House sale quandary - under contract!

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Quirkz
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House sale quandary - under contract!

Post by Quirkz »

I could use some advice here, because I think we're in a bit of a gray area.

We are selling our house. Last week we contacted a real estate agent about selling it, but the listing has not gone up yet. She's done some prep work and the plan was to list next Saturday. In the meantime a neighbor heard we were leaving and just offered us basically the full asking price minus commission.

We've tried to reach out to the agent to figure out what happens in this situation, but she's on vacation for the next week. A partner from her firm reached out and basically said they wouldn't hold us to the contract, but did make sure to point out if we go on our own we're at risk of making legal mistakes, and recommended at the least getting a real estate attorney. (If it matters, the contract states that the listing period doesn't begin until the 9th, and it is currently the seventh.)

So now we're trying to figure out what to do. Options include:

1) Cancel the contract, take the offer and get an attorney. I don't know how much they cost, but my impression is a few grand. Risks are without the listing, if something falls through we're starting over later and may have also burned goodwill with our agent. One pro is it sounds like the neighbor is really flexible on closing date, so we'd have a lot of wiggle room as we make arrangements to move out of state.

2) Continue with the listing as planned. My wife has become convinced that because we've already got interest, there's going to be a bidding war, people are going to pay over asking, and we're going to squeeze a few thousand more from the transaction. More likely in my mind the offers negotiate in below asking, we get dinged for a few things at inspection, and we're worse off when it's all over. Also, odds are the buyer is going to have a firmer timeline and we'll have more of a scramble moving out.

So, I guess I could use any input. Should we take the offer? How much does a real estate attorney cost? Are there things they don't do that a real estate agent would do for us? Are there options I'm missing or things I should be considering? Thanks.
Last edited by Quirkz on Tue Sep 15, 2020 1:42 pm, edited 1 time in total.
Jags4186
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by Jags4186 »

Quirkz wrote: Mon Sep 07, 2020 6:15 pm I could use some advice here, because I think we're in a bit of a gray area.

We are selling our house. Last week we contacted a real estate agent about selling it, but the listing has not gone up yet. She's done some prep work and the plan was to list next Saturday. In the meantime a neighbor heard we were leaving and just offered us basically the full asking price minus commission.

We've tried to reach out to the agent to figure out what happens in this situation, but she's on vacation for the next week. A partner from her firm reached out and basically said they wouldn't hold us to the contract, but did make sure to point out if we go on our own we're at risk of making legal mistakes, and recommended at the least getting a real estate attorney. (If it matters, the contract states that the listing period doesn't begin until the 9th, and it is currently the seventh.)

So now we're trying to figure out what to do. Options include:

1) Cancel the contract, take the offer and get an attorney. I don't know how much they cost, but my impression is a few grand. Risks are without the listing, if something falls through we're starting over later and may have also burned goodwill with our agent. One pro is it sounds like the neighbor is really flexible on closing date, so we'd have a lot of wiggle room as we make arrangements to move out of state.

2) Continue with the listing as planned. My wife has become convinced that because we've already got interest, there's going to be a bidding war, people are going to pay over asking, and we're going to squeeze a few thousand more from the transaction. More likely in my mind the offers negotiate in below asking, we get dinged for a few things at inspection, and we're worse off when it's all over. Also, odds are the buyer is going to have a firmer timeline and we'll have more of a scramble moving out.

So, I guess I could use any input. Should we take the offer? How much does a real estate attorney cost? Are there things they don't do that a real estate agent would do for us? Are there options I'm missing or things I should be considering? Thanks.
Are you in a hot market? Where I am all houses are going for over asking, getting multiple bids within a few days of going on the market. If that's the case, I'd list. You're not getting a deal from the neighbor if he's offering you asking minus commission. Considering your neighbor is trying to sneak in before listing, I'd say you'd be better off listing. If they want the house that badly they can make the best offer.
Last edited by Jags4186 on Mon Sep 07, 2020 6:22 pm, edited 4 times in total.
mattsm
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by mattsm »

You could offer your real estate agent 3% or whatever they would have gotten and eat it. They still do some stuff on the back end.
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kelway
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by kelway »

Quirkz wrote: Mon Sep 07, 2020 6:15 pm I could use some advice here, because I think we're in a bit of a gray area.

We are selling our house. Last week we contacted a real estate agent about selling it, but the listing has not gone up yet. She's done some prep work and the plan was to list next Saturday. In the meantime a neighbor heard we were leaving and just offered us basically the full asking price minus commission.

We've tried to reach out to the agent to figure out what happens in this situation, but she's on vacation for the next week. A partner from her firm reached out and basically said they wouldn't hold us to the contract, but did make sure to point out if we go on our own we're at risk of making legal mistakes, and recommended at the least getting a real estate attorney. (If it matters, the contract states that the listing period doesn't begin until the 9th, and it is currently the seventh.)

So now we're trying to figure out what to do. Options include:

1) Cancel the contract, take the offer and get an attorney. I don't know how much they cost, but my impression is a few grand. Risks are without the listing, if something falls through we're starting over later and may have also burned goodwill with our agent. One pro is it sounds like the neighbor is really flexible on closing date, so we'd have a lot of wiggle room as we make arrangements to move out of state.

