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truong81 · Aug 7, 2007, 07:14 AM

Ok here is the story. I recently found a house that I really like. It is an end unit townhouse. The sign said FSBO. So I did some research on the property and found out that the guy. It then turns out the guy is an agent and is the listing agent for another house in that community.

So, I went and talked to the owner (his name is Luis) and he said to me that if I was interested in buying this house he would list it on the market and let his friend who's an agent sell it. Is he breaking any law there? Here is the catch - this is a short sale. And I knew this going in so when he said his agent will give him the commission back I said it would be the lender paying the agent. He said yes the lender will pay his agent but he will get the agent to pay him back. I think there has to be a red flag there. Then he goes and tells me that he has a friend who will appraise the house. Wait - if the house is a 'short sale' wouldn't the LENDER be sending one of their people to appriase the house? Am I missing something.

I really do like this house. But it seems like he might be 'price fixing'. His price for his house is 575 and the other house he is listing is 559. But there is another house - on the same street that is listed for 474. Now, I know the market right now is crazy and lots of people are losing lots of money. But wouldn't you base the price on the recent sale. So the other end unit sold for 480.

And Luis is telling me his price is fair market value... blah I know he paid 700 for his house with over 100k in upgrades...

ScottGem · Aug 7, 2007, 07:20 AM

If a house is advertised as FSBO and the owner brings an agent into it then somethingis definitely off. Whether its illegal or not is a different issue. There are false advertising laws and that may cover this.

But your bottomline is whether you want the house and what YOU want to pay for it. Whether the seller uses an agent or not, whether is a short sale or not really has no bearing on you. You make an offer for what you feel is a fair price. If the offer is accepted then fine, if not, you have the option of upping your offer or walking away.

The only thing that should concern you is whether the seller can convey clear title.

truong81 · Aug 7, 2007, 07:22 AM

How do I check the titel on the house?

ScottGem · Aug 7, 2007, 07:28 AM

You agree on a price and then go to contract. You pay a deposit. One of the clauses in the contract would be that the contract is voided if clear title cannot be conveyed. You then purchase Title Insurance from an isurer who researches the title and guarantees it.

excon · Aug 7, 2007, 07:30 AM

Hello truong:

As ScottGem said, your FIRST step is to make an offer on the house. If it's not accepted, who cares who's on the title? It costs NOTHING to make an offer - but it costs money to do a title search.

Once an offer is accepted, you HIRE a title company to check on the title. That costs money, so you shouldn't be doing that unless you know you can buy the house.

IF you just want to spend money, hire a title company. You can find them in the phone book.

excon

truong81 · Aug 7, 2007, 07:33 AM

Ok. I understand all that. But can he list the house as FSBO and then turn around and say he wants to bring his agent into this game?

excon · Aug 7, 2007, 07:45 AM

Hello again:

He can wear a different pair of pants every day too. That, and whether he hires an agent, has absolutely NOTHING to do with your offer.

The amount you are willing to pay and whether he accepts or not is the ONLY thing that should concern you. What difference does it make to you how he spends the money after you've given it to him??

excon

truong81 · Aug 7, 2007, 07:48 AM

I guess that is true. Now I really do like this house. I just don't know what to do. I think he is trying to drive the price in the community cause he is now listing the other house for sale.

excon · Aug 7, 2007, 07:55 AM

Hello again, truong:

Of course he's trying to drive the price up. It's a perfectly proper thing to do. That's exactly what you're going to do when you sell it. And he can drive it up as high as he wants... He can make up all sorts of numbers...

But, if it's MORE than you're willing to pay, so what??

Look. One of the major mistakes buyers make is falling in love with the house. You've made that mistake. Stop that!!

Do this instead: Make an offer on the house based upon what YOU think it's worth - NOT what HE thinks it's worth. If he doesn't accept your offer, walk away. There are a jillion houses on the market right now.

excon

RubyPitbull · Aug 7, 2007, 07:55 AM

truong, first rule of thumb in any transaction, go with your gut. If you are uncomfortable with what he is doing, don't bite. Wait it out. If you feel he is driving up the price because he believes you really want the house, back off it. With the way the market is at the moment, you can afford to take the chance that the guy is pricing himself out of the market. If another home that is equivalent to the one you are looking at, sold for $480K, then he is overvaluing it and won't get the price he is placing on it.

By the way, as ScottGem & Excon have stated, don't worry about the FSBO change to an agent. The seller is liable for the paying a broker, not the buyer. AND, your lender will come in and put a value on the property if you choose to enter into a contract to purchase.

rockinmommy · Aug 7, 2007, 07:57 AM

Originally Posted by truong81

Ok. I understand all that. But can he list the house as FSBO and then turn around and say he wants to bring his agent into this game?

Yes, he can do whatever he wants. I don't know of any law or regulation that would prevent him from doing so. As you stated in your orig post - his buddy is going to kick the commission back to him. That's why he wants to do it that way. As long as the price you and the seller agree on isn't changing what difference does it make? One tip. If he wants to use his friend/agent let him. You would also have the right to use a buyer's agent who represents only you. Then they split the commission, so he won't like that arrangement. But it would give you way more personal service and someone "on your side".

Regarding the purchase in general... I don't know where you're residing - East or West I'm guessing with a price like that for a townhome. The guy is obviously in a dire financial situation and is making some desperate attempts to somehow improve his situation. The price (based on the comps you mentioned) sounds way out of line. (You don't want to wind up upside down in your home.) The kickback on the commission is not on the up-and-up. There's nothing you can do about his intent to do that, and you'd have a hard time proving that it happened. Just lots of red flags I guess is what I'm getting at. I'd very strongly suggest hooking up with an agent. Ask around among your friends and find an agent who has done good work. They could represent you in this transaction, as well as show you other properties. You might even find something you like as well or better that wouldn't have all of this "wierdness" associated with it.

