Home Buying in San Diego>Question Details

Joe_pass, Home Buyer in Los Angeles, CA

I want to know what involves to buy an REO condo with cash offer ($200k) without using agent.

Asked by Joe_pass, Los Angeles, CA Fri Aug 14, 2009

How much is the closing costs more or less?

Help the community by answering this question:


Hi Joe,

Good question. So here's an answer that addresses it at face value:

It involves pounding the pavement, researching like crazy on the internet, and matching your findings with balanced news pieces and blog posts you find to be useful. It also involves negotiating for yourself the lowest price, while still getting the offer accepted in light of 20 other buyers competing on the same bidding process. It involves educating yourself to the point where you’ll understand each of the disclosures to ask for, and each of the inspection reports worth paying for. It also involves interpreting the info you get from disclosures and inspectors and weeding out which opinions deserve heeding, and which ones are most likely inspectors covering their you know what.

Without using an agent, you will, at some point, need to make contact with the seller or their representative. Since all REO’s universally hide behind the listing agent they appoint, the one and only contact person you will find, will be the listing agent. This agent is the one who works specifically for the seller. This agent works for this seller all the time, no just on this transaction, and would never do anything to jeopardize their relationship with the party that pays them huge commissions… especially in a market where many other agents are starving without these REO relationships.

You can submit your own offer to this listing agent, and they will be happy to help you, perhaps even fill out the forms for you and recommend a “good” lender (who happens to work very closely with the seller… or maybe even is the seller themselves since they are a bank after all).

One day, perhaps years down the road, when you go to sell your home, you'll try to sell the home yourself… because after all you had success in buying it by yourself. But then you will likely find you'll need the help of a real estate agent to get you the price you're looking for. This will cost you somewhere around 5 or 6% in commissions. You will try not to use the agent at first, but reluctantly realize the net proceeds you can get with their help justifies the cost. So you'll probably end up using the agent.

Then all of a sudden, it will dawn on you... years ago, when you bought the condo, when you thought you “bought the home yourself”, in actuality you used the listing agent, who works for the seller... holy crap, that dude or chic collected 5 or 6% commission all to themselves, instead of keeping only 3% for himself and paying 3% to your own agent. Your (non)actions basically paid for the counsel of a buyer's agent… but you waived that right... just like going to court without a lawyer.

Bummer, you’ll think you should have thought to negotiate the price you paid lower to get rid of that extra 3% commission the listing agent collected. But if you did, you would have realized the listing agent would never have given this up… maybe with one exception. They would have passed this savings to the seller, rather than give it to you. Why would they give it to you, when 19 other buyers would have been willing to do the deal with the 3% cost?

Doh! and you'll also discover in hindsight that the rate you paid on your loan, and the closing costs that went along with it were way too high.

Oh well, chalk it up to a learning lesson.

Then again you’re pretty smart. You asked this good question in this forum presumably to learn, and hopefully save yourself the lesson in real life.

And while on the subject of asking questions… how about these other good ones:

How do I determine what makes up a good agent?

Why limit the search to REO’s… how to do I get the best deal?

What would the best deal look like?

Why am I even buying a house right now?

Bottom line: agents exist because they create value. When they stop creating value, a new business model will transcend it. This has been tried numerous times, and each time so far, it has failed.

Whatever you end up doing, I wish you the best. Go get 'em.
Web Reference: http://www.SethChalnick.com
4 votes Thank Flag Link Fri Aug 14, 2009

Perhaps it may help if you review the bid/purchase process information provided on the sites created by the Banks/Gov to make information available to the Public.

Sites like these... http://www.countrywide.com/purchase/f_reo.asp ..... http://www.wamuproperties.com/
http://www.hud.gov/homes/index.cfm ... https://www.citimortgage.com/Mortgage/Oreo/SearchListing.do

You can find the links to the Banks/Gov ( REO/Foreclosure) properties for sale sites here...
http://www.mortgagenewsdaily.com/wiki/REO_Database_List.asp ... http://www.biggerpockets.com/bank-reo.html

Good hunting, Dunes
2 votes Thank Flag Link Fri Aug 14, 2009
I'm sure Joe is now aware that every Agent feels he needs to hire an Agent.

I am also sure he appreciates so many agents repeating that to him over and over again.


Let's check and see if Joe is even still around or if he's run Far Far away making this merely a spamming thread for YOU NEED TO HIRE AN AGENT......