2) Continue with the listing as planned. My wife has become convinced that because we've already got interest, there's going to be a bidding war, people are going to pay over asking, and we're going to squeeze a few thousand more from the transaction. More likely in my mind the offers negotiate in below asking, we get dinged for a few things at inspection, and we're worse off when it's all over. Also, odds are the buyer is going to have a firmer timeline and we'll have more of a scramble moving out.

So, I guess I could use any input. Should we take the offer? How much does a real estate attorney cost? Are there things they don't do that a real estate agent would do for us? Are there options I'm missing or things I should be considering? Thanks.
I'd take this as an indicator that you may be under-priced. Seems like it was too easy.
Kookaburra
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by Kookaburra »

I would list it. Not only is your neighbor not giving you a deal, but taking their offer would cost you (relative to listing it) since you would have the extra cost of a RE attorney. I would also take a cue from their interest and consider nudging your price up a bit before listing.

BTW- no real estate agent should go out of town for a week of vacation and be inaccessible, especially so close to a listing.
LittleMaggieMae
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by LittleMaggieMae »

I guess you need to give us some more information:

The offer from the Neighbor - did they stop over with a generic contract with their bid and terms on it? Cause if you aren't using a realtor someone will need to supply the contract. If they didn't have one in hand (or some sort of written agreement) they might not be very serious about buying your house. Has the neighbor indicated how they will be paying for your house? Do they have to get financing or will they just be writing you a big check?

If they came to you with a generic contract which outlined their bid price, the "they've got 10 days to get an inspections" escape clause AND if they have indicated they won't need financing... It might be worth it - you are only tied up this for 10 days at which time your neighbor changes their mind (ie they object to something in the inspection to back out of the contract) and backs out of the contract OR you and your neighbor are setting a closing date. You will probably want to get a real estate attorney and start getting familiar with the ins and outs of selling a house.

If they didn't come over with a contract/bid and don't have financing quickly available - I'd go with the Realtor. I might suggest talking with your realtor AND neighbor to see if you can work out some sort of a discount on the asking price to give the neighbor a deal while paying the realtor a little less (of the full 6% commission they would get without a buyer realtor agent) - since they won't have to do so much work/time spent (no open house, no fancy pictures, no showing the house, etc.). the realtor can then spend time on other houses they are selling.
JediMisty
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by JediMisty »

Quirkz wrote: Mon Sep 07, 2020 6:15 pm I could use some advice here, because I think we're in a bit of a gray area.

We are selling our house. Last week we contacted a real estate agent about selling it, but the listing has not gone up yet. She's done some prep work and the plan was to list next Saturday. In the meantime a neighbor heard we were leaving and just offered us basically the full asking price minus commission.

We've tried to reach out to the agent to figure out what happens in this situation, but she's on vacation for the next week. A partner from her firm reached out and basically said they wouldn't hold us to the contract, but did make sure to point out if we go on our own we're at risk of making legal mistakes, and recommended at the least getting a real estate attorney. (If it matters, the contract states that the listing period doesn't begin until the 9th, and it is currently the seventh.)

So now we're trying to figure out what to do. Options include:

1) Cancel the contract, take the offer and get an attorney. I don't know how much they cost, but my impression is a few grand. Risks are without the listing, if something falls through we're starting over later and may have also burned goodwill with our agent. One pro is it sounds like the neighbor is really flexible on closing date, so we'd have a lot of wiggle room as we make arrangements to move out of state.

2) Continue with the listing as planned. My wife has become convinced that because we've already got interest, there's going to be a bidding war, people are going to pay over asking, and we're going to squeeze a few thousand more from the transaction. More likely in my mind the offers negotiate in below asking, we get dinged for a few things at inspection, and we're worse off when it's all over. Also, odds are the buyer is going to have a firmer timeline and we'll have more of a scramble moving out.

So, I guess I could use any input. Should we take the offer? How much does a real estate attorney cost? Are there things they don't do that a real estate agent would do for us? Are there options I'm missing or things I should be considering? Thanks.
Is your agent willing to sign the contract with an addendum that if you sell to the neighbor, they will cut their commission substantially? You might get the best of both worlds. It's an incredibly crazy market here in central NJ. You might be underpriced or you might not. If the neighbor really wants this house, they can buy it once it's listed. Is there something substantially bad that would make you think that you'd get into issues when it's listed? My SO got a verbal offer from someone he knew who kept him waiting for two months. It didn't pan out and he had to list it. If you decide to go with the neighbors offer, make it really in your favor - no clauses for not getting a mortgage, big down payment, sold "as-is", etc.
kelvan80
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by kelvan80 »

I think our attorney was only $500. I'd do the work on your own. We did it in Florida and the title company handled everything after we received the contract.
tim1999
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by tim1999 »

I'd list it. Just went through this with an elderly relative selling their house in a hot suburban market with crazy low inventory. The listing contract was signed, sign went in the yard, but the listing wasn't going to hit the MLS for a few days to allow us some time to do some final cleaning/decluttering and have the agent hire a professional photographer to come in. As soon as the sign went up, within hours we had a neighbor maybe 10 houses away approach us expressing strong interest on behalf of his daughter and son in law. He made a verbal offer of full list price minus commission, told us he would come back with a written letter of intent later in the day. We had no special allegiance to the guy, and told him we appreciated the interest, but would be proceeding with the listing and he was welcome to submit an offer via our agent like everyone else. We also did not want to weasel out of the signed listing contract with the listing agent, who is a good family acquaintance of many years and a trustworthy guy who was already discounting his commission percentage substantially vs. the norm in the area.

