If you want anything done right, you must do it yourself. Right? Well, you should be competent, well-researched, and know what you’re doing. If you’ve never held a wrench in your life and endeavor to change the kitchen sink pipes after watching a YouTube tutorial once, then all you’re doing is making a prospective plumber richer instead of saving money. The point is that you could create an unavoidable mess. Like, buying a home without an agent.
The average realtor earns a 5% to 6% commission fee against the sale value of a home they facilitate selling.
According to information compiled by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, over 681,000 homes were sold in the United States in 2019.
So, a realtor charging a 6% commission for the sale of a $384,000 home can make $23,040.
That’s a nice fee for just facilitating a sale.
Also, realtors can make more money against a home sale in other ways.
Realtor Fees
Realtors could conceivably charge extra fees for processing, paperwork, facilitating the processing logistics between mortgage lenders, buyers, sellers, and so on.
So, when accounting for all of a realtor’s possible fees, you’re going to spend well over $400,000 just to buy a home.
(However, the realtor’s commission could also be paid out of the home’s equity value, if applicable. But that is only possible if you know about such things – more on that later).
When you look at it like that, you’re bound to save tens of thousands of dollars buying a home on your own.
Maybe you can do better buying a home on your own. After all, almost a fifth of all licensed realtors only acquired their operating license within the last year.
Right?
Well, maybe.
A home sale is a legally binding transaction involving contracts. You could be sued by the seller if anything goes wrong during or after the sale.
If you don’t know what you’re doing, you may end up losing and/or spending more money than you would have with the help of a realtor.
Buying a home Without an Agent? Be Prepared to Work
According to the National Association of Realtors, about 8% of home sales in 2016 were facilitated by FSBO transactions, or, “For Sale By Owner.”
So, yes, you can sell or even buy a home without the aid of a real estate agent.
However, it’s a complicated, technical, and months long process involving a lot of paperwork
If you’ve made the decision to buy a home on your own, you’ll need a lot of patience, time, and research prep work.
Also, keep in mind that just because you’re buying a home without an agent doesn’t necessarily mean that the seller doesn’t have one.
The bane of almost all home sellers is dealing with buyers without realtors, who’re unprepared, and don’t know what they’re doing.
You don’t want to give the impression that you’re wasting a seller’s time and/or making things up as you go along during negotiations.
Additionally, you’re at a logistical disadvantage if the seller has a realtor (just assume they will).
The seller’s agent will have years or decades of experience they will bring to the deal.
This experience benefits the seller and their agent’s motivation to earn a commission more than your desire to buy a home on your own terms.
Always remember, a home sale is a legal transaction. What you don’t know could end up costing you financially and legally if you aren’t careful.
Here are just some of the things you must do to buy a home without a real estate agent.
Research Prices and the Market
Research the market in the neighborhood, or neighborhoods, that you are considering buying a home.
Do the neighborhoods you’re considering have the life amenities, like preferred schools, shopping centers, work opportunities, that you’re looking for?
What are the average prices for homes in these neighborhoods? If you understand the real estate market prices for the home you want to buy, you could have negotiating room to pay a price nearer to your own terms.
Decide on your buying budget and try to stick with it.
Choose Some Prospective Properties
In life, we don’t always get what we want. Talk to some prospective sellers and feel them out. Go to some open houses, check out some houses, and talk to some sellers.
After you have done your research, make a list of 3, 5, or 10 houses that you may want to buy.
Prioritize which home you’ll pursue according to your interactions with the seller.
Get Preapproved for a Mortgage
If there is one thing that sellers, and their realtors, hate, it’s having their time wasted.
You’ll look a lot more serious and professional if you’ve already been preapproved for a mortgage.
Look at it from the seller’s point of view – who do you think the seller would prioritize their negotiating time with? A buyer without an agent asking questions to learn the process as they go along or a buyer without an agent but with a mortgage looking to make a deal?
Get Seller Disclosure Statement
This is basically a list of issues or problems with the home. For example, you want to know if the home has problem like:
- Rodent or infestation problems
- Remodeling, repairs, and rehabilitation history
- Water damage and mold issues
- Issues with plumbing and electrical systems
If the house you are buying was built before 1978, then the seller is legally mandated to inform you if any part of the house was painted with lead-based paint.
Beyond that, whether or not the seller must be totally honest with you concerning a disclosure depends on whether or not you live in a, “caveat emptor,” state.
If you live in a state without caveat emptor a legal mandate, then you must ask specific questions of the seller concerning the property in question. However, you must know what to ask in the first place.
Hire a Licensed Home Inspector
A home inspector will inspect the property and look for any issues or problems that the seller may be keeping from you or may not know about.
Hire a licensed and certified home inspector based on recommendations from a trusted source.
Don’t try to buy a home without getting the input of a home inspector. If you buy a home unaware of problems or issues not revealed beforehand, then you’ll be stuck dealing with it financially.
Plus, if you didn’t ask the seller about these issues in a caveat emptor state, you may not have legal grounds to sue.
Even if you do, you’re just paying more money for a lawsuit that might have been better spent on a realtor.
Assess All Closing Costs
Real estate closing costs are all of the fees associated with numerous finalization processes required to close a deal.
The kinds of closing costs you’ll be required to pay depends on the state and city you live in.
Having a lawyer helps a lot.
Hire a Lawyer
I keep coming back to the need for a lawyer for a reason. A real estate transaction is a legal process.
These are some of the documents and paperwork required for the processing to sell a home. Assume that the seller and their realtor are aware of the need of such documentation.
Are you?
Make sure you have a lawyer looking over the paperwork throughout the process and before signing any contract.
You want to buy a home with a realtor. Fine. Don’t try doing so without a lawyer on your side.
Invest in Time, Research, and Patience
This site has some general tips on how to buy a home without an agent. Use it as a starting point to learn more about the subject.
Remember that this process will take a personal investment in spare time, patience, and meticulous research. This is not something you’ll be able to do in a weekend.
Get advice from a real estate professional if possible.
Most of all, try to remember to buy the home you need, and not necessarily the one you want.
You’ll make better prioritization and negotiating decisions that way.
Read More
HOW TO GET A GOOD DEAL ON A HOME
BUYING A HOME – 10 POINTS TO CONSIDER
WHAT TO LOOK FOR IN A NEW HOME: THE 5 THINGS YOUR NEW HOUSE NEEDS
Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.