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Working With The Seller’s Agent
Working With a Buyer’s Agent
There’s a good chance that you will be working with a real estate agent in your search for land. A good agent or broker (the owner of a real estate brokerage) can be a great resource and help you locate, evaluate, and compare pieces of land. Always remember that, however, that unless you are expressly working with a buyer’s broker, the agent is working for the seller, not you. No matter how professional, friendly, and informative the real estate agent may be, and no matter how many properties and agent shows you, agents traditionally work for the seller and have a legal fiduciary obligation to act in the seller’s best interest.
When getting down to the financial nitty gritty of prices and offers, you should take their advice with a fair amount of caution. Also, most agents are more knowledgeable about houses than vacant land, so their knowledge of the intricacies of wells, septic systems, zoning, and the rest may be pretty limited. You’ll need to do your own research to make sure the land you are considering will meet your needs.
I’ve bought and sold a lot of properties and worked with many real estate agents as both a buyer and seller. In most cases, I’ve found agents to be helpful and honest, although clearly some are more knowledgeable than others about the technical aspects of houses, land, construction, and law. Choose an agent carefully as there is a lot of money on the table and mistakes can be costly. Look for someone who is knowledgeable and experienced, who listens well, and that you have a good rapport with.
However, whether you are working with a buyer’s broker, seller’s broker, or some combination of the two, at the end of the day, the agent’s first priority is to make a sale happen – that’s how they get paid. They get paid the same whether they show you 5 properties or 50 before you buy, and get paid nothing in most cases if you don’t buy anything they show you. So put yourself in their shoes. They are more likely to say, “It’s a cozy spot with pretty marsh views” than “Are you sure you want to build in this mosquito-infested hollow?” So take all their advice with several large grains of salt. Also remember that they are not building contractors, engineers, home inspectors, or lawyers, so don’t rely on them for professional advice in these areas of expertise.
WORKING WITH THE SELLER’S AGENT
Like it or not, there is by definition an adversarial relationship between buyer and seller. So confiding in an agent who is working for the opposition (for example, telling the broker how high you will go in a negotiation) is unwise as the agent is obligated to tell the seller. On the other hand, the seller’s listing agent can be an excellent source of detailed information about a property. He or she probably knows more about the property and the seller than any other agent, even those working out of the same office. With the increasingly strict real estate disclosure laws enacted in many states, the seller’s agent is unlikely to withhold information from you if asked directly.
So pepper the agent with any questions you may have about perc tests, water quality, wetlands, former uses of the land, and so on. Just make sure you confirm any information before acting on it. The listing agent also knows how long the property has been on the market and its price history (now readily available to anyone on the Web), and probably has some insight into the sellers’ level of motivation and what they are willing to accept. While the agent is unlikely to advise you how on much to bid, and would be violating his legal obligation to the seller by doing so, he may with a wink and nod answer your question, such as “Would it be worth offering $60,000 on this $100,000 property of would I be wasting my time?” You’d be surprised at the information you can sometimes glean.
WORKING WITH A BUYER’S AGENT
Fortunately for buyers, the real estate business is in transition and more and more agents and brokers will also work with you as a “buyer’s agent” or “buyer’s broker” at no additional cost to you, as they are paid out of the sales commission. In this case the broker’s fiduciary obligation is to the buyer. If you plan to look at a lot of properties. I’d recommend working with a buyer’s broker, if available in your area. You lose the benefit of talking directly with the seller’s agent, but it will simplify your search process, and you can have your agent ask the same questions of the listing broker. Sometimes things get more complicated because the seller’s broker and buyer’s broker work out of the same office, creating a possible conflict of interest. For example, the buyer’s agent might get a bonus for bringing the buyer to his own office. Worse still, some states allow brokers to act as “dual agents” working for both the buyer and the seller – creating a guaranteed conflict of interest. Avoid both of these situations as they make a somewhat murky relationship even murkier.
Land is often sold directly by the owner, often a developer who has bought a larger parcel and subdivided the land. With fewer middlemen, you can sometimes get a better deal this way. However, you’ll need to be on your toes as you will be dealing directly with a seasoned pro who knows a lot more than you do about land. Most land developers are honest, hard-working folk, but some will gladly sell you swampland in Florida or former toxic waste dump. If possible, ask around and talk to others who have bought land from the developer. Before making an offer directly to the seller, I’d strongly recommend working with a lawyer to carefully draft an offer with the necessary contingencies to protect you from any surprises.
Read more on Making an Offer
How Do We Make An Offer on Land For Sale By Owner?
We really love a piece of rural land that is for sale by owner. We have walked the property several times, talked to the neighbors, asked them about their wells, their septic systems, etc. We have called the seller a couple times to ask questions too. He claims the lot is buildable, not wetlands, has electricity/cable/phone lines available on site already, and he would like a cash offer.
He only speaks Spanish so we have been using a friend to make the phone calls for us. Now we are interested in making an offer but we don’t have any formal surveys, paperwork, inspections, or anything on the property and neither does the seller. What would be our next step before making an offer? We know we don’t have all the facts of the land yet, but didn’t want to pay for inspections on a property we will not end up buying (e.f., if the owner doesn’t accept our offer). Should we get a lawyer to draft an offer or use some forms from Legal Zoom or another similar site? What kind of lawyer are we looking for here? And should we pay for inspections FIRST, before making an offer? Thanks so much! We are very overwhelmed but have dreams of building our family home in the country.
You are asking all the right questions, so you are off to a good start here. If a seller seems trustworthy, you can accept his information as more-or-less accurate, but still you want to verify everything independently. Trust but verify, as they said in the cold war.
Misinformation about lot can result from a seller intentionally withholding information, distorting information (or outright lying), or providing information they think is true, but isn’t. Statements such as, “as far as I know the lot is buildable” carry little weight.
In addition to confirming the information provided by the seller, you will need to conduct all the inspections and testing needed to get the information you need. Bring in experts as needed. Start with the least expensive – for example – information at the town hall or registry of deeds before spending money on perc tests or surveys.
For the reasons you suggest, most people do not spend any money on tests or inspections before their offer is accepted. The key thing is to craft your contingencies so they cover all the key issues: septic, zoning, well water, utilities, and any issues particular to this piece of land.
Make sure you leave a discretionary “out” in your contract. This is usually done with one or more contingencies that state that the test or report must be “satisfactory to the buyer at the buyer’s sole discretion.” If you don’t like the findings, you get your earnest money back.
Make sure earnest money is held in an escrow account by a title company, lawyer, or bank, not the seller’s personal bank account.
Since an offer to buy real estate is a legal contract, with your earnest money on the line, I certainly recommend having the document drafted, or at least reviewed, by a real estate lawyer. For a modest fee most real estate lawyers will provide you with a standard offer from (Purchase & Sale Agreement) that complies with state law, and that you can customize for your needs. They can then review it before you make this offer. (Some lawyers offer this for free and make their money on the closing).
Not having an offer reviewed by a lawyer (or at the very least by a buyer’s broker) is pennywise and pound-foolish. There is a lot a money at stake, and buying the wrong piece of land can be a nightmare.
Steven Bliss, Editor