the service providers...
- Construction: is left blank...
- Other: is left blank...
Is leaving them both blank typical or do people typically put 0% & none?

"Section 7.D: Representations: Name any employer, relocation company, or any other entity that will provide benefits to Client when acquiring property in the market area:...".
Not sure what section 7.D means... Am I supposed to list any potential service provider up front? I have no idea yet who in that area I will trust to do the additional services that need to be done to actually close the deal (survey, inspection(s), structural engineer(s), repair/improvement contractor(s), title, lawyers, etc)...

Lastly, I am going to try to shoot this document to a real estate attourney as well (if he says this is something he does or a regular attorney if he does not) but I figured some of the folk on this forum could at least tell me what is typical/normal as the lawyer may only be able to tell me what is legal....

Just an observation, I am very glad that Texas doesn't have Nebraska's detailed sales recording rules nor Colorado's water restrictions (discussed in another forum thread) as that would be even more things to worry about...

Tod, Good point regarding the homestead... My thoughts are that it could be a double edge sword & it is sad that we have to think about all of these things/angles.

For example, I remember when I was a kid that one of our cows got out on the road and a kid on a motorcycle hit it and his parents sued us. At first my dad was pretty worried because of our little farm house they may cause us to lose our home and everything. We eventually were able to prove that someone cut our fence and stole one of our horses (letting the cow out) and the kid did not have proper license/registration/insurance & was speeding. I think our lawyer beat them up pretty good and they had no answers as to why he was going so fast near our fence (per the skid marks) & whether he was involved with cutting our fence. In the end I believe they settled for minimal medical bills before any rulings. From that I think my dad incorporated/separated the farm and also structured our main business differently (one corp own the building/plant, one corp find/hire the people, & one corp to be responsible to run the operations & lease the location/plant & contract the people).

I spoke with my sister and a few other farm owners and we came up with a few options to discuss with our Real Estate Attorney & Attorney:

-1) Do them together as a homestead and have an LLC lease the farmland and do the operations for crops & run the animals.

-2) Do the land & home totally separate, with an LLC owning/operating the farm.

-3) Do the land & home totally separate, with an LLC owning/operating the farm contracting any ranch hands/help from a third LLC.

I suspect the first option gives a single property and homestead option to defend it (if need be) and may have similar protections to the other options.

My second option has more paperwork with officially dividing the land and recording deeds, etc & may make the farm land un-homestead-able (that may not be a word).

The third option may be way overkill for the size/scope of the farm I have planned (at least in my generation)...I spent the weekend touring a $3M plus horse operation and likely it would be more suitable for something like that...

Thanks everyone. Feeling much better...

I have already spoke with the Ag Exemption folk and confirmed the minimal Animal Units & per the recommendation I am also getting the financial records... I just wasn't comfortable asking him if I had to turn in those forms and whether he or someone was going to try to screw me...

As part of the process I am getting all of the reciepts for the last 10 years and the ag ledger and I am buying with cash at a little under market price at least enough of the current Animial Units (plus a few extra) to keep the exemption.

Still a little stressful but that worry about tax legacy for my family is much better.

I still do plan to meet with that Real Estate Attourney when he gets back from grieving about maybe doing a quick-claim deed of the ag side to one of my LLCs to protect the homestead from a lawsuit (or what ever he recommends). At least I don't have to worry so much about any financing being a particular way (big thanks!).

Thanks guys. Your replies are consistent with what a few other farm owners have said.

Part of what was scaring me was that I have purchased some more conventional lots in that same County and the Assessor's office had sent me these forms to fill out indicating purchase price, etc and I thought that automatically adjusted/reset the baseline of the particular property that was purchased.

Multiple people have told me since then that those forms are voluntary and I don't need to disclose to them if/or how I financed and such.

I am likely to make an offer on a farm property with a home to raise my kids and ideally hold on to it for my kids and their kids... My inituition is that tax savings over that long of a period is significant so I want to do this right.

