I’ve mentioned a few times already that I plan on buying another property this year, even with all the gloomy talk of a recession and a housing crash looming. Apparently it’s inevitable.
I always believe there is money to be made in the property game, particularly in the long-term, but only if the right property is in question. Simply, the right property for me is a property that is underpriced and situated in a solid rental location.
I’m currently in a situation where I’ve found a pretty sweet deal, and now I’m tempted to approach the seller directly to strike up a deal, bypassing all other obstacles. The question is,
can should I do it?
I’ve seen a house I like
I’ve been looking at a few auction websites for properties in a particular location that will shortly go under the hammer. It’s not necessarily an upcoming ‘hotspot’; it’s already a well established area. However, there is great rental return in the area and properties within that area rarely go under the hammer. That tells me that there isn’t much repossession going on there, which is good because it means the area is most likely going to sustain its value. If a location is being haunted by repossessions it probably means that it’s going through a meltdown. That’s never a good sign.
I’ve spotted a house that seems glaringly under priced, and the area is extremely sought after by tenants.
It’s not clear whether it’s a repossessed property, so I can’t determine whether it’s being sold by the owner or the lender. The particular auction house that has taken control of the sale requires all interested buyers to register and pay an excessive registration fee. Apparently the commission they make from the sale alone isn’t enough.
Sure, here, want my lungs, too?
Approaching the seller directly – is it a good idea?
I personally don’t see any harm in it, especially because it’s a gamble that could pay off. I’m sure it happens all the time.
I’m going to contact the seller directly and see if I can cut a deal without using 3rd party mediums. I hope that the property hasn’t been repossessed, and that the vendor is at the stage where he/she needs a quick sale. I’m going to knock on the door in an attempt to turn over a few stones. Wish me luck!
Is it illegal to approach a home-seller directly?
Just in case you’re wondering, there’s no legal restriction that stops buyers from approaching a home-seller directly, and asking them about selling their home directly, by-passing an auction or estate agent.
The home-seller is not breaking any laws, either. They are within their rights to sell their property however they want, including avoiding the use of third-party agents and middlemen. However, something to bear in mind is that if the seller has already signed an agreement to use a particular agent or to auction the property, they may still be responsible for paying the agreed-upon fees even if you contact them directly.
Is it ethical to approach a home-seller directly?
While it’s not illegal, I did momentarily question the ethical aspect of the approach. I guess this a subjective question and will be determined by each person’s moral compass (no judgement from me). I really don’t think there’s a right or wrong answer.
I concluded (in my own mind), that if the seller has not hired an agent or put the home up for auction, there’s no reason to believe that approaching a home-seller directly is unethical.
Things get a bit more complex if a third party is already involved, though. Some people may think that it’s unethical to go around the middle-man and make an offer to the seller. And, in some cases, a seller may be alienated or offended by this.
Overall, though, I don’t think it’s unethical to approach a home-seller directly. I feel like I’m well within my rights to do so, and if the seller wants to sell to me directly instead of through a middle-man, that’s a good thing for both of us, right?
The benefits of the direct approach – Pros & Cons of directly approaching home sellers
I have considered the pros and cons, and here’s what I came up with:
- Save money by avoiding estate agent fees or auction fees
- Get a quicker sale by negotiating with the home-seller directly
- Get a better deal if the home-seller is desperate to sell the property quickly (and if the seller avoids commission fees, they may reflect in the agreed sale price)
- Circumvent other offers or buyers by going around third parties
- Some home-sellers may not be comfortable with selling their property on their own
- Requires more work on the buyers end e.g. contact them, make offers, get inspections, and so on
- Approaching them directly may alienate the home-seller if they believe it’s unethical or a bad idea to bypass their agent/auction house
- Requires the buyer to have some knowledge of real estate and good negotiation skills to ensure a fair deal
For the most part, I think that the pros outweigh the cons when it comes to approaching a home seller directly without an agent – unless it’s a case of being very committed to a certain property, because if the issue of alienating the seller becomes an issue, you might lose out!
In my experience (and from the word on the street), though, lots of vendors and home-sellers are happy to cut out middlemen and their outrageous fees, I think it’s part of the process. It’s expected.
If you’re in a similar position, I say go ahead and contact the home-seller directly to see if a deal can be made! The gamble may just pay off big-time.
Is what I’m doing ultimately praying on the vulnerable?
I’ve heard that argument before. The psychological state of a desperate vendor is exactly that, desperate. So I can understand why people would think I’m taking advantage. But the truth is, the vendor needs a sale one way or another. The vendor doesn’t have to take up on my offer, I’m just providing another option for a quick-sale.
Has anyone else ever been a sneaky little shit and contacted the vendor directly to strike up a deal? Let me know your story!
Disclaimer: I'm just a landlord blogger; I'm 100% not qualified to give legal or financial advice. I'm a doofus. Any information I share is my unqualified opinion, and should never be construed as professional legal or financial advice. You should definitely get advice from a qualified professional for any legal or financial matters. For more information, please read my full disclaimer.