Many consumers wonder whether they need a Realtor to buy a house.
If you are considering buying a home, chances are you have questioned whether you need a Realtor.
Real estate agents in film and television are often portrayed negatively, which leads to a perception that they may be untrustworthy.
No laws also require you to use a Realtor, so what’s the point? Why bother?
Buying a home without a real estate agent can bring risks and lead to issues you may not be aware of.
Many good, honest agents focus on what is best for their clients. The benefits of having a fantastic buyer’s agent are immeasurable.
Buying a home is a big deal – it may be the most significant transaction ever.
You should be aware of the risks before you buy without representation because you may discover that the potential problems of going solo outweigh the possible benefits.
Buying a home without a real estate agent can be financial suicide if you’re not careful!
Buyers need to keep a few things in mind. An exceptional buyer’s agent represents your best interests. The agent owes the buyer undivided loyalty, confidentiality, reasonable care, obedience to lawful instruction, and accountability.
The best buyer’s agents put your needs above their own. You lose all these things when you buy a house without a Realtor.
The biggest problems occur when a buyer tries to purchase a home for sale by an owner without a Realtor.
Can You Buy a House Without A Realtor®?
If you are wondering whether you should buy a home without a Realtor, the answer is NO! From thirty-eight years of experience, you would be giving up many significant benefits without having an agent.
Realtors do many things for home buyers. Many people think of an agent as someone who shows homes. Frankly, this is the least essential service they provide.
Realtors do many things for their clients to achieve their goals.
Understanding Legal and Financial Aspects
When purchasing a home without a Realtor, it’s crucial to understand the legal and financial aspects involved. This includes familiarizing yourself with terms like escrow, earnest money deposits, and the importance of getting a pre-approved mortgage.
These elements are fundamental in ensuring a secure and efficient transaction. Additionally, engaging a title company to handle the property transfer ensures no existing liens or disputes over property ownership.
You Could Hire a Real Estate Attorney
If you don’t want to work with a Realtor, you could hire a real estate attorney to represent your interests. A Real Estate attorney has an automatic real estate broker’s license.
You must find an attorney to provide home-buying services, including showing properties and writing an offer.
If not using a Realtor is to save on paying a real estate commission, it is unlikely to happen. A Real Estate attorney will want to be compensated similarly.
So, you do not need a Realtor to buy a house, but it makes little sense not to.
Does Buying a House Without a Realtor® Save Money?
The common question is, “Do you pay a real estate agent if you are a buyer?”
In most real estate transactions, the seller pays the entire commission, including compensating the listing and selling agent. For years, buyers have not paid any fees out of pocket to work with a REALTOR®.
However, this could change due to the Justice Department suing the National Association of Realtors. Commission structures and how agents get paid could also change. That is still up in the air.
It is unlikely that working without a Realtor will save you any money. If a buyer goes directly to the listing agent, it does not mean the agent only makes half a commission. The seller is obligated to pay the agent the full commission.
The seller’s agent is not obligated to give the buyer any of the commission (although they might agree to.)
By working with the seller’s agent, you will create a dual agency situation or work with someone representing the seller. Neither situation is suitable for a buyer.
Can I View a House Without a Realtor®?
Usually not. Most sellers are instructed by their Realtor never to let an unvetted stranger into their home. Appointments to view homes are made via a buyer’s agent through the listing agent.
Things to Consider When Buying a House Without an Agent
When you go without an agent to buy a home, you and the seller are two regular people making a deal without the hassles of dealing with “professionals.” What could be simpler?
Of course, homeowners selling without a Realtor usually do so to save money on a commission. There are pros and cons of selling a home without a real estate agent, and the same holds when buying one.
Well, the simplicity of this arrangement is more of an illusion than a reality. Potential problems of buying a house without a Realtor include:
You Won’t Know The Local Market Like an Agent
A skilled REALTOR is highly adept at navigating the real estate market and will have extensive knowledge of local listings. They may also know about properties that have not yet hit the market.
Experienced agents have ample knowledge of their region’s housing markets – an asset that can prove invaluable when making important decisions such as purchasing a home.
Realtors tune in to your home requirements and seek appropriate properties within your budget. If you lack an agent, it will be up to you to undertake exhaustive research–with all the associated effort!
Overpaying For The Home
The price of a home is set by the owner, who may or may not have any idea what the house’s actual value is. Homeowners are notorious for overestimating the value of their homes. The owner could set any price, and you will not have a way to verify the validity of that price on your own.
Folks selling for sale by owner usually use rudimentary methods to determine an asking price, including a Zillow Zestimate if it suits their needs.
Anyone with half a brain understands that you have better odds of spotting Bigfoot than seeing an accurate Zillow home value. Some sellers don’t know any better.
If it looks too good to be true, it probably is! Other sellers pick a number from a hat based on what they need or want for their home.
One of the significant benefits of having a buyer’s agent is someone in your corner who can analyze market value for you. Overpaying is a substantial risk of buying a home without a real estate agent.
