Most people you know that have bought a home have probably done so with the help of a REALTOR® or real estate agent. Realtors, by the way are real estate agents who belong to the National Association of Realtors, requiring them to adhere to a certain code of ethics.
But considering the commissions both draw, you might be asking yourself, “Can you buy a house without a realtor?” The answer is yes—you aren’t required to go through a professional to complete the transaction.
That said, it’s not a decision to make lightly. It can be beneficial to utilize a home affordability calculator to get a better understanding of how much house you can afford. Since buying a house is likely the biggest investment you’ll ever make, with the median price of a new home in the U.S. costing nearly $310,000 as of late 2018.
So if you make a mistake in the homebuying process, there’s a lot of money and possibly other risks on the line you may have to live with for many years to come.
And although the buyer’s agent isn’t liable for home defects, they may be able to help you identify and negotiate or avoid them. That’s one of the reasons why only about 10% to 20% of home sales each year take place without an agent involved. In fact, more buyers are using agents than ever before.
However, if you do want to buy a home on your own, there are a growing array of resources out there that can help (which we’ll get to later in this post). Before you take the leap, doing the research to familiarize yourself with some of the pros and cons might help you figure out whether this path is right for your situation.
What Agents Do
Before you decide whether or not to forgo a Realtor or real estate agent, it can be a good idea to brush up on what they actually do. Both of these professionals are licensed to help clients buy and sell real estate.
Realtors, as mentioned, have to follow an NAR ethics code which includes putting their client’s interests first.
Unlike many other professionals, most real estate agents and realtors don’t bill by the hour or job; instead, they only get paid if you actually buy or sell the property.
Among the work that real estate agents do for buyers is actively looking for property listings that fit their goals, checking out listings in person, writing offers and counteroffers, being present for inspections, helping you negotiate with the seller, and troubleshooting any roadblocks that come up.
The Pros of Buying a House without an Agent
The main appeal of taking the DIY approach to a home purchase is keeping costs down. In a U.S. home sale, the seller’s and buyer’s agents usually split a commission equal to about about 5 to 6% of the property price.
In many markets, that can add up. For example, in San Francisco, where the median home price was $1.6 million in 2018, that’s a commission of commission of $96,000 ! The seller is typically responsiblefor this fee paid at closing from sale proceeds, unless you agree with the seller and their agent on an alternative arrangement.
Even though you’re not directly responsible for this expense, sellers may increase the selling price of the home in order to cover the cost of commission. So keeping agents out of the mix could reduce your overall costs.
Keep in mind that most home purchases involve a property appraisal which ensures that the purchase price is in line with the market value of the property.
Another potential reason to go it alone is that you now have access to some of the same information that realtors do. Historically, agents had lots of insider tidbits about listings.
Now, you can instantly find out about new properties and neighborhood demographics with the click of a button. That means taking the buying process into your own hands is considered by some as increasingly feasible depending upon certain factors such as the complexity of the transaction or property.
And since no one knows what you are looking for as well as you do, the search process can sometimes be more efficient, One situation where it might make sense to eschew an agent is if a friend or relative is selling you the property.
Although risks may still be involved, the transaction may be more straightforward if you know the seller. You still want to make sure you and the seller are clear on the price, closing date, what furniture or fixtures will be included, contingencies, and more.
It is recommended that a buyer review and approve home inspections and obtain full loan approval in writing before lifting certain contingencies whether you are using an agent or not. And since laws about contingencies can vary state to state, it’s important to review contingency contracts with a professional before agreeing to release them.
If it is known that a contingency date cannot be met, or another material change takes place after the contract is written, such as a seller credit for closing costs, a contract addendum fully executed by all parties outlining the change is usually obtained.
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The Cons of Going it Alone
Not hiring a real estate agent or realtor to help you with your home search comes with disadvantages and risks. For one, you have to be constantly on the ball, keeping a lookout for properties and arranging a time with the seller to visiting them.
