Your car has a blown engine, and needs a new one. Can you replace it on your own?
Of course you can. But that doesn’t mean that you should.
If you’re an experienced auto mechanic, it might make sense to do the work yourself. But if you’re just a weekend tinkerer, or if you don’t know the difference between a Chevy and a Tesla, it’s probably best to rely on an expert to do the work. Otherwise, the damage you could do might end up costing a lot more to repair than you’d be saving in labor costs.
Here’s the lesson, and you undoubtedly know what we’re going to say next: of course you can buy a house without a realtor, but that doesn’t mean that you should.
Home sales are complicated. And real estate agents (or realtors, who are simply agents who belong to a specific industry group) have knowledge, contacts and experience that most of us don’t. After all, helping people buy or sell houses is what they do every day.
They know the market and its pricing trends, they’re experienced in negotiation and the required paperwork, they’re familiar with the best outside professionals (inspectors and title companies, for example), and they often have inside knowledge about houses that are about to hit the market or aren’t listed on MLS. Many times, they know the seller’s agent personally and can find out if the listing price is realistic, or exactly what it will take to get a deal done.
Here’s what may be the most important reason for using a good real estate agent. The buyer usually doesn’t pay for their real estate agent; the seller does. In other words, using a realtor or buyer’s agent doesn’t cost you anything, but pays huge dividends – especially if you’re a first-time home buyer who’s completely new to the home buying process.
Even so, some people want to do it themselves. Here’s a look at when that may make sense, and a step-by-step guide to buying a house without a realtor.
When You May Want To Go It Alone
There are a few cases when home buying without a real estate agent could make sense.
- You’re a realtor or former realtor, or have a close friend or relative who is a realtor.
- You’re buying the house from a friend or relative who you completely trust.
- You’ve bought lots of homes or other properties, and know exactly what to do and how to do it.
- The seller doesn’t want to pay your agent’s commission – and neither do you. This happens most commonly when the house is a FSBO (For Sale By Owner), because the seller isn’t paying a listing agent commission for his side of the sale either. (Caution: some FSBOs don’t use realtors because the seller doesn’t want to disclose a serious problem with the house to an agent, who would then have to disclose it to prospective home buyers. Proceed at your own risk.)
In that last case, the many advantages of using a real estate agent may make it worth your while to swallow hard and pay a buyer’s agent on your own. But if you’re still determined to buy a house without a realtor, here are the steps to take. If you’re looking for a comprehensive checklist for buying a house, you can find it here.)
How To Buy a House Without a Realtor
Before anything else, you should narrow down the list of communities or neighborhoods in which you’d like to live, do a complete budget to figure out your how much house you can afford, check your credit score to get a good idea if you’ll qualify for a mortgage, and do some general research on home prices in your target area (Zillow, MLS or other real estate websites are fine for that). Armed with that initial information, you can move forward.
- Get a Mortgage Pre-Approval: This not only saves time during the mortgage approval process, but shows the seller and her agent that you’re a serious and qualified buyer. It also confirms how much you can afford to spend on a house, because you’ll know approximately how large a mortgage loan you can obtain and what interest rate you can expect to pay.
- Hire a Real Estate Attorney: In some states you’re not required to use a lawyer when you buy a home. It’s highly advisable, though, if you don’t have an experienced realtor who can review the mountains of paperwork required for a real estate purchase. A small legal mistake can cost you dearly. Fortunately, real estate lawyers aren’t usually as expensive as you’d think, since you only need their services a few times during the process.
- Find Your Dream House: As you house hunt, you’ll be dealing directly with sellers or their agents. Remember that neither is your “friend,” even if you have a lengthy, pleasant discussion with them at an open house. You’ll be advocating for yourself, so the more research you’ve done on the neighborhood, homes in the area and real estate in general, the better.
- Get the Seller Disclosures: By law, home sellers have to disclose structural and safety issues with a house to potential buyers. Since you’re acting as your own agent, it’s up to you to obtain that disclosure. (Disclosure laws vary by states – you should research the specific laws in your own state before going any further. At the very least, most states require lead paint disclosures, and require that the owners give truthful answers if asked direct questions.)
Home sellers generally have to disclose issues like the use of lead paint, asbestos and radon in the home, damage done from insect infestations, water and mold, and major defects in the foundation, heating and plumbing systems.
This is also a good time to ask questions about other structural or safety concerns you may have, and to find out how recently important items like the roof and furnace were replaced. You can also clarify at this time which fixtures or appliances will be staying with the home, and which might be available for inclusion in the sale or purchase.
Congrats – you’ve bought your new home.
There are three common thoughts that people have after buying a house without a realtor:
Hopefully you’re in the second or third group, meaning your home purchase went through smoothly.