Buying a House Without a Realtor
Risks to Consider and Tips Before You Buy
Most people would not consider purchasing a home without an agent. In fact, just 6% of buyers who purchased homes in the 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 involved in the transaction. In the industry, these types of sellers are considered unrepresented.
Learn more about buying a house without a realtor and how to avoid costly mistakes.
How Does Buying a House Without a Realtor Work?
Buying a house without a realtor follow the same steps that you would take with a realtor. The main difference is that you are responsible for each step yourself.
If you do decide to purchase a home without a realtor, you should still hire a lawyer. Buying a home involves complex legal and financial paperwork; you'll want to have a trusted expert advise you during that process. Hiring a real estate attorney is often less expensive than the commission paid to a realtor.
If you are buying a house without a realtor, you can make an offer on any home you would like to purchase, not just ones that are FSBO. However, that does not mean every seller will be interested in working with you.
Start by checking out your local market to find houses you want to see. You can either visit them during an open house or schedule a private viewing.
Once you find a home you want to make an offer on, you'll be responsible for the negotiating that a buyer's agent would normally handle. You'll have better luck with this if you have researched the market and have a sense for how comparable houses in the neighborhood have sold.
After you make an offer, you will need to schedule an inspection and appraisal. The inspection may impact your negotiations, while the appraisal is necessary for getting your loan approved.
A licensed agent is usually required to be present for inspections and appraisals. This can be the seller's agent if you aren't working with a realtor, but you may have to pay extra for their time.
After the inspection and appraisal, it's time to close on your house. This is when you will want a lawyer to help you review the paperwork and make sure there are no surprises.
Should You Buy a House Without a Realtor?
For some people, buying a house without a realtor could be a cost-effective choice. You may be able to buy a house without a realtor if:
- You have a lot of experience buying homes and feel comfortable handling the process and paperwork yourself.
- You're a realtor or former realtor.
- You have a close friend or relative who is a real estate agent and can advise you.
- The seller won't pay the commission for your agent (this is most likely to happen when a house is FSBO) and you don't want to pay for it yourself.
You'll increase your chances of successfully buying a house without a realtor if you have your paperwork in proper order, such as proof of finances or a pre-approval letter from a lender.
For other buyers, not working with a realtor could lead to costly mistakes. You should work with a realtor if:
- This is your first time buying a home.
- You are new to the area or are buying before you move to a new location.
- You are uncomfortable negotiating or handling financial paperwork.
- You are worried a seller may try to hide something from you during the buying process.
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 you decide to buy a home without an agent, you'll want to make sure you are prepared for the process.
Do Your Research
Find out how much comparable homes sold for before making an offer. The prices of active listings aren't always a good guide to a home's value. Talk to neighbors to learn more about the neighborhood and its quirks.
Get a home inspection. Don't hire a home inspector from a list; instead, ask around for a recommendation to find someone you can trust.
If you want sellers to take you seriously, get a mortgage prequalification or preapproval letter first. This lets the seller know a lender is ready to work with you and could put you in a better position to negotiate.
Use our mortgage payment calculator to see how much home you can afford considering your down payment and potential interest rate. Don't just assume you can comfortably handle the monthly payment on the loan amount your lender preapproves you for.
Be Ready to Negotiate
Ask around for recommendations for a good 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.
Get Title Insurance
Make sure you buy or the seller pays for a title insurance policy. You should get a clean title, free from liens and encumbrances.
Risks of Shopping Without a Realtor
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. After all, their business depends on their reputation, and often on referrals from satisfied buyers.
If you opt to buy a home without an agent, you'll need to be aware of several risks.
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.
Lack of Local Knowledge
Agents who sell in certain areas know facts about that neighborhood that a seller might not disclose. Without a realtor, you won't have a neighborhood specialist on which to rely.
You might not receive all of the seller disclosures to which you are legally entitled if you don't have a realtor asking the right questions. Sellers might not purposely withhold a disclosure, but you likely will not know what to request.
Higher Closing Costs
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 without a knowledgeable realtor advising you.
An agent can explain the difference between a disclosure and an agreement, and help you to understand what you sign. Without a realtor, you'll be left to decipher piles of paperwork filled with complicated contract language.
Lack of Lender Relationships
Realtors often have relationships with lenders, and without one, 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.
Many 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. If you don't have a realtor, you'll be on your own to determine the types of inspections you should perform.
The Bottom Line
Before buying a home without a realtor, 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 the financial risks you take when buying a home.