Disclosure Issues
In some states, sellers do not have to disclose problems with their homes. This is known as Caveat Emptor or “let the buyer beware.” Realtors, however, are held to much higher standards.
If a real estate agent knows about some problem with a home, it must be disclosed! There are few instances where a real estate agent can avoid disclosing a condition that would make a buyer think twice about purchasing a home.
For example, if the seller’s basement floods every spring, a real estate agent must disclose this to any buyer interested in the property.
Agents are not allowed to have a “blind eye” regarding potential issues they have discovered. There can be many red flags when making a home purchase.
Some sellers in states where non-disclosure is allowed will try to sell their home for sale by the owner.
Some of these owners may even market their homes as being sold as-is. A big red flag should go up if you are purchasing a home for sale by the owner and they are selling as-is!
Inspection Problems
A home inspection report can be difficult for the average person to decipher. The inspector will list every potential problem, and the information may include 20-50 points of concern.
Some of these may be things you need to worry about, while others may look like a big deal, but they are not.
Understanding unreasonable inspection requests is a service a top-shelf buyer’s agent provides. Real estate agents always look at these reports so they know how to pick out the vital stuff you will base your negotiations on.
Without an agent, you will also not be aware of the different types of inspections that are advisable for your area or, for that matter, picking the right home inspector.
You may need to do a mold inspection, a radon inspection, an inspection for insect infestation, or some other special inspection. Having a home inspection checklist is essential.
If you miss the necessary inspection, you may wind up with a home with real issues.
No Knowledge of The Neighborhood
One of the most significant advantages of a Realtor is that they are an expert on the neighborhoods you buy – School districts, property taxes, HOA rules, commutes, property values, etc.
Knowing how to pick the right neighborhood is essential. The community you choose can significantly impact its value and resale potential down the road.
You are not just buying a physical home and property in a particular area.
Considering how much money you are spending, it is worthwhile to know what you are getting and if it fits your goals for ownership.
A knowledgeable local buyers agent helps give you the big picture, whether it is a small town or a big city.
Appraisal Problems
As mentioned above, you can face appraisal problems when you overpay for a property.
The difficulty of property appraisals increases exponentially when dealing with buyers and sellers who are not using professional real estate agents.
Often, it is the blind leading the blind. Not using a Realtor can create real estate appraisal problems that must be overcome.
Can you imagine having your home under contract and getting an offer accepted on a house only to find out it doesn’t appraise for what you are purchasing it for?
What if the seller won’t budge? When buying and selling a home in the same time frame, an uncooperative owner can create significant havoc!
Think about what happens when you have nowhere to go because the home you buy will fall apart due to an appraisal. This is one of the significant risks of purchasing a house without a real estate agent in your corner to protect your interests.
Laws, Regulations, and Paperwork
Real estate law varies from state to state, city to city, and county to county. You must obey the letter of the law to avoid potential legal troubles later on.
Knowing how to read a contract before you sign it is crucial. You must complete all necessary paperwork correctly and submit it by the deadline. Legal mistakes and missteps in your paperwork can lead to severe, long-term, and expensive headaches.
If you are not using a buyer’s agent when purchasing a home, it is highly advisable to have an attorney represent you.
Navigating the Closing Process
The closing process in real estate transactions can be complex, especially without the guidance of a Realtor. It involves several steps, including finalizing your mortgage, conducting a final walk-through, and handling various legal documents. Understanding each step is crucial to avoid any surprises.
For instance, knowing the role of escrow helps ensure that all funds are appropriately secured and transferred during the closing process.
Additionally, knowing potential closing costs and how they are calculated can prevent unexpected expenses.
You Get Connections to Industry Experts
Purchasing a home requires dealing with many third-party experts. A real estate professional can connect you to high-quality professionals such as contractors and home inspectors who can help streamline the process.
When you don’t have an agent, you must conduct diligent service research for contractors. From experience, I can tell you this is an invaluable service an agent provides.
When you buy a house without a Realtor, you’ll be conducting significant real estate due diligence.
Buying From A Seller’s Agent or “Dual Agent.”
Going directly to a seller’s agent to buy a home is equally as bad as not using a buyer’s agent when purchasing a for-sale-by-owner property.
Many buyers think they will get some “special deal” by going directly to the seller’s agent.
Instead, buyers deal directly with someone who is obligated to the seller. A dual agent is no better because the agent is a slave to two parties, not exclusively representing either.
When facing off with a real estate agent selling you a home, you go toe to toe with a pro.
It is unwise to assume you know as much as the agent. Ultimately, you will be at their mercy, hoping you will be treated fairly. Some potential problems include:
Dealing With a Salesperson
When you have your agent, you are insulated from the persuasiveness of the other agent.
Your agent knows what you want and need, and they know how to avoid being taken in by salesmanship.
Paying Too Much Because of Not Understanding Location Value
Unless you work in the area’s real estate industry, it is unlikely that you can determine the actual value of the homes you are viewing. With a Realtor, you have a pro who can tell you when something costs too much.
Without an agent, you are highly likely to pay more for a home than you would with an agent working for the seller. After all, part of the seller’s agent’s job is to get their client the most money!