Some of you might as least PRETEND you are here to Answer the Question Joe actually asked.....
1 vote Thank Flag Link Wed Aug 19, 2009
There are some very good answers below, but one part that I feel has been left out is the market research a good agent can do for you. Who determined the asking price? A good agent can pull comps for you that are probably going to be more current than the ones the bank is using. The foreclosure process is slow and you may very well be purchasing this condo at "last year's price".
1 vote Thank Flag Link Tue Aug 18, 2009
Closing costs are mostly constant, so you will save nothing by representing yourself, rather, you may lose some skin in the process. It would be like performing eye surgery on yourself. REO's have unusual challenges and you would be walking blindly.

Protect yourself and consult a professional; it basically cost you nothing and will probably save you money. It will definitely help save your peace of mind.
1 vote Thank Flag Link Tue Aug 18, 2009
joe_pass, whether you hire an agent or not, you will be using one (the listing agent) and that agent will be representing the bank. To go this alone, without representation, will require a lot more of your time and diligence. Escrows don't just happen they need to be managed, and unless you have a lot of experience doing that, not having an agent to represent you could cost you more for failure to: 1)close on time, whether it's your fault or not. 2) Remove the contingencies on time.
Closing costs will be slightly less, but it doesn't have anything to do with whether you have an agent or not. Because you're paying cash, you won't have the fees normally associated with obtaining financing, i.e. appraisal, credit report, lender fees, lender's title insurance. If this condo is owned by Fannie Mae or Freddie Mac you will be paying their portion of escrow and title as well (an experienced agent would have let you know that).
Good Luck!
1 vote Thank Flag Link Tue Aug 18, 2009
Joe, All that being said an agent won't cost you any money and is your partner when looking for the right REO. You should interview many and select the one you feel has the most of what you're looking for. Whatever you decide, agent or no agent, good luck.

1 vote Thank Flag Link Fri Aug 14, 2009
oh, hey, I missed your sub question. Re: closing costs... your loan should cost you about $3,500. You'll also have to budget for pre-paid expenses like tax, insurance, and interest. If you're going FHA, you'll need 3.5% min down payment. If you're going conventional, you'll need 20% down payment. You'll need about $800 in inspection fees. And you'll need around $5,000 in reserves. Those are the basics. If this is Greek to you, consider contacting a loan officer.

For a more advanced answer, without good counsel, make sure you avoid pitfalls and mistakes, that could cost you your entire investment, ruin your credit for 10 years, and/or stress out important family or significant other relationships.
Web Reference: http://www.SethChalnick.com
1 vote Thank Flag Link Fri Aug 14, 2009
Why would you buy without an agent. You don't pay the agent anyway it's the Bank that will pay the agent not you. Hire an agent to help you Joe. Do you drill and fill your own cavities or go to the dentist? A good agent gives you proper representation and you can leverage thier experience and connections to get what you need. It won't cost you a dime. You will have closing costs fees and if your paying cash you wont have any lenders fees, you will have escrow fees, and other small misc. fees and you should have a professional home inspection $200 - $400. Good Luck.

1 vote Thank Flag Link Fri Aug 14, 2009

The websites provided below provide are great directories of foreclosed properties, but to quote the HUD site which is also noted below http://www.hud.gov/offices/hsg/sfh/reo/reobuyfaq.cfm :

"How are HUD Homes sold?
All properties available for purchase by the public are offered for sale at Internet listing sites maintained by management companies under contract to HUD. Any real estate broker registered with HUD may submit an offer and contract to purchase on your behalf. HUD pays the real estate broker's commission, if included in the contract."

Your biggest obstacles will be having access to all necessary disclosures and contracts needed to complete a transaction and knowing when and how to use them. You will also be missing the benefit of having an advocate looking out for our best interest by negotiating the best deal for you. The cost of representation for the buyer is typically covered by the seller, why not take advantage of the service and have a partner who is there to help you to achieve your goal of purchasing a condo.

Best of luck,
April Tavares, GRI, ASP
DRE License #01742179
Web Reference: http://www.AprilTavares.com
1 vote Thank Flag Link Fri Aug 14, 2009
Hi Joe, I'm going to be honest with you. The fact that you asked this question tells me you don't know enough about buying a property to go it alone! In that price you are going to be competing with other buyers who are investors, so you need an agent to fight for you and be agressive. So first things first ,interview some agents and find one that is listening to you.
1 vote Thank Flag Link Fri Aug 14, 2009
Hi Joe,

Yes I highly reccommend using an experienced agent. It can save you lots of time, money and headaches. And in the ultra-competitive world of buying a foreclosed property, it can make the difference between a winning and losing bid. Banks don't care about you but your agent will...and will have your best interests at heart.


