What You’ll Learn
The benefits of working with a buyer’s real estate agent
When buying a home without an agent can work for you
7 steps to buy the home you want without an agent
As prices soar in competitive housing markets, it’s not surprising that some homebuyers are looking for DIY ways to get the home they want for a cheaper price. Home improvement shows have demonstrated the value of sweat equity—surely the same logic could apply to buying the home itself, right? Well, not exactly. For most people, a home will be the largest purchase they ever make and now that the average cost of a home in 2021 is $408,800, there’s a lot more on the line if things go awry. So before we explore how to buy a home without a real estate agent, let’s take a moment to understand what you’ll be missing, and learn which situations may warrant a DIY home purchase.
Buying a house without a real estate agent
In most cases, buyers don’t directly pay their real estate agent—the buyer's agent commission is paid by the seller, so whether you use an agent or not, you won't be out of pocket. A good real estate agent makes their job look easy; look at homes all day, set up appointments, then make a couple of phone calls to negotiate when the client says “buy.” But it’s the experience of years spent getting to know the market and understanding the rules and regulations that helps them develop a keen eye for the pitfalls and possibilities of homebuying. With a buyer’s agent by your side, you’ve got an expert in your corner helping you find the right home at the right price.
Agents give you access to information, people, and properties
On real estate apps you may see the acronym MLS. It’s short for Multiple Listing Service and it’s the database of available listings that licensed real estate agents have access to. Real estate apps draw most of their data from the MLS, but the details that are hidden from the public are also crucial to help agents do their jobs effectively. We’re talking about the seller’s contact information, access codes to gated communities with available properties, showing instructions, and the amount of the buyer’s agent commission. When you have an agent, you have access to this information plus the agent’s network of realtors, clients, and business contacts. This means they hear about off-market listings (also known as pocket listings or quiet listings) which are homes that are for sale but are not listed on the MLS. If you’re looking to buy in a competitive market, finding out about a home before everyone else can give you the jump on homebuyers with deeper pockets.
Buying a home involves a surprisingly large number of people—it may look like there’s just the buyer's agent, the seller's agent, the seller, and the lender. But there’s also escrow, the title company, third-party experts such as home inspectors, and insurance agents, plus a number of people behind the scenes at your lender working to put the mortgage together. That’s not including an attorney which may be necessary in some states. A real estate agent can recommend trusted professionals for each of these roles and will liaise with everyone involved to keep the house hunt and sale going smoothly.
Good real estate agents also have deep knowledge about the neighborhood. They don’t just know about the atmosphere of the streets, shops, and amenities that you can access. They can also give you a sense of the school districts, and they’ll know about upcoming projects that will impact your new home i.e. planned shopping centers, public services, and neighborhood construction. Agents know which areas are primed to go up in value and which neighborhoods to stay away from. If you’re looking at a fixer-upper, they can also give you advice on the kinds of approvals you’ll need and rough timeframes and costs to get renovations done.
Agents know the ins and outs of homebuying so you don’t have to
When you first start looking for homes, having a buyer’s agent can feel a little like having a personal assistant. They’ll ask questions to find out the kind of home you’re after, they’ll put a list of available properties together, and arrange and accompany you to showing appointments for all the homes you’re interested in. That’s just for starters. The real estate industry is rife with jargon, local phrases, local rules, and sadly experience from one part of the country, may not apply to the next county over. A good real estate agent knows all the lingo, local regulations, exactly what to ask the seller’s agent, and what disclosures you should get. From house-hunting to closing, realtors have been through it all hundreds of times before so they know what to expect and common speed bumps you may come up against. In many cases, they’ll even advocate for you with the lender to keep your mortgage application on track to close.
Agents are born negotiators
Perhaps ‘born’ is an exaggeration, but their livelihood comes down to getting the deal and they’ve got the experience to do it. A good real estate agent is a relationship builder who’s able to get information from the seller’s agent to help in the negotiation. They know the prices for comparable properties homes that sold recently (in many cases their brokerage or MLS has software that can give them a competitive market analysis in a snap) and their experience helps them gauge what price a home is likely to sell for. And most importantly, they’ll know how to write up an ironclad offer on a home and what contingencies would be appropriate. Contingencies are conditions that need to be met before the sale goes through. If any issues arise during the home inspection, they’ll go back to the negotiating table to get repairs made or concessions given. Best of all, when it comes to negotiating, they’ll stick to the numbers in your comfort zone and keep a cool head in what can be an emotional rollercoaster for many homebuyers.