The house ended up receiving more than 8 offers the first two days of the listing, all at or over asking price, house went under contract with a buyer paying half the price in cash and settled for a price 10% over the listing price. Came out way ahead vs. had we gone with the neighbor's deal.
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Quirkz
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by Quirkz »

My agent is unreachable on a bicycle trip for a few days. Her partner suggested she would let us out of the contract, but she probably wouldn't be interested in doing a halfhearted job for reduced commission, so it's all or nothing.

I don't know about my market. On the one hand, the price indicators say things are down 2% in the last year. On the other hand, inventory is short and we've observed with our own eyes a bunch of former city dwellers retreating to our small-town location for remote work. We planned on listing at $415k, sort of splitting the difference between the realtor's recommendations of $400 for "get it done quick" and $425 for "test the market." Our closest comp is the neighboring unit that sold for $378 just 12 months ago ... a bit stale and she spent 9 months fixing it up afterward; our place isn't perfect but we've been working on it, and there are no major flaws. Still, I honestly thought we were reaching with $415.

My wife has dreams of a bidding war. I'm still scarred from the last time we sold (yes, I know, it's not the same market, but losing $40k sticks with you), when we turned down what we thought was a lowball offer and then had to wait a year to accept the next, even lower, offer.

I'm afraid if we pass up an easy, reasonable offer we'll put in a ton of energy over the next two months and end up walking away with less money. My wife is afraid if we don't use a realtor the offer's going to fall through and we'll have to start over.
invest4
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by invest4 »

Quirkz wrote: Mon Sep 07, 2020 6:15 pm 1) Cancel the contract, take the offer and get an attorney. I don't know how much they cost, but my impression is a few grand. Risks are without the listing, if something falls through we're starting over later and may have also burned goodwill with our agent. One pro is it sounds like the neighbor is really flexible on closing date, so we'd have a lot of wiggle room as we make arrangements to move out of state.

2) Continue with the listing as planned. My wife has become convinced that because we've already got interest, there's going to be a bidding war, people are going to pay over asking, and we're going to squeeze a few thousand more from the transaction. More likely in my mind the offers negotiate in below asking, we get dinged for a few things at inspection, and we're worse off when it's all over. Also, odds are the buyer is going to have a firmer timeline and we'll have more of a scramble moving out.

So, I guess I could use any input. Should we take the offer? How much does a real estate attorney cost? Are there things they don't do that a real estate agent would do for us? Are there options I'm missing or things I should be considering? Thanks.
Yes to Option 1

* You should have a real estate attorney anyway (imho) and the cost is reasonable...~$500.

* If for some reason the neighbor doesn't work out, I would strongly encourage to to consider listing it yourself with a flat fee MLS (~500?) where you will save the fee of the listing agent for yourself and also decide what the commission will be for the buyer's agent. If no buyer's agent..both parties to the purchase can benefit and save.

* In the worst case where you actually use a real-estate agent, I would make an effort to negotiate both the commission AND the terms of the contract involving the buyer's agent. Common practice is often for the listing agent to take the entire commission on both sides if no buyer's agent. Ridiculous. I sold my last house via flat fee MLS along with my real-estate attorney and the thousands of dollars saved was well worth it.

mattsm wrote: Mon Sep 07, 2020 6:18 pm You could offer your real estate agent 3% or whatever they would have gotten and eat it. They still do some stuff on the back end.
Madness...not sure why anyone would purposely throw away thousands of dollars for "some stuff" which you don't need an agent to do.
illumination
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by illumination »

For me it would completely come down to the offer the neighbor made and whether it's reasonable, I would think you had a number in your mind already. If it hit that number, I would take the neighbor's offer and hire an attorney to draft the deal. A quick check on Zillow for nearby sales should easily tell you if it's a good price.

I would give the real estate agent something for their work, but considering it's not even listed, you can't reach her, and she obviously had zero to do with finding the buyer or representing you (her fulfillment of the contract), I wouldn't at all feel obligated to pay her the full commission. Something like a $1000 cash with her signing a release.

Is the neighbor's offer what the real estate agent told you to start at the asking price?
adamthesmythe
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by adamthesmythe »

It depends.

Is neighbor prepared to deliver a written offer with acceptable contingencies and a check for earnest money in a day or so? Or could he just be blowing smoke? Do you know enough to evaluate an offer quickly? Is it possible that he is flexible on closing because he needs more time to set up financing?

To compare- I recently sold a house for asking price (justified by comparables) immediately upon listing, and realized that price less the agents' 5%. So I ended up where you would end up.
RyeBourbon
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by RyeBourbon »

Quirkz wrote: Mon Sep 07, 2020 7:34 pm My agent is unreachable on a bicycle trip for a few days. Her partner suggested she would let us out of the contract, but she probably wouldn't be interested in doing a halfhearted job for reduced commission, so it's all or nothing.

I don't know about my market. On the one hand, the price indicators say things are down 2% in the last year. On the other hand, inventory is short and we've observed with our own eyes a bunch of former city dwellers retreating to our small-town location for remote work. We planned on listing at $415k, sort of splitting the difference between the realtor's recommendations of $400 for "get it done quick" and $425 for "test the market." Our closest comp is the neighboring unit that sold for $378 just 12 months ago ... a bit stale and she spent 9 months fixing it up afterward; our place isn't perfect but we've been working on it, and there are no major flaws. Still, I honestly thought we were reaching with $415.