Christine Van Tuyl
Prudential California Realty
Leading Edge Award Winner
101 Orange Avenue
Coronado, CA 92118
Search properties free on our website:
Check out our blog at:
1 vote Thank Flag Link Fri Aug 14, 2009
There is no reason not to use a Realtor to represent you, when buying any home, including an REO. Seller typically pays for your agents commission. If you choose to not use one, you will be giving all of your confidential information to the bank's agent and I don't think that is wise. The bank addendums to the purchase contract, usually are quite restrictive for the buyer and can be difficult to understand, so having a good, independent Realtor, on your side, is very valuable. Closing costs for a buyer can be negotiated in many cases (againa Realtor representing you, will help). Costs should be somwhere around $1500 for a $200,000 sale. Most offers for REOs at your price will have multiple offers if the property is in decent condition, which is anothe reason for having your own agent, See my video on buying REOs at
1 vote Thank Flag Link Fri Aug 14, 2009
Read a few books on the process, there are plenty out there. Research properties using realtytrac/foreclosure(s).com, mls (realtor.com) and bank contacts. Get on hungryagents or find an agent willing to rebate 75% of the commission with the understanding you will do nearly all the work and each time they drive to show you a property, you will compensate them X dollars for their time.
0 votes Thank Flag Link Thu Sep 3, 2009
There have been 27 answers before mine; however, I'll give a different answer. To protect yourself, you have 2 options. You need to retain either a Buyer's Agent (Seller (Bank) pays the commission) or retain an Attorney (you pay for the cost). You can interview a Buyer's Agent & an Attorney. Then, decide for yourself which option you want to choose.
0 votes Thank Flag Link Mon Aug 24, 2009
If you have cash, why wait for the REO to hit the market.
Go direct to the auction.
The link is below.
Be sure to preview the properties and take notes. You might need a real estate agent to do a comparable sales. You don't want to over pay at the auction as well. Or do a Zillow or Trulia comp (Rough comp).
Hope this helps you and others that are interested as well.

Good luck,
Jes Sierra, B.Sc.
0 votes Thank Flag Link Thu Aug 20, 2009
I agree with everyone else that you definitely want to use an agent. It is no cost to you. But it sounds like maybe you had a bad experience with a Realtor? Or maybe you don’t trust us? I would suggest asking for a referral from a friend. Or if that doesn’t work maybe meeting with a few to find one you connect with. I promise, we aren’t all bad. Best of luck!

Melissa Mate
Ascent Real Estate, Inc.
cell (858) 405-7702
Web Reference: http://www.melissamate.com
0 votes Thank Flag Link Wed Aug 19, 2009
The fact that you need to ask this simple question (and the 100 or so to come...) is why you shouldn't even consider buying a home without an agent.

There's a perception that you can save money by doing without an agent. This is seldom true - unless perhaps you've been an agent yourself before, and really do know what you're doing.

Maybe you're someone who changes his own oil instead of paying someone else. Ok, that's maybe similar to renting an apartment. With some basic knowledge, pretty much anyone can do that. Even so, there's a bunch of things you can do, even with such a simple process, to mess things up pretty bad - just by missing a detail - stripping the threads or forgetting to refill the oil or not putting the new filter on tight enough. You get the idea.

Buying a home is probably 100 times more complicated. Even if you do change your own oil, you probably wouldn't rebuild your engine. It's like that. Buying a home from a bank, adds yet another level of difficultly.

Many brokers argue that you don't pay the broker anyway so why not use one? I don't like that argument personally. I don't work for free - and neither does any other broker I know. We DO get paid - and to me it's just an argument in semantics whether we say the money is coming from the bank (seller) or the buyer. There's just so much money in "the deal" and part of it comes to me if I've helped make the deal happen.

My argument instead is that I provide a valuable service, as I've briefly described above, and as others in this thread have also argued, and as a result, I deserve to be paid for the service I've provided. If your experience in the past has been that the agent you used didn't earn their commission, and that's why you don't want to use one this time, then I would offer two thoughts. Either a) you don't fully realize all the agent did for you - and maybe that's not really your fault; or b) you had a bad experience with the wrong agent and need to find a different one.

So - long answer to a short question. Sorry about that. Here's my real answer to your actual question:

There is no way to answer your question here. There are many, many things you need to know. Even the answer on closing costs could be as simple as a few hundred dollars, or as complex as $6000 or more. It depends.