When you might decide to go it alone
There are situations when it may make sense to consider buying without a real estate agent. However, this doesn’t mean you should avoid using lawyers and title companies—buying a home is costly so you need to make sure your rights (and wallet) are protected. And in some states lawyers are required. But if you do find yourself in one of the situations below, take some time to read the section on how to buy without a real estate agent so you've got all your bases covered.
You’re a real estate agent yourself
Obviously. If you’re licensed as a real estate agent, previously worked as a real estate agent, or are working with a relative who’s a real estate agent then you’ve got all the skills and the experience you need. The question is, do you want to take the time to do it all yourself when you can have another agent do all the legwork.
You’ve bought lots of other homes or properties
If buying and selling property is kind of your thing, then you’ve more experience than most people. There’s a good chance you already have a relationship with a real estate agent who can give you some pointers if you need them.
You have a direct connection to the seller
If you’re buying a home from a relative or a neighbor, this would be considered a direct connection. You don’t need to do any of the house hunting and you should already know the area deeply so this could be a good opportunity for you and the seller to avoid paying any real estate agent’s commission. This is when you should be especially diligent about consulting a lawyer, conducting a title search, and making sure all the paperwork is completed and filed correctly. With such a large exchange of money involved you want to take care that nothing sours the relationship. Don’t skip the home inspection and make sure your lawyer includes contingencies in the purchase contract to cover any repairs that may be needed. It’s no good to discover you’ve bought a money pit with no legal recourse, it’s even worse when that money pit came from someone you know.
You’re buying a new construction home
About 6% of homebuyers bought directly from a builder or builder’s agent in 2020. An interesting fact about new construction homes is that just because they’re new, doesn’t mean they won’t need repairs. As the first person to live in the home, you’ll have a front-row seat to any builder errors and flaws, so make sure to get the home inspected and ensure a lawyer looks over the contracts.
Neither you nor the seller want to pay your agent’s commission
While forgoing a buyer’s agent could seem like a money saver, if the home you’re interested in buying is For Sale By Owner (FSBO) there may be a serious problem with the home that the owner is trying to avoid disclosing to an agent. A seller who’s not using a listing agent and is reluctant to pay commission for a buyer’s agent could be a red flag. This is a situation where an inspection is imperative, and you’ll also want a good lawyer to make sure you’re protected in all kinds of worst-case scenarios.
How to buy a house without a realtor
Now you know what you’ll be missing without an agent and when you might decide not to use one, so let’s look at how to go about buying a home if you do decide not to use a realtor. Even without a real estate agent, you really can’t do it all yourself. You’ll need to prepare your homebuying team and do your due diligence to ensure everything goes according to plan.
1. Apply for a mortgage
You need to know how much you’ll be approved for so you know which homes will likely be within budget. Keep in mind that if the area you’re interested in has a competitive market, homes will most likely go over list price. A pre-approval from Better Mortgage will give you an idea of how much home you can buy in as little as 3 minutes.
2. Research the neighborhood and homes you like
Look beyond the amenities you’re interested in using now and dig deep into what’s planned for the area. Vacant land, new roads and utility extensions, and/or new corporate neighbors are red flags indicating that the quiet area you’re hoping to call home may not stay that way.
3. Research comparable homes, sales, and the market
Comparable homes that were recently sold, known in real estate as comps, are how real estate agents get a feel for the realistic price for a home. How long homes were on the market and whether homes are selling for above or below list price will help you gauge the level of competition in the area, which in turn will help you decide when and how high/low to make your first offer.
4. When you like a home, ask for the seller’s disclosure
Sellers must disclose known issues with a home, remodeling or repairs, and a whole laundry list of items that varies from state to state. Common disclosures include deaths in the home, neighborhood nuisances, hazards (including asbestos), Homeowners Association information, water damage, and items the seller may be taking with them. That said, if the state doesn’t legally require a seller to disclose something, chances are they won’t. If you live in a state that takes this ‘buyer beware’ approach, you may want to ask more direct questions about areas of concern. Most states require sellers to answer directly and honestly.