My wife has dreams of a bidding war. I'm still scarred from the last time we sold (yes, I know, it's not the same market, but losing $40k sticks with you), when we turned down what we thought was a lowball offer and then had to wait a year to accept the next, even lower, offer.

I'm afraid if we pass up an easy, reasonable offer we'll put in a ton of energy over the next two months and end up walking away with less money. My wife is afraid if we don't use a realtor the offer's going to fall through and we'll have to start over.
Get a new realtor.
Clemblack
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by Clemblack »

More info is needed, but you are likely best served to sell to the neighbor if his offer is reasonable.
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Watty
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by Watty »

Just FYI, you can have listing agreements that specify that the commission is automatically reduced if the buyer does not have a real estate agent. Double check your contract to make sure that it does not already have a clause like that.
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JonnyDVM
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by JonnyDVM »

Your goal is to get the most money possible. I think the best way to do that in this case is to list. It sounds like you might get over ask. Your neighbor can still put their bid in.
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stan1
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by stan1 »

I'd tell the neighbor to put in a bid like anyone else. Let the market give you the benefits of competition if you expect the house to be in high demand. If there's a buyer with a large down payment who loves the house pick them not the buyer who want a bargain. The same people who don't want to pay the realtor commission will likely be the same ones that come back over and over again for additional repairs. The neighbor might not have financing lined up or even worse might want to make the purchase contingent upon the sale of their existing house. Just say no to those time wasting games. If by some chance the neighbor has a strong offer such as an all cash purchase it will rise to the top in the competition.
Last edited by stan1 on Mon Sep 07, 2020 9:07 pm, edited 1 time in total.
MathIsMyWayr
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by MathIsMyWayr »

If you have a reasonable expectation of selling the house at the asking price, what benefit will you get by selling it to a stranger neighbor? The one who will benefit is not you, but he. List as planned.
stungerz
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by stungerz »

Selling a house cost about 6% (3% to buying agent, 3% to selling agent) in commission. At a listing price of $415K you are looking at about $25K in commissions.

I'm not sure how hot your market but you'll essentially need a bid for $415K+$25K-$2K(legal fees if you are not using an agent) or $438K or about 5.5% over listing to make the same amount of money. I'd probably sell to them

I would go over to Zillow and see houses sold in the last 6 months.
Also, you can list the neighborhood and city and some bogleheaders might have some input.

The other thing to think about is why would they want to buy your house.
kelvan80
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by kelvan80 »

Quirkz wrote: Mon Sep 07, 2020 7:34 pm
My wife has dreams of a bidding war. I'm still scarred from the last time we sold (yes, I know, it's not the same market, but losing $40k sticks with you), when we turned down what we thought was a lowball offer and then had to wait a year to accept the next, even lower, offer.

I'm afraid if we pass up an easy, reasonable offer we'll put in a ton of energy over the next two months and end up walking away with less money. My wife is afraid if we don't use a realtor the offer's going to fall through and we'll have to start over.
1. It still needs to appraise so a bidding war doesn't always work out.
2. That's what earnest money is for. Also ask about their financing and how much down.
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by ScubaHogg »

mattsm wrote: Mon Sep 07, 2020 6:18 pm You could offer your real estate agent 3% or whatever they would have gotten and eat it. They still do some stuff on the back end.
You think the OP should pay an agent $10,000+ (probably) for doing a little paperwork a lawyer could do better?
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Katietsu
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by Katietsu »

Based on your second post, I would cancel the contract with the agent. I would not burn a bridge with the real estate agent. But let them know you want to work with the the neighbor for a week or two and you will use them if the neighbor thing does not work out. You can always sign a second contract with the same agent. Unless they are an agent that you would ever want to work with anyway, they would not hold this against you. It is an ordinary part of their business.

I would hire a real estate attorney. Get a contract signed with the neighbor. Put the neighbor on a fast track with a very short time for any inspection or finance arrangement. If it does not work out, it gets listed two weeks later and you are not really out anything.

The primary job of a real estate agent is to market and matchmaking. If you do not need this, do not pay for it.
AlphaLess
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by AlphaLess »

Asking minus commish (5.5-6%) is not a deal for you.

It becomes more of a deal, if you split the commish 50-50, and you get asking minus, say, 2.75%.

My thinking is that commission gets paid by buyer and seller, partially and jointly, because it is a tax on the transaction, so to speak.

At asking minus 2.75%, there is a lot of value to you, and the neighbor. Neighbor pays 2.75% less, and you get 2.75% more.

Now, of course, the R/E agent gets screwed here, because they have done some work, and also lack of work essential creates lack of income.

You could throw them a bone, like give them a large gift card.

If you neighbor is paying cash, then they can save even more money, e.g., on title insurance, etc.
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denovo
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by denovo »

Quirkz wrote: Mon Sep 07, 2020 6:15 pm I could use some advice here, because I think we're in a bit of a gray area.

We are selling our house. Last week we contacted a real estate agent about selling it, but the listing has not gone up yet. She's done some prep work and the plan was to list next Saturday. In the meantime a neighbor heard we were leaving and just offered us basically the full asking price minus commission.

We've tried to reach out to the agent to figure out what happens in this situation, but she's on vacation for the next week. A partner from her firm reached out and basically said they wouldn't hold us to the contract, but did make sure to point out if we go on our own we're at risk of making legal mistakes, and recommended at the least getting a real estate attorney. (If it matters, the contract states that the listing period doesn't begin until the 9th, and it is currently the seventh.)