Ok, I've babbled on long enough.
Karla in TX

truong81 · Aug 7, 2007, 08:00 AM

OK. I know its my fault for falling 'in love' with the house. Now my concern is... if this house is a 'short sale' I know I can offer whatever I want but I'm trying to think of it as a seller and lender's point of view. He owes 570 on this loan -the small one is for 60. So I'm guessing that is why the lender is even willing to do a 'short sale'. So given those figures, what are my chances that I will even get this house at the price I want.

I know - I should just put an offer. Thanks for all the replies.

truong81 · Aug 7, 2007, 08:05 AM

Thanks! I was thrown back when he said he was going to bring his agent into this cause I myself have an agent that will give me 2points back for my closing cost.
I've done the cal. and I hight doubt he will be losing a lot of money out of this transaction.

In 2004 he purchased a townhouse in the community for roughly 450
2 months later he flipped it and sold it for 570
He went across the street and bought a single family home and sold it and make about 50K
In 2005 he came back to the townhouse community and bought the end unit for 700
He put 10% down -70k and took out two loans one for 570 and the other one for 60.
He's owned this house for two years and its been rented out for that long. So he never lived in the house.

Now if he was to sell it at 575 he will just repay the first loan off and walk away. And if he gets the commission back from his friend he wouldn't be losing much.

OK now I'm blabbing and even more confused.

Originally Posted by rockinmommy

Yes, he can do whatever he wants. I don't know of any law or regulation that would prevent him from doing so. As you stated in your orig post - his buddy is going to kick the commission back to him. That's why he wants to do it that way. As long as the price you and the seller agree on isn't changing what difference does it make? One tip. If he wants to use his friend/agent let him. You would also have the right to use a buyer's agent who represents only you. Then they split the commission, so he won't like that arrangement. But it would give you way more personal service and someone "on your side".

Regarding the purchase in general..........I don't know where you're residing - East or West I'm guessing with a price like that for a townhome. The guy is obviously in a dire financial situation and is making some desperate attempts to somehow improve his situation. The price (based on the comps you mentioned) sounds way out of line. (You don't want to wind up upside down in your home.) The kickback on the commission is not on the up-and-up. There's nothing you can do about his intent to do that, and you'd have a hard time proving that it happened. Just lots of red flags I guess is what I'm getting at. I'd very strongly suggest hooking up with an agent. Ask around among your friends and find an agent who has done good work. They could represent you in this transaction, as well as show you other properties. You might even find something you like as well or better that wouldn't have all of this "wierdness" associated with it.

Ok, I've babbled on long enough.
Karla in TX

excon · Aug 7, 2007, 08:12 AM

Hello again, Truong:

You're outthinking yourself. You're too worried about what's in everybody else's pocket.

Here's my last and final piece of advice. It should relieve this entire burden from your shoulders: Pay attention to what's in YOUR pocket, and your pocket only - nothing else!

excon

ScottGem · Aug 7, 2007, 08:24 AM

Excon and Ruby have filled in what I would have said. You seem hungup on this FSBO thing. Sure it seems like false advertising, but it really doesn't affect you. YOU decide what you want to pay for the house and then make an offer. The seller can refuse or make a counter offer. Until an offer is made and accepted and you go to contract, neither of you has committed to anything.

The advantage of an FSBO is ostensibly a lower price because the seller isn't paying a commission. But if you don't like the quoted price, then you make a counter offer or walk away. Forget the FSBO thing and concentrate on whether you want the house and how much you are willing to pay for it.

truong81 · Aug 7, 2007, 08:55 AM

I really do want this house and I know I shouldn't let my emotions get involved. This house has it all... well all that I want.

RubyPitbull · Aug 7, 2007, 09:31 AM

Originally Posted by truong81

I really do want this house and I know I shouldn't let my emotions get involved. This house has it all..... well all that I want.

Truong, this will be your undoing if you aren't careful. You may love it but you need to be smart about this. You have to take a step back and remind yourself that a house is the largest investment of your life. It can give you years of happiness or heartache. It will all be dependent upon the kind of deal you make. Initially, you might be very happy when you purchase it, but if it is done at a price you aren't happy with, that happiness will be fleeting.

truong81 · Aug 7, 2007, 09:36 AM

What you said is very true. And I am trying to make a smart move that will benefit me in the long run.

Originally Posted by RubyPitbull

Truong, this will be your undoing if you aren't careful. You may love it but you need to be smart about this. You have to take a step back and remind yourself that a house is the largest investment of your life. It can give you years of happiness or heartache. It will all be dependent upon the kind of deal you make. Initially, you might be very happy when you purchase it, but if it is done at a price you aren't happy with, that happiness will be fleeting.

rockinmommy · Aug 7, 2007, 10:51 AM

Now you've really got me wondering... do you mind telling us where you live?

The high prices (MUCH higher than I'm used to) I know aren't uncommon in some places. But is it common in your area for realtors to kick back $$ to the buyers/sellers? That I've never heard of as standard practice. Just curious.

Karla in TX

RubyPitbull · Aug 7, 2007, 10:57 AM

Rockin, I would hazard a guess he is in New York, New Jersey, Florida, California, or the Boston area. Those prices aren't unheard of in those areas.

And, it isn't standard practice for kick backs, but it does happen frequently enough. Very unethical & illegal practice. The Real Estate Broker business is not monitored the way it should be. We have come a long way in certain states over the past 20 years, but not enough. Just like the construction industry, there are so many ways people can skirt around the law.