Again - sorry - but that's about the best we can do for you here...
0 votes Thank Flag Link Wed Aug 19, 2009
I would strongly recommend to get a representation and not go directly to the bank with your offer. Some of the banks don't even accept offers directly from the buyers.

In case of REOs, more and more banks started using electronic forms to submit an offer and it has to be filled out by the agents, it has to include a purchasing agreement approved and provided by local association of REALTORS. They ask for a complete agent and broker info to be submitted with the offer. Banks make the process more and more complicated so I don't not know why you would want to do it on your own.

As for closing costs, an experienced agent can put a contract together that can actually save you money on closing costs....and manage other little details in there for your protection. Best part of all, you don't pay commission to an agent...banks do!!!

Good luck with the REO purchase, hope it was helpful.

Dmitri Stupachenko, REALTOR®
Web Reference: http://www.619HomeSales.com
0 votes Thank Flag Link Tue Aug 18, 2009
Although you don't need an agent to represent you in purchasing a home, I highly recommend that you get one anyway, You don't have to pay the agent as the seller pays the commission on both sides. With laws changing so much it is in your best interest to seek the advise of a licensed professional.
0 votes Thank Flag Link Tue Aug 18, 2009
Your closing costs and all your costs could be more without using a REALTOR to represent you. You could pay more, for the property ,miss essential details, have no one to negotiate on your behalf with experience - why would you not use a REALTOR?
Web Reference: http://topbrainerdagent.com
0 votes Thank Flag Link Tue Aug 18, 2009
With or without an agent, the closing cost is about the same, the seller pays the commission, so why not have someone working for you who is a professional and does not cost you anything, you need an experience professional on your side, on REO there are paper work that a realor is more capable off doing and is experience in to save you a lot of time and headache.

Julita Le Blanc
ERA Showcase Properties
& Investments
901 Arabella Lane
Cocoa Florida
Direct 321-394-7795
Fax 321-639-3739
0 votes Thank Flag Link Tue Aug 18, 2009
Don't forget...the sellers contract is written and usually overseen by an attorney on a REO property. Without the knowledge and experience of a local agent you are at a stronger disadvantage with not just a corporation but an attorney involvment as well. What advantage do you as the buyer have in representing yourself?
0 votes Thank Flag Link Tue Aug 18, 2009
Closing costs remain pretty constant...it's whether or not you will be paying them that is the real question.

Everything the other agents say here is true ...that you are essentially using the seller's agent instead of having your own agent representing you. Bad idea. REALTORS have spent a lot of money and time getting the education to help buyers make good choices. We know the ins and outs of a transaction, how to negotiate closing costs, the right questions to ask about the condition of a property, reports concerning inspections, and much more. If you don't have an agent representing you, the seller's agent will know that you aren't as knowledgeable as you should be and you will be at a disadvantage.

There are negotiation tools and strategies to use depending on whether the seller is an individual or a lending institution. You won't know what these strategies are, and if you are successful in buying without an agent representing you, you will surely pay more and give up more than if you use an agent who has your interests in mind.

Secure an agent and move forward! Good luck!
0 votes Thank Flag Link Tue Aug 18, 2009
I'm not sure if you mean direct from the bank or threw the banks agent for both sides of the transaction. If you mean direct from the bank I only know of one that seems, like it will let you go direct and then it is just you dealing with their in house agent.
Either way the costs are going to be the same whether you have your own agent or not.
0 votes Thank Flag Link Fri Aug 14, 2009
Good agents exist because they create value....... Bad agents exist because Consumers fail sometimes to become informed enough to tell the Difference

Seth is an excellent Agent and he just proved it by pointing out there are many things to consider and become informed about including "How do I determine what makes up a good agent?" Seth is a good place to start if you'd like to know what value a "Good" agent can provide.
0 votes Thank Flag Link Fri Aug 14, 2009
Joe, As April correctly pointed out there are some different bid/purchase processes among the different entities selling the properties and that is exactly the reason reviewing which process is used by them may assist you in making an informed decision.

I am not saying one way or the other if using an agent is wise, but I'm am saying it is NOT always REQUIRED.

The decision of using an agent belongs to you and you alone as it involves your personal financial commitment

Become informed and base your decision on what you think will work best for you.
0 votes Thank Flag Link Fri Aug 14, 2009
There won't be any difference in the closing costs if you don't use a buyers agent. Unless you make a mistake then they will be higher.
0 votes Thank Flag Link Fri Aug 14, 2009
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