So now we're trying to figure out what to do. Options include:

1) Cancel the contract, take the offer and get an attorney. I don't know how much they cost, but my impression is a few grand. Risks are without the listing, if something falls through we're starting over later and may have also burned goodwill with our agent. One pro is it sounds like the neighbor is really flexible on closing date, so we'd have a lot of wiggle room as we make arrangements to move out of state.

2) Continue with the listing as planned. My wife has become convinced that because we've already got interest, there's going to be a bidding war, people are going to pay over asking, and we're going to squeeze a few thousand more from the transaction. More likely in my mind the offers negotiate in below asking, we get dinged for a few things at inspection, and we're worse off when it's all over. Also, odds are the buyer is going to have a firmer timeline and we'll have more of a scramble moving out.

So, I guess I could use any input. Should we take the offer? How much does a real estate attorney cost? Are there things they don't do that a real estate agent would do for us? Are there options I'm missing or things I should be considering? Thanks.
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onourway
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by onourway »

While I have bought and sold houses both ways, I think that if your market is showing signs of being as hot as many areas right now, you are taking a big risk by accepting the neighbors offer without your agent. Others have made the case as to why - financing, inspection, etc. can all go wrong at which point you are now several weeks behind where you’d be if you’d listed it and received multiple offers. You certainly should, at the very least, be splitting the commission savings.

We were in a similar situation recently. A neighbor made a very fair offer (in normal times) on our place. We went ahead and listed and had a long line of offers up to 15% more than that first offer. When the first buyers got cold feet, we were able to pivot to the next (equivalently good) offer in a matter of hours, and in the end it cost us no more than a day of time. With that list of other offers as leverage, we were able to negotiate close to zero dollars in repairs after inspection.

In a normal market I’d agree - selling to a neighbor without involving agents is appealing. The way some markets are red-hot today, I think you’re likely leaving a bunch of money on the table to do so.
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by galawdawg »

LittleMaggieMae wrote: Mon Sep 07, 2020 6:33 pm I guess you need to give us some more information:

The offer from the Neighbor - did they stop over with a generic contract with their bid and terms on it? Cause if you aren't using a realtor someone will need to supply the contract. If they didn't have one in hand (or some sort of written agreement) they might not be very serious about buying your house. Has the neighbor indicated how they will be paying for your house? Do they have to get financing or will they just be writing you a big check?

If they came to you with a generic contract which outlined their bid price, the "they've got 10 days to get an inspections" escape clause AND if they have indicated they won't need financing... It might be worth it - you are only tied up this for 10 days at which time your neighbor changes their mind (ie they object to something in the inspection to back out of the contract) and backs out of the contract OR you and your neighbor are setting a closing date. You will probably want to get a real estate attorney and start getting familiar with the ins and outs of selling a house.

If they didn't come over with a contract/bid and don't have financing quickly available - I'd go with the Realtor. I might suggest talking with your realtor AND neighbor to see if you can work out some sort of a discount on the asking price to give the neighbor a deal while paying the realtor a little less (of the full 6% commission they would get without a buyer realtor agent) - since they won't have to do so much work/time spent (no open house, no fancy pictures, no showing the house, etc.). the realtor can then spend time on other houses they are selling.
Agree, this pertinent information is necessary for any advice to be well-informed. The only details are that "a neighbor heard we were leaving and just offered us basically the full asking price minus commission." For all we know, this could have been a casual "Hey Quirkz, heard you might be moving. How much are you asking for the house? I'd be interested if you'd knock off the commission...". Without any details, it is impossible to weigh in on the "attractiveness" (or even seriousness) of the neighbor's offer and whether OP should even consider cancelling the listing.
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by Jack FFR1846 »

Bird in the hand.....

What if you instead decide to be greedy, put the house on the market, neighbor finds a different, better house for less money and the best offer you get is 80% of asking?

An attorney will be well under $1k (I've done that twice).
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MillennialFinance19
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by MillennialFinance19 »

I have several points, and I speak from experience on this considering I've conducted upward of 10 RE transactions, both with RE agents and without.

1) If the neighbor is serious, he needs to put it in writing immediately. If he won't, then just continue forward with listing. People make non-binding verbal offers all the time. (EXAMPLE: I once had a handshake agreement with a neighbor on a 3-acre lot. I told him I would need a contract in 3 days since verbal isn't binding. He ghosted me for 14 days and I sold it to someone else). This happens all the time. Note if he quickly puts this in writing, he is serious and you should ask that he pays closing as well. Once that is worked out it is simple enough to hire an RE attorney to complete the transaction. In fact, you could even use a title attorney.

2) As someone else said, the Realtor should be available regardless. I always expect my Realtor to answer the phone or return calls promptly. They always do and that's why they keep my business. With that said, it sounds like their partner is implying you can get out of the listing contract which is quite reasonable. That is why point #1 above must be executed quickly.

3) Did you meet with multiple Realtors? Unless you are familiar with a good one, you could have been given 3 or 4 different price estimates. How do you know $415k is correct? There are too many factors for us to consider without being an expert in your specific area.

