Homebuying Without an Agent
Risks and Tips Before You Buy
Most people would not consider purchasing a home without an agent. In fact, just 11% of buyers who purchased homes last year did so without a real estate agent or broker.
Although many for-sale-by-owner (FSBO) sellers will pay a commission to a buyer's agent, some will not. Some FSBOs want to sell without any real estate agent involvement in the transaction. In the industry, these types of sellers are considered unrepresented.
Homebuying From an Unrepresented Seller
An unrepresented seller might decide against hiring a real estate agent so that they can save money by not having to pay a real estate commission. But, in some cases, this approach can backfire, especially when it can be the case that hiring a competent agent with effective negotiation skills can end up saving you money.
Agents in the industry see a lot of FSBOs underprice, which is favorable for the buyer. It's also common for a homebuyer to wonder if the seller is hiding a defect or some other problem because they don't want an agent involved, which is also possible.
Beware if you are trying to buy a home directly from an unrepresented seller. The seller may not know what they are doing or might be taking advantage of you; either way, it could be problematic.
Tips for Homebuying Without an Agent
Before proceeding to buy a home directly from an owner, ask the seller if you can let your agent represent you. The seller might be willing to pay a commission for a buyer's agent, which means your agent costs you nothing. If not, here's what you do:
- Find out how much comparable homes sold for before making an offer. The prices of active listings are worthless and not indicative of value.
- Build contingencies into your offer. You need a way to cancel the contract if everything is not to your satisfaction without risking your earnest money deposit.
- Get a home inspection. Don't hire a home inspector from a list, ask around for a recommendation.
- Hire a real estate lawyer. Real estate advice is not expensive. Expect to pay several hundred dollars for a lawyer to review your contract and offer advice.
- Make sure you buy or the seller pays for a title insurance policy. You should get a clean title, free from liens and encumbrances.
Buying a home directly from an owner is risky. Use a buyer's representative to protect yourself from costly mistakes. Also, do your own thorough research to avoid any unpleasant surprises.
Risks of Homebuying Without an Agent
Note that some homebuyers, especially first-time homebuyers, are wary of real estate agents. They think that real estate agents care only about closing the deal and not about them. A small percentage of real estate agents are like that, but the larger percentage care deeply about providing quality service and treating clients honestly and ethically.
If you opt to buy a home without an agent:
- You'll have to do your own negotiation. Negotiating an offer is very different than, say, buying a car, because the risks in buying a home far exceed price considerations.
- You won't have a neighborhood specialist on which to rely. Agents who sell in certain areas know facts about that neighborhood that a seller might not disclose.
- You might not receive all of the seller disclosures to which you are legally entitled. Sellers might not purposely withhold a disclosure, but you likely will not know what to request.
- You might pay more for closing costs than is customary in your area. Sellers might make you pay for everything, and you won't know the difference.
- You'll be left to decipher piles of paperwork filled with contract language. An agent can explain the difference between a disclosure and an agreement, and help you to understand what you sign.
- You'll find your own mortgage. You won't know if your lender has a reputation for closing on time or whether you're getting the best rate and terms.
- You'll be on your own to determine the types of inspections you should perform. Most buyers don't know how to spot potential problems such as dry rot or wet basements or know how to determine if a sewer inspection is necessary.
The Bottom Line
Before buying a home directly from an owner, you should consider ways to protect yourself from risks that can be costly. Using a buyer's agent and hiring a real estate lawyer to answer questions and review contracts can minimize risk. Also, do your own research to learn about home values, schools, and transportation in the area.
National Association of Realtors®. "Highlights From the Profile of Home Buyers and Sellers." Accessed March 17, 2020.
Oregon Association of Realtors. "Dealing with FSBOs and MLS Only or Limited Service Listings." Accessed March 17, 2020.
Collateral Analytics. "Saving Real Estate Commissions at Any Price." Accessed March 17, 2020.
Real Estate Buyer's Agent Council of the National Association of Realtors. "5 Need-to-Knows Before Buying a FSBO House." Accessed March 17, 2020.
De Bruin Law Firm, "How Much Does a Real Estate Closing Attorney Cost?" Accessed March 17, 2020.
Consumer Financial Protection Bureau. "What Is Owner's Title Insurance?" Accessed March 17, 2020.
Consumer Financial Protection Bureau. "Schedule a Home Inspection." Accessed March 17, 2020.