In my area, Metrowest real estate values can vary staggeringly from town to town for the same house.
Expecting a Deal on Commission
The commission on a home sale is split between the seller’s agent and your agent. Many buyers who avoid hiring an agent hope the seller’s agent will discount the commission because there is no buyer’s agent to pay.
How likely is it that the seller’s agent will discount the commission, though? It
would be unwise to assume that the seller’s agent will make many adjustments for you as a buyer without an agent.
Some agents are adamant about not discounting the commission. Even if they did, does it make sense to save a few thousand in commission only to overpay for the home by ten thousand instead? You do the math – it doesn’t work!
No Negotiating on Your Behalf
What skills of yours are most developed? Unless you are incredibly unique, your answer will relate to the skills you have practiced most. The first will probably be work-related skills since you are practicing 40 hours a week at least. Next would be your hobbies.
Real estate agents negotiate for every client they work with, month after month, year after year. They know every factor influencing home values and every pressure point likely to deliver a response. You, on the other hand, are new to this.
When you negotiate with the seller’s agent, you should not expect to be the winner.
You Won’t Have A Fiduciary
The difference between a buyer’s and a seller’s agent is staggering. When you go directly to a seller’s agent, you lose the ability to have someone who is your confidant.
Those who think of a buyer’s agent as a taxi cab driver are missing the whole point of having a buyer’s agent. The most minor role a buyer’s agent serves is showing you homes! Again, when you go to a seller agent, you give up the following:
- Loyalty to you and you only!
- Confidentiality—By law, a seller’s agent must pass along anything relevant you tell them to a seller.
- Accountability – an agent working for the seller is not accountable to you.
- Obedience to lawful instruction – a buyer’s agent must follow your instruction unless it breaks the law.
Buying A “For Sale By Owner” Home Without A Realtor®
Some people want to know what happens when they have a Realtor but find a house for sale by the owner. Does a buyer still have to pay a real estate commission?
It depends on the circumstances. Some for sale by owners will offer a Realtor a commission. When they won’t, paying a commission will depend on whether you have signed an exclusive buyer’s agent agreement.
A buyer’s agent agreement is a contract that locks a buyer into working with a specific agent. The agreement will typically spell out these circumstances.
Buyers often agree to compensate an agent for their services when they find a FSBO.
Tips For Buying Any House
When you buy any house, these are the steps you will need to take:
- Get pre-approved for a mortgage
- Research potential communities you would like to live
- Find properties to view
- Ask for a copy of the seller’s disclosure
- Make and negotiate an offer
- Hire a home inspector to examine the property
- Negotiate any repairs or ask for a seller’s concession
- Hire a real estate attorney to look over the purchase contract
- Finalize your financing
- Attend the closing
The steps for buying a house without a Realtor are straightforward, but you have no representative. No representation can lead to mistakes that can cost thousands of dollars.
Pros and Cons
Pros
- You may potentially get a commission discount from the listing agent
Cons
- No representation from an agent
- Lack of understanding of the current local real estate market
- Less access to potential listings before hitting the market
- Potential to overpay for a home
- No negotiation help throughout the transaction
- Increased odds of dual agency
- Potential for higher attorney fees
- No access to contractors and other industry experts
Final Thoughts
Home buying without an agent can be a tricky business.
It does not make sense to forgo using a buyer’s agent. In most circumstances, you DO NOT pay a real estate agent to represent you when buying a home.
A seller almost always pays for a real estate commission. Is it possible you will run into a for sale by owner that won’t pay a buyer’s agent fee – sure. In a case like this, where you would have to compensate a buyer’s agent, you must make your offer considering this.
The best buyer’s agents do a lot for their clients. Without a buyer’s agent, your odds for problems go up significantly.
Keep in mind there are good and lousy buyer agents. You would be wise to do a thorough interview with a buyer’s agent you’re considering hiring.
Additional Helpful Home Buying Articles
- When you should hire a real estate lawyer – good tips on when it makes sense to have a real estate attorney.
- Understanding real estate contingencies – learn some of the most common contingencies in a real estate contract.
- Planning your first home purchase – see what you need to know when you will buy your first home.
Use these additional articles to make sound decisions when buying a home. Think twice before jumping into the real estate market without a top-notch Realtor!
About the Author: The above Real Estate information on buying a house without a Realtor was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 37+ Years.
Are you thinking about selling your home? I am passionate about real estate and love sharing my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
I like what this article mentions about paying too much for a building or house. It makes sense that somebody like me, with no real estate buying experience, would have a very difficult time reviewing the value of a property. It’s something I’ll have to remember to make sure I can get a house without paying too much for what it’s worth.
I agree that you run the risk of overpaying if you buy a home without a real estate agent. Your real estate agent will make sure that your future home is correctly priced and may be able to negotiate your best interest. Hiring a realtor could make your home buying process cheaper and faster.
Thank you for this. I have a verbal agreement to buy a hone and have now found out the price is too high and there are problems that wont allow it to pass inspection for the mortgage. What a mess. They want to sell the home as is and have asked for hand money.