Sounds like you're in a great place overall. Good luck!
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by mattsm »

ScubaHogg wrote: Mon Sep 07, 2020 9:34 pm
mattsm wrote: Mon Sep 07, 2020 6:18 pm You could offer your real estate agent 3% or whatever they would have gotten and eat it. They still do some stuff on the back end.
You think the OP should pay an agent $10,000+ (probably) for doing a little paperwork a lawyer could do better?
If it helps the OP sleep at night. They did agree to those terms already by selecting them as a realtor.

-M
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by ScubaHogg »

mattsm wrote: Tue Sep 08, 2020 11:05 am
ScubaHogg wrote: Mon Sep 07, 2020 9:34 pm
mattsm wrote: Mon Sep 07, 2020 6:18 pm You could offer your real estate agent 3% or whatever they would have gotten and eat it. They still do some stuff on the back end.
You think the OP should pay an agent $10,000+ (probably) for doing a little paperwork a lawyer could do better?
If it helps the OP sleep at night. They did agree to those terms already by selecting them as a realtor.

-M
I think the terms also implied the realtor would find a buyer. The seller found the buyer.
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8foot7
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by 8foot7 »

Under no circumstances should you pay the realtor anything if you sell to your neighbor. But you got nothin' till you got a (written) offer from your neighbor and I'd be inclined to list it to play the market unless you are not in a hot area. And as for your neighbor, I'd attempt to split the difference with him - otherwise you are paying him to be your realtor, as selling to your neighbor at list-minus-six is the same thing as selling to a third party at list and paying your realtor six.
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by rich126 »

Personally I wouldn't give the neighbor a discount price. Right now around me houses are going above list price so a neighbor that offers me list price minus commission isn't doing me a favor but instead would be getting a bargain otherwise they would not be making that offer. Maybe your area is different than mine.
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by Dottie57 »

rich126 wrote: Tue Sep 08, 2020 11:56 am Personally I wouldn't give the neighbor a discount price. Right now around me houses are going above list price so a neighbor that offers me list price minus commission isn't doing me a favor but instead would be getting a bargain otherwise they would not be making that offer. Maybe your area is different than mine.
+1.

However taking list price is fine. You chose the price so it must be reasonable. You have a real offer - you might not get as good when listing it.
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by smatter »

I would counter the neighbor at a 3% discount off of list and insist on an AS-IS sale with a quick close.

Otherwise, list it.

Neighbor saves 3% ($12K), you can take some of the 3% you save and pay for a RE attorney to review (in my area ALL of the forms used for real estate transactions are completely standardized ... so this should be a minimal cost... i.e.<$1,000).... and then you can drop off a $2,000 GC to the realtor as a gift for the time they did spend helping you prepare for the listing. There, I think I covered everything. 8-)

Neighbor should not get all the benefit in this transaction. Otherwise, besides the contract, the net result to you is the same. Neighbor may also be expecting you to negotiate. So you should!
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by neverpanic »

I'm assuming the neighbor is making you an all-cash offer with a short inspection period and a quick close, in which case I would make a deal, but still let the realtor handle the mechanics. There's a discount available, but you should not be the one subsidizing all of it.

If the neighbor is not bringing all cash and the market is strong, my suggestion would be to list it.
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by Olemiss540 »

Heck yes I would sell it. Not having to show a house during the pandemic, along with the hassle reduction would be worth the cheap cost of a real estate attn.

Assuming they are willing to buy with no contingencies and close quickly.
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by Goal33 »

What kind of deal is this for you? The neighbor is getting all the commission. Split it or list it
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by davemanjam »

I would absolutely avoid showing my house to a bunch of people in normal times. Let alone the current situation.
Like others have said the neighbor has to prove themselves to be serious quickly.

They may be offering a fair price, but trying to get a small deal, trying to move family closer or have a rental property close.
Who knows, but i don't know why anyone would assume they are trying to get an unfair deal with what they offered. It sounds totally reasonable to me.

Its really not that hard to sell or buy a house without an agent.
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by bsteiner »

davemanjam wrote: Tue Sep 08, 2020 2:14 pm ...
It;s really not that hard to sell or buy a house without an agent.
The broker's job is to find a buyer. Some people who want to sell their houses can't find a buyer, and need an agent to find them one.
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by adamthesmythe »

Adam's probabilities

70% neighbor never makes a written offer
20% neighbor makes offer but doesn't close
10% neighbor closes on approximately terms suggested.

Waiting for update.
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by poker27 »

No reason not to counter the neighbor, and make it worth your while. "I expect to sell above our listing cost due to the market conditions. If you want to close quick, I would sell at asking with no discount". If they say yes, take it!
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by LittleMaggieMae »

I don't quite get the seller is getting a bad deal if they go with a neighbors offer of asking price minus commission PROVIDING THE NEIGHBOR actually has a contract in hand and can make good on the offer. I've put in bids on houses with a filled out "boilerplate" real estate contract (they are free online) without a realtor involved.

If the asking price is $300,000 and there's a 5% commission with a realtor the Seller will get $285,000 minus all the other non-realtor expenses.

If the asking price is $300,000 and the seller agrees to sell for the asking price less 15,000 commission - the "selling price" is $285,000 minus all the other non-realtor expenses.

The seller MIGHT save some money on property taxes, utilities, whatever other monthly expenses they have that keeps the house functional IF the sale to the neighbor happens quickly - say with 45 or 60 days. I would guesstimate a 285K house has atleast $600 a month in non mortgage expenses. If it's a high property tax place - that adds to it too. Selling with a realtor MIGHT take 3 to 6 months. if the seller has to carry two houses this could be a "hidden expense". Selling quickly could also make buying a new house a bit easier - there isn't any contigency nor need for a lengthy "bridge loan".

