buying from neighbor bypassing RE agent

[Pele]

Gday

Last week I learnt from my neighbor that he is putting his property on the market in Feb next year. I am interested in buying it and asked if he would entertain an offer from me now. He said maybe. I spoke to him again today and he said that he had already signed a contract with a real estate agent to sell it at auction next year and that even if i buy it from him without being introduced by the agent he will have to pay the agent the usual commission.

For those on the forum with knowledge of contracts does this sound correct? Also for apartment that goes for ~$1m what would the rough fee be that the vendor pays the agent?

Thanks.

Pele.

 

[buzzps]

Hi,
This does sound unusual....who would tell a neighbour they are selling soon then list it with an agent to fork out $20k to $25k in fees? Unless they were
fearful of the selling process or thinking they could get a higher price via an agent to more than offset the selling costs?
I would recommend further discussion to try and get to know the seller's reasons
for this action (if he has infact listed it).
Good luck,
Gavin

 

[Terry_w]

For those on the forum with knowledge of contracts does this sound correct? Also for apartment that goes for ~$1m what would the rough fee be that the vendor pays the agent?

.

Without knowing what the 2 parties agreed to there is no way to confirm. But agents will usually insert clauses so that they will get paid no matter how or who the property is sold to. Not sure why your neighbour would have agreed to this but he seems to know that he would be liable.

roughly 2%

 

[Pele]

Gday

Ok thanks for that. I havent sold a property so i wasnt sure if that was standard policy. Sounds very restrictive and not something i would agree on but each to his own.

Because of the clause he would rather take it to market as he will be paying the agent either way and would rather generate some competition on the demand side.

The other thing he told me was that if he doesnt get the price he is looking for at auction then he will not sell it and is happy to rent it out for a few years. If that happens will there be any fee payable to the agent? How much?

Thanks.

Pele.

 

[Terry_w]

If that happens will there be any fee payable to the agent? How much?

Thanks.

Pele.

Contracts are agreements between 2 or more parties. We are not parties to that agreement so don't know the terms.

if going to auction there will be expenses and at the very least he probably agreed to pay $X to the agent for marketing etc

 

[Big Will]

Gday

Last week I learnt from my neighbor that he is putting his property on the market in Feb next year. I am interested in buying it and asked if he would entertain an offer from me now. He said maybe. I spoke to him again today and he said that he had already signed a contract with a real estate agent to sell it at auction next year and that even if i buy it from him without being introduced by the agent he will have to pay the agent the usual commission.

For those on the forum with knowledge of contracts does this sound correct? Also for apartment that goes for ~$1m what would the rough fee be that the vendor pays the agent?

Thanks.

Pele.

A couple of things the neighbor could if the agent hasn't started to advertise is;

1. Let the REA agent run it as normal and have a exception for commission if you purchase it. It would require approval from the REA but the vendor should be able to get that to happen as they have found you on their own. The vendor would still be required to pay advertising though. This is a win win for all as the REA gets free adverting if you are successful and if they have a buyer that is willing to pay more the vendor they will also get commission. Which means the vendor is winning but you as the purchaser may lose.

2. The REA gets the commission if you purchase

3. The vendor stops the agreement and sells to you directly. They shouldn't be able to claim commission as I would assume that no advertising has been completed and they didn't introduce you to the property so how could they claim they intro you to the property?

 

[wylie]

Twice I've had situations where a neighbour will say (when they know we will be selling an IP) "Oh my son might be interested in buying it." Both times, we have noted on the selling agreement that should that particular party buy the house, there will be no commission payable by us to the agent. Both times we put a tight deadline (five days from memory) for them to make their move. We were not prepared to waste the time of the selling agent, have them do all the work and then pull the rug from beneath them by selling to that particular person.

Both times nothing came of it. Once the neighbour heard the price we wanted (market price) it fizzled out. My educated guess is they hope that we will discount the price considerably so their offspring can buy it and when they realise we want what it is actually worth, they back off .

 

[Jacque]

Hi,
This does sound unusual....who would tell a neighbour they are selling soon then list it with an agent to fork out $20k to $25k in fees? Unless they were
fearful of the selling process or thinking they could get a higher price via an agent to more than offset the selling costs?

Gavin you've hit the nail on the head with these 2 reasons and, in my experience, this is exactly why sellers list with agents in the first place (amongst other reasons). If you're afraid of negotiating (and it can be especially difficult with neighbours/friends more so than strangers) using a third party who is removed from such relationships, experienced at negotiating (and thus achieving a superior price) and professional in their approach can make all the difference.

In NSW you can actually list with a selling agent using a sole agency agreement, which actually provides you with the right to sell the property to those buyers you've introduced (as opposed to those introduced via the agent)and avoid a commission. Downside is that very few agents won't take you on as a vendor unless you're signing an exclusive agreement. Sometimes it can also be a very grey area as to who actually introduced who in the first place, or who was the "effective cause of sale".

Like most vendors, your neighbour will want to expose his property to the largest market possible (like most sellers) in order to obtain the best outcome- it sounds as though if you want to be in the running you've just got to compete with the masses at auction or pre-offers. Best of luck with it all