Current tax roles on the property basically the value of the ag land is ~50K & taxes on the ag land are only ~$20. The house is currently valued at approx $150K and taxed at approximately $3K...

Comps in the area of current sales and all listings show that ag land is really worth at least $225K and the house (with its acre) is at most $175K...

The listing is just for the house with the acerage and we think we can get it for ~$400K or less...
I am likely to make an offer on a farm property with a home to raise my kids and ideally hold on to it for my kids and their kids... My intuition is that tax savings over that long of a period is significant so I want to do this right.

Current tax roles on the property basically say the market value of the ag land is ~50K & taxes on the ag land are less than $20. The house is currently valued on the tax roles at approx $135K and taxed at approximately $3K...

Comps in the area of current sales and all listings show that the ag land is really worth at least $225-$250K and the house (with its acre) is between $150-$175K...

The listing is just for the house with the acreage as a single item and we think we can get it for ~$400K or less..

I think that technically the land is two roughly equal size lots (one with the house and one not) that have been worked as a single farm and taxed together for well over a decade.

The realtor is thinking that I could likely get the home and the half lot to appraise for most of the purchase price and do a conventional loan to cover most of the entire deal and basically get the other half lot for free or pay some cash...

I am concerned that the combined market value on the tax roles is currently only $200K and once I buy it it becomes recorded at $400K and they may decide to try to keep the land at 50K and stiff me by saying that my home is now worth $350K and more than double the taxes to $6-7K.

Do I need to structure my offer to somehow make it clear that I am paying, for example, $250K for the ag land & $150K for the house?

If I do any financing, to minimize the long term taxes, do I really need to do an ag loan for the land side and a conventional home loan for the house (and make sure the home loan/valueation are kept low)?

The Real Estate Attorney in the area I was going to talk to about this had a sudden death and had to reschedule and I really don't want to delay my offer for fear that someone else will buy it (multiple people have been also checking it out).

Does is matter how I offer and pay for it?

Any thoughts as to what I should do?

Steve, Thanks.. Good to know Jon H. got his props! He really helped... The County Extension Agency was great and I now have a Agent that specializes in Farms (he also personally lives on a farm)...

Jon K, I am a director for a South American Mission that has an extensive water collection system/cistern through efforts with UNICEF. We are looking in the Hill country and my wife's cousin is currently buiding an extensive Rain Water harvesting system utilizing the roofs of his new house and barn near Fredricksburg. If memory serves me correctly he has two 2300 or 3400 sealed tanks (I think they may be spheres?)... I haven't seen it but will try to go by on my next trip (maybe this weekend) and/or get pictures and confirm manufacturers/etc...

On our ranch we have a large uncovered concrete cylinder that we pump into for the animals. We are considering utilizing the barn & shed roofs there but they have rust and the nails and such may not be suitable for animals let alone human consumption...

In a hurry and gotta run...

Also, I don't know if I can give you points or anything but you have been great everytime I see your reponses on these forums. I voted above but if there is any other way to give influence points or something I would be happy to do so (just don't see how).

Jon, U are a gem. Thanks for, as always, the rapid and thoughtful replies.

I frankly never heard of a County Extension Agent (CEA), I will try to do that today. Maybe the CEA will recommend some real estate agents that speacilize in farm properties.

The property already has a working well (and septic) and I know multiple other properties in Texas that do rain-water collection so I don't think that is an issue in Texas.

Good points and thanks for taking the time to respond.

I think what they were talking about was rebating the commission on the HUD statement such that it was less than 3% from the get-go and not some cash behind the scenes. I don't know that much about this stuff so I could be wrong...

In my wall of text above, believe I did say above that we did buy about $80K worth of properties (two ~$40K lots) through that agent the first go around.

I didn't mention above that we also brought two other extra lots in the same subdivision (we have lots of kids & family) for another $95k and subsequently sold one of those for $75K, all through that same agent and the agent was paid on all of those transactions (80+95+75=$250K thus far).