5. Hire a lawyer, make an offer, negotiate, then renegotiate
It’s important to remember that once your offer is accepted and both parties have signed, your offer letter is a legally binding contract. For this reason, it’s important that you get the legalities right the first time. Even if you’re not represented by an agent, it’s helpful to have a real estate attorney look over the documentation to make sure contingencies are covered. When it comes to the dollar amount of the offer, this is where your research on comparable homes and the market comes in.
For your finances and negotiation leverage, it’s wise to start with an offer lower than the maximum you’ve been approved for. Have a lawyer review the offer before you share it with the seller. You’ll need to include details such as the full address of the property, your full legal name, and the names of anyone else who’s buying the home with you, and of course the offer amount. Contingencies are important to include as this is where your lawyer can save you time and money in the long run. (An experienced lawyer will make sure that the purchase and sale agreement has language incorporated to protect your interests.) You should also include seller concessions you’re requesting, a copy of your pre-approval letter, the date you expect to close, the date you anticipate moving in, a deadline to respond to your offer, and any additional items you want to be included in the sale (such as appliances or window dressings).
In most cases, you’ll be negotiating with the seller’s agent. In most states going without a buyer’s agent means the seller’s agent will take their own commission plus the commission that would’ve been intended for the buyer’s agent—this is called dual agency. Dual agency could be a problem because the seller’s agent has an obvious conflict of interest: the higher the sales price, the more commission for the seller’s agent. Dual agency is illegal in some states, and other states have varying rules regarding dual agency disclosure. As a buyer, this is time for you to beware.
If all goes well, the seller/seller’s agent may be willing to reduce the purchase price because they know commission won’t be paid to a buyer's agent. Expect there to be some back and forth on the price. Once an offer is accepted, you’ll likely need to prepare a check or wire transfer for an earnest money deposit.
6. Secure your financing, and hire a home inspector
When you and the seller agree on the purchase price, it’s time to lock in an interest rate and begin the mortgage application process in earnest. To make the process faster and smoother it helps to get your docs together as soon as possible and be ready for more document requests. In the final days before your loan is approved. In the process of reviewing your paperwork in detail, it’s common that additional questions will come up and the underwriter will need documents to verify the information you’ve provided.
While lenders typically require a home appraisal, they’re less concerned about the home inspection, but that doesn’t mean you should be. A home inspection can uncover minor and major defects that you can use as a negotiating tool and also give you the information you need to walk away if you need to. A good home inspector will evaluate the interior and exterior parts of the home, including but not limited to electrical, plumbing, roofing, HVAC, and the all-important building foundation.
A home inspection will typically uncover some issues, so this is the time to ask for repairs, additional price reductions, or allowances to remedy any issues that did come up. If you’re unhappy with the result of the home inspection, in most cases you’ll have the option to walk away from the deal within 7 days. Once you and the seller reach an agreement, you can remove the contingencies and prepare for the next step, closing.
7. Review the closing documents, ask questions and get ready to close.
You’ll receive the closing disclosure three days before you’ll close. Your attorney will help review the closing package with you and advise on what your next steps will be. You’ll most likely need to work with a title company, and maybe an escrow company. The people you’ll need to work with vary from state to state. Know what to expect and learn about the closing process, how to prepare, and who will be there and you’ll have the keys to your home in no time.
Connect with a Better Real Estate agent to discuss your options
Buying a home without a buyer's agent is possible and in some cases it’s preferable. However, for most homebuyers, it’s advisable to make the purchase with a buyer's real estate by your side. That’s why Better Mortgage and Better Real Estate offer other ways to help homebuyers save on their new homes. A loan with Better Mortgage saves the average new homebuyer $8,200 over the life of the loan1 as you’ll never pay any application fees, origination fees, or underwriting fees. Connect with a Better Real Estate Agent and learn how you can save up to 1% of the purchase price2 of your new home. That could be $4,000 on a $400k home.
By working with a Better Real Estate Agent and funding with Better Mortgage, not only could you save up to 1% of your new home's purchase price3, you could also close up to 10 days faster than the industry average4.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
1 See Better Mortgage claims.
4See Better Mortgage claims.