There's also the weird "remodel" your house to the buyers expectations thing going on... I've witnessed quite a few home sellers "upgrading flooring" and "updating kitchens and bathrooms" - sometimes spending $20K or 30K so they can sell their house for the going price for an updated home in their neighborhood. They don't want to offer the house as is for 20K or 30K less than the standard price for an updated house... they'd rather go thru the drama of updating to sell it.

What if the OP gets caught in that trap? All the people who walk thru the house don't like the carpeting or the kitchen countertops or the vanity in the bathroom - because they are dated OR all the appliances are a few years old so the seller installs all new appliances? And the seller winds up spending money to get that 300K price (so they can pay the realtor $15000) and still get $285K (- minus all the upgrades)???

It's weird out there... I watched a neighbor "update to the buyers expectations" put in all new appliances, new kitchen countertops and refurbished the kitchen cabinets, new sink/faucet -- and the house sold ... only to have the new buyers rip out the kitchen cabinets/counter tops/sink and put in all new appliances. It's weird out there!
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by rich126 »

LittleMaggieMae wrote: Tue Sep 08, 2020 3:19 pm I don't quite get the seller is getting a bad deal if they go with a neighbors offer of asking price minus commission PROVIDING THE NEIGHBOR actually has a contract in hand and can make good on the offer. I've put in bids on houses with a filled out "boilerplate" real estate contract (they are free online) without a realtor involved.

If the asking price is $300,000 and there's a 5% commission with a realtor the Seller will get $285,000 minus all the other non-realtor expenses.

If the asking price is $300,000 and the seller agrees to sell for the asking price less 15,000 commission - the "selling price" is $285,000 minus all the other non-realtor expenses.

The seller MIGHT save some money on property taxes, utilities, whatever other monthly expenses they have that keeps the house functional IF the sale to the neighbor happens quickly - say with 45 or 60 days. I would guesstimate a 285K house has atleast $600 a month in non mortgage expenses. If it's a high property tax place - that adds to it too. Selling with a realtor MIGHT take 3 to 6 months. if the seller has to carry two houses this could be a "hidden expense". Selling quickly could also make buying a new house a bit easier - there isn't any contigency nor need for a lengthy "bridge loan".

There's also the weird "remodel" your house to the buyers expectations thing going on... I've witnessed quite a few home sellers "upgrading flooring" and "updating kitchens and bathrooms" - sometimes spending $20K or 30K so they can sell their house for the going price for an updated home in their neighborhood. They don't want to offer the house as is for 20K or 30K less than the standard price for an updated house... they'd rather go thru the drama of updating to sell it.

What if the OP gets caught in that trap? All the people who walk thru the house don't like the carpeting or the kitchen countertops or the vanity in the bathroom - because they are dated OR all the appliances are a few years old so the seller installs all new appliances? And the seller winds up spending money to get that 300K price (so they can pay the realtor $15000) and still get $285K (- minus all the upgrades)???

It's weird out there... I watched a neighbor "update to the buyers expectations" put in all new appliances, new kitchen countertops and refurbished the kitchen cabinets, new sink/faucet -- and the house sold ... only to have the new buyers rip out the kitchen cabinets/counter tops/sink and put in all new appliances. It's weird out there!
You are basing it on your expectations or maybe your current or old market. I'm just saying in Arizona it is a HUGE seller's market in any desirable area where people are literally getting a number of offers above list price. Just since January my house value has gone up 25% and it seems to go up daily. At least until things collapse.

Suggesting a sale will take 3-6 months is ludicrous in some areas based on the agents I know in AZ and back east. It is often more like 3-6 days. My GF has people constantly sending her offers to sell. And yeah it is crazy but unless you know the exact location and the exact market your previous experiences are out the door.

I sold a house once in MD a number of years ago during a hot market, got above list price and even with a long list of items from the home inspection I had to fix almost nothing because the buyers knew I could simply go down the list of offers and take the next one.

People here too often want to put everything in the context of their area and experiences. Maybe the OP has a situation closer to yours or maybe they have one similar to mine but we don't know that.
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by kd2008 »

We sold 2 properties this year without ever listing ...directly to friends of friends etc. People make a big deal about getting best price or legal issues etc..but we valued getting rid of the properties without any hassles and getting them ready for market etc ...and in some cases it is so ..but in most transactions that are cash or straight forward sale where abstract is up to date and there are no liens etc ..require no special handling ...you have to do the homework and know what the process is in your county where the deed is filed and what standard real estate forms are involved in your state. Some states require attorneys and as such..so be aware of that.

I wish the whole process could be done online with biometric verification and photos of people signing documents like in other countries instead of paper-based notary and just signatures like the medieval times as is in the case in the US of A.
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by FeesR-BullNotBullish »

I vote for listing as planned and keeping this as impersonal as possible. The neighbor likely has a lot of experience and feels like your house is an absolute steal. You won't have the luxury of back up offers or seamlessly re-listing your house if neighbor wants to change the terms or falls through.