This process can get exhausting and time consuming, and if you aren’t attentive, you could let great homes slip by, or make the whole process take longer than it might have with a real estate agent. You’ll also be on the hook for all the necessary details that come with the transaction, including filling out paperwork for contracts, offers, and inspections.
Without an agent, you’re also on your own when it comes to understanding the home-buying process and advocating for yourself.
Buyers report that the top benefits of using an agent include that they help explain and execute the process such as helping to determine the correct bid price and terms, watching the contract contingency dates, and knowing the ins-and-outs of the contract, which may be necessary if terms or dates need to be changed. Additionally, agents are also experienced to help point to hidden flaws in the property or transaction.
If you don’t have a real estate agent in your corner to help research the proper bid price, you may risk paying more than you need to on the home—which may work out to more money spent, even with the cost of commission. although this is rare, you may not receive all the disclosures that you’re entitled to, or without someone to explain the jargon, you may not necessarily understand everything you should about the purchase process, or the home and neighborhood itself.
An agent also has access to information that’s not necessarily online thanks to their connections with other real estate agents, inspectors, etc. Plus, there’s no substitute for experience.
Most agents operate under a broker with multiple years of experience who oversee and consult on various transactions.
It could take you a lot of effort to figure out what a realtor has learned through years on the job and required ongoing education, and that learning curve may not be worth your time, especially if the buyers agent commission is covered by the seller with no apparent bump in the purchase price based on comparable listings.
So You Decided to Go it Alone: Now What?
If you’re committed to going it alone, start by doing a lot of research in order to arm yourself with information. Check out our home buyer’s guide to learn about the home-buying process and everything you should be prepared for. You want to make sure you find the neighborhoods that meet your criteria, and be aware of how much homes in that area have sold for recently.
Researching the area you are interested in puts you in an informed place to help evaluate properties that go on the market for bid range and other aspects.
Once you find a home you’re interested in, it’s recommended that you hire a home inspector. If you choose one from a list the seller or agent provides, check the company out online, ask for references or r find one that comes recommended from a friend or family member.
Don’t forget to include inspection contingencies in the offer, so that you can cancel the contract if something goes wrong without losing your deposit.
Sellers will likely include a loan contingency. It is recommended that a buyer obtain full loan approval in writing before lifting loan contingency in the purchase contract.
It is also recommended that the buyer obtain Owners Title Insurance.
This can be a cost that is sometimes covered by the seller but protects the buyer against title defects such as mechanics liens and other after closing. It’s often a good idea to hire a real estate lawyer to prepare documents and look over your contract before you sign it.
This usually only costs a flat fee of several hundred dollars , but could pay off big in making sure your contract is airtight, that paperwork is filed correctly, and that your interests are protected.
An increasing number of technology startups have been cropping up that can also aid you in your home search. Open Listings is a free platform that can help you find out about properties and open houses that meet your criteria.
If you end up purchasing one, the company will distribute half the commission to you. Door allows you to buy a home with licensed agents that operate on salary rather can commission. Houzeo is another website that can help unrepresented buyers connect with sellers that are also not working with an agent.
Navigating home purchases online without an agent is likely to become increasingly popular, considering that millennials—who are more comfortable with using technology and making expensive purchases online—now make up the largest share of homebuyers.
Financing Your Dream Home
Whether or not you opt to seek help from an agent, you may need to apply for a mortgage loan to purchase a home. One benefit of having an agent is that he or she may recommend lenders that they think can close more quickly or may offer more competitive rates and terms.
But you don’t need to rely solely on an agent to find good lending options.
Whether you are using an agent or taking charge of the home buying process yourself, online lenders may be an appealing option for finding a mortgage.
With a SoFi home loan, you may be eligible for a mortgage with as little as 10% down, and with our Jumbo loan options, you won’t be on the hook for expensive private mortgage insurance.
SoFi has an easy online application and help is just a call away when you need it. SoFi also offers member benefits such as rate discounts on our personal or student loans and more.In the market for a new home?
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