Buying a Home Without an Agent

young couple looking at home with a real estate agent
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Some may wonder whether it's wise to engage in the home buying process without an agent. While it would be nice to say that all agents are ethical, honest, experienced, and care about their clients—especially first-time homebuyers—that would not be true. It might be true about the majority of the agents in the business, but it's not true about every single agent.

There are agents whose sole purpose is to make as much money as they possibly can, as quickly as possible, with little regard for the buyers they stomp on along the way. The problem is some of these agents look and act just like the ethical agents, so it's hard to tell them apart. This confusion can also make some first-time home buyers overly suspicious. They wonder if they would be better off without an agent. They think maybe they can buy their first-time home by themselves and do a better job. This is when home buying without an agent begins to look like a popular option.

However, before you go it alone, keep reading for some considerations that could impact your decision.

Why You Probably Want a Buyer's Agent

Home buying without an agent is not necessarily your best option. For starters, first-time home buyers have generally engaged in some other business apart from real estate, so they tend to know very little about real estate. Most experienced real estate agents are in the business full-time, so they acquire knowledge every single day.

The business of buying a home is complicated; it requires expert negotiations and familiarity with the extensive paperwork required. There are often small problems with initial negotiations and paperwork that, if left undetected, can place your entire transaction into jeopardy.

My advice for first-time homebuyers is to hire a buyer's agent to work for you. In almost every instance, the seller pays the fee for your buyer's agent, so it costs you nothing extra.

Make sure you hire an experienced agent. Agents who are new to the business won't like this advice, but a problem with the real estate industry is that agents make their mistakes as they learn. Don't be a guinea pig.

Hiring the Seller's Agent to Buy a Home

There's a little-known thing called a "variable commission," which makes some buyers think they will get a better deal by going directly to the listing agent. This is how it works. Say the real estate commission is eight apples, and the listing agent is willing to split that commission with a buyer's agent, so each will get four apples.

In a variable commission arrangement, the listing agent might have a side deal with the seller or make a side deal upon offer presentation. This deal might be if the listing agent happens to also represent the buyer, the listing agent might reduce the commission from eight apples to six apples, which would save the seller two apples.

The National Association of REALTORS's code of ethics states that an agent representing a buyer or renter must disclose that they're receiving a variable commission before the buyer or renter makes an offer. However, even with the disclosure, there may be downsides to this strategy. For one, realize the seller will not share the two apples they saved with you. The only way for the buyer to see those savings is to reduce the sales price by a comparable amount.

Some people believe the listing agent has more incentive to push through an offer when the agent represents both parties in a dual agency capacity, but that behavior may be unethical. If a listing agent is representing the seller, how can they have the buyer's best interests at heart?

A buyer's agent, if push comes to shove, generally has the ability to match a listing agent's variable commission rate. Therefore, don't let an attractive variable commission rate tempt you too much.

A Buyer's Agent's Fiduciary Duty

A major benefit to hiring a buyer's agent is that they have a fiduciary responsibility—a legal obligation to put your concerns first. Specifically, this duty includes a requirement of loyalty to your best interest, confidentiality with your information, and disclosure of any important property information the agent might have. For example, a buyer's agent may:

  • Negotiate sales price, terms, or conditions on your behalf
  • Anticipate problems and proactively address them
  • Tell you the truth and disclose any defects they notice
  • Provide you with seller disclosures and every piece of documentation to which you are legally entitled

The Bottom Line

After you've bought a few homes and are used to the process, you might believe you do not need to hire your own agent to buy another home. If you know the process and the risks involved in going at it alone, then it may turn out fine. However, something unexpected could happen—even to experienced buyers. For a first-time homebuyer, these risks are greater, so it's almost certainly a good idea to hire a buyer's agent.

Besides, you'll find that agents who specialize in working with first-time homebuyers tend to derive a great deal of personal satisfaction in providing superior customer service and making their buyers' dreams come true. Those are good qualities in a buyer's agent.