The agent did help us get to/from all of them though my sister and I found most of them that time also. The due diligence was minimal because these were just lots in a subdivision with no improvements or amenities.

This agent does not appear the strongest at helping me work the ag exempt side but maybe can bring to the table the right inspectors...

I guess that impression is maybe part of what concerns me about this agent as I want to structure the deal with the right tax advantages and any loans may need to separated (home and farm loan separately).

I also want the inspector to tell me multiple things like "is the roof suitable for rain water collection for human or animal consumption or both" and needs to know to check for how the metal seams were done, any nails used, etc and I suspect only an ag type inspector would know these things… There is also some ag machinery that I may need to get appraisals on because I know nothing about pricing tractors or implements or such (my wife & I grew up farming but didn't ever buy anything because our parents did all that).

Another example is that I can pursue the home loan through my banks but I will need to talk to the local farming property loan people and don't know much about that... I suspect I also need the tax history on both lots and home and not sure how to get that...

You may not have enough information to answer this but do you think that it is likely that most agents in this type of semi-rural ranching/farming area know how to handle this sort of deal and bring to the table the right people?

Do you think that I maybe should look at a more farming/ranching buyer's agent while I still can?

I have a question on what is the appropriate commission to negotiate...

Background: For 5+ years my wife & I have been planning on semi-retiring & watching a semi-rural area (ranching/farming type community where you could commute to a big city) where other family members have retired to. Over a year ago we convinced my sister & her husband to also retire there and we jointly looked for a 20+ acre "ag exempt" property that didn't have restrictions preventing at least 2 homes. My sister found an agent and the agent helped us look at multiple properties. In the end, we didn't find a property we both liked/wanted (most were approx $200K-225k for the raw land) and we ran out of time so my sister decided that she instead wanted to get some 1-2 acre lots in a lake subdivision with amenites (pool, pavilion, boat ramp, basketball/tennis/volley ball courts etc)... In total the lots were approx $40K apiece and we thanked the agent for helping us.

Since then I have been watching that market and finally found a property that meets our original desires & is really close to the lake lot (we will try to keep that lot and maybe build a lake house one day or just use it for the amenities since the HOA is really reasonable).

Anyway, the property I found is likely to go between $325K-$375K total, is ~21 acres total (house .5ish & 20.5ish ag). We self-toured property (no agent on our side) & the house is likely not what most people want (older many-kids/large family style) but my wife & I are fine with the house overall... Most ~20 ag exempt acres I have seen in that area are approx $200-$250K so to me that means the house could arguably be approx $75K-$185K of the total deal depending on slice it. I am not sure exactly how this works but they put it up on the market as a 20.5 acre property but I think it is technically two 10ish acre lots with the house on one and .5 & house taxed as improved and 20 acres ag exempt (or something like that).

I frankly don't know much about proper due-diligence on buying properties and want help on validating many things (tax roles for the house vs. the ag property, should I make two offers (one for house and one for the ag property, etc)). I also want quality inspectors to review the house, wells, septic, barn, etc.

At this point I still don't have a buyer's agent. My brother and his buddy run a real estate company (re-finances, etc) and his buddy offered to represent me & rebate 2% of the 3% back to me but really doesn't know that area & I want some due-dilagence he likely can't do.

My sister recommended I talk with her original agent and tell her I found a property and would like that agent to do it but since I found it and did most of the leg work (up to now) ask for a percent or percent-and-a-half off (of the 3%).

Anyway, I thought this agent was "ok" and as good as any I had met though I personally would have chosen someone with more of a rural/ag focus. She appears to be pretty connected in that area and with me moving my family there with kids in those schools I don't really want to offend anyone for no reason...

Sorry for the long post but I figured it best to share the details as best I could to get a quality response. If you have read this far I really appreciate it...

Anyone have any recommendations/thoughts as to what reasonable discount/rebate, if any, I should be asking for if I go with this (or another) agent?