Buying a Home without a Realtor
If you are looking at buying a home without a Realtor, there are four major steps you should take to protect yourself and help make your transaction a success.
About 10 to 15% of all home sales in the United States are completed directly between buyer and seller without the aid of a Realtor. While it is certainly possible to buy or sell a home without a Realtor, our overall recommendation is to work with a buyer's broker if possible.
If you are looking to purchase a home that is actually listed for sale with a Realtor, then you should strongly consider hiring a Realtor as a buyer's broker to assist you with the transaction. When a home is listed for sale with one real estate agency, that company shares real estate commissions paid by the seller with buyer's brokers. Hiring the services of a buyer's agent will not cost you any more money than if you represent yourself in the transaction.
Even if you are looking at a home that is not listed with a Realtor, you may be able to work with a buyer's broker. In many cases, a buyer's broker will negotiate a commission to be paid by the seller. While this may seem like it may add to the cost of your home purchase, in most cases buyers save money because your buyer's broker can negotiate a better deal for you than you could on your own.
For situations where the home you want to buy is not listed with a Realtor and you choose to forego the services of a buyer's broker, there are three critical steps that you should take to make sure that your transaction goes as smoothly as possible:
- Make sure you are not pursuing an over priced turkey. A buyer's broker will be able to provide you with comparable sales and the current market value, but without their help you are on your own to determine actual current value. Getting a realistic estimate of current market value is important to help put your transaction together. Many FSBOs do not have a realistic view of their property's value because they have not had a Realtor help them establish current market value. Even if you want to buy the home at a price higher than market value, your mortgage lender will only finance your purchase based on the actual appraised value, not your purchase price.
- Hire an attorney at the beginning of the process. When Realtors are involved, they handle negotiations between the buyer and seller and usually have standard contracts that they have the buyer and seller sign when an agreement is reached. But without Realtors, neither the buyer nor the seller is experienced with negotiating the many details of a real estate sales contract. For example, how much for a down payment, which party holds escrow deposits, mortgage contingency dates and closing dates are all subject to negotiation. Using the services of an attorney can help you and the seller come to an overall agreement after you have agreed on the price.
- Work closely with your loan officer Even though you may not have a Realtor assisting you with your home purchase, you will most likely have a loan officer and home inspector to assist you and provide you with advice about your transaction. Take advantage of their experience to guide you through the home-buying process.