Now on to your agent...It's good that a partner helped you, but it sounds like you didn't know your agent was on vacation. If I was in your shoes, I would have expected to call the partner directly because I would have known that agent wouldn't be available. How confident do you feel that you picked a good agent? How did you arrive at the asking price? If agent threw out the first number, she might be in it for an easy sale. It's probably not too late to get a new agent.
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by Katietsu »

neverpanic wrote: Tue Sep 08, 2020 1:29 pm I'm assuming the neighbor is making you an all-cash offer with a short inspection period and a quick close, in which case I would make a deal, but still let the realtor handle the mechanics. There's a discount available, but you should not be the one subsidizing all of it.

If the neighbor is not bringing all cash and the market is strong, my suggestion would be to list it.
What mechanics do you think someone should be a real estate agent tens of thousands of dollars to execute? The actual legal transaction is very standardized and can be handled cheaply by the RE attorney or title agent, depending on locality. I would not stick with the neighbor's offer if there are additional "negotiations" or details to handle. If that kind of thing came up, I would just move on and list it.

And there is some value in not having to have your house on the market at anytime let alone during a pandemic. Add in the possible flexible move out date that has value to the OP and I would accept the risk of a lower profit. How much less potential upside is up to the OP. Low friction transactions are worth a lot to me. I recognize that some people put low or no value on avoiding hassle, showings, and negotiations. I would give the neighbor thing a week or two to see if it can be low friction and mutually beneficial.
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by bsteiner »

Katietsu wrote: Tue Sep 08, 2020 4:28 pm
neverpanic wrote: Tue Sep 08, 2020 1:29 pm I'm assuming the neighbor is making you an all-cash offer with a short inspection period and a quick close, in which case I would make a deal, but still let the realtor handle the mechanics. ....
What mechanics do you think someone should be a real estate agent tens of thousands of dollars to execute? ...
Finding a buyer (and persuading him/her to buy). Some people need a broker to find a buyer and get him/her to buy.
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by Katietsu »

bsteiner wrote: Tue Sep 08, 2020 4:49 pm
Katietsu wrote: Tue Sep 08, 2020 4:28 pm
neverpanic wrote: Tue Sep 08, 2020 1:29 pm I'm assuming the neighbor is making you an all-cash offer with a short inspection period and a quick close, in which case I would make a deal, but still let the realtor handle the mechanics. ....
What mechanics do you think someone should be a real estate agent tens of thousands of dollars to execute? ...
Finding a buyer (and persuading him/her to buy). Some people need a broker to find a buyer and get him/her to buy.
Exactly. I completely agree with you. In the OP case, they may have the buyer already. And, if the neighbor needs help getting to the finish line, I would not bother. At that point, I would just list the house with the real estate agent and let them earn their full commission. What I do not understand is neverpanic’s suggestion to potentially sell to the neighbor and yet still use a real estate agent for the mechanics. It was this middle road that did not make sense to me.
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Re: House sale quandary - got offer from neighbor before agent listed house

Post by jminv »

Quirkz wrote: Mon Sep 07, 2020 6:15 pm I could use some advice here, because I think we're in a bit of a gray area.

We are selling our house. Last week we contacted a real estate agent about selling it, but the listing has not gone up yet. She's done some prep work and the plan was to list next Saturday. In the meantime a neighbor heard we were leaving and just offered us basically the full asking price minus commission.

We've tried to reach out to the agent to figure out what happens in this situation, but she's on vacation for the next week. A partner from her firm reached out and basically said they wouldn't hold us to the contract, but did make sure to point out if we go on our own we're at risk of making legal mistakes, and recommended at the least getting a real estate attorney. (If it matters, the contract states that the listing period doesn't begin until the 9th, and it is currently the seventh.)

So now we're trying to figure out what to do. Options include:

1) Cancel the contract, take the offer and get an attorney. I don't know how much they cost, but my impression is a few grand. Risks are without the listing, if something falls through we're starting over later and may have also burned goodwill with our agent. One pro is it sounds like the neighbor is really flexible on closing date, so we'd have a lot of wiggle room as we make arrangements to move out of state.

2) Continue with the listing as planned. My wife has become convinced that because we've already got interest, there's going to be a bidding war, people are going to pay over asking, and we're going to squeeze a few thousand more from the transaction. More likely in my mind the offers negotiate in below asking, we get dinged for a few things at inspection, and we're worse off when it's all over. Also, odds are the buyer is going to have a firmer timeline and we'll have more of a scramble moving out.

So, I guess I could use any input. Should we take the offer? How much does a real estate attorney cost? Are there things they don't do that a real estate agent would do for us? Are there options I'm missing or things I should be considering? Thanks.
Check that the price you are listing at is really 'full price'. Often agents will try to get you to list for under true value to get the home to sell quickly. This helps their stats, gets them a quick return, and makes for happy customers (our house sold in 3 days for over list with multiple offers). This was the plan of a realtor my relatives were using last month until we pointed out that the house was worth more and why not just list for 5% more which is what is seemed like the actual true value was. Home still sold quickly with a lot of interest for over list to someone paying all cash with no inspection contingency and short closing.

If the price is really full value and you're not in an area where multiple offers over list are the norm, I'd consider taking the neighbors offer. Real estate attorneys are not expensive and you're saving yourself a lot of hassle if the offer is actually good. Is there a financing contingency? If it's cash can you get him to buy it as is? What's this neighbor like as in is this going to be a smooth transaction? Listing to try for more money is always good but the deal could fall through in the end while the market shifts and it could cost you money. Having to relist after financing falls through etc can also have a negative impact on your sale price.
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