Buying a home is a major life decision. But that doesn't mean you can't do it on your own with a little bit of research and planning. The process of homebuying does not require hiring a Realtor, although, in many situations it might make sense to do so. This article, written by a licensed broker, explains the pros and cons of buying a home without a real estate agent and also provides some tips for solo home buying.
Benefits of buying on your own, without an agent
Purchasing a home on your own is definitely doable. The main advantages include commissions savings on the purchase, control of the timeline and transparency into the process. We'll explore these factors below.
Commission savings
The major downside of hiring an agent is the cost. Yes, that's right, the cost! Many consumers believe that it is "free" to hire a Realtor - however, that is not true. In fact, in 2020, the US Department of Justice ruled that real estate brokers can not use the term "free" when describing their services to prospective home buyers. That's because the buyer agent does get paid a commission at the time of closing.
As the homebuyer, you do not necessarily write a check to your agent once you start shopping for properties. However, there are embedded agent commissions that are baked into your home purchase price when you hire a Realtor to purchase a home.
By not retaining a buyer agent, you essentially make your offer more competitive and give yourself a higher likelihood of the seller accepting your offer. A consumer could theoretically purchase a home for 3% less than the advertised asking price if the homebuyer negotiated directly with the seller, instead of hiring a buyer agent.
For example, you could make an offer of $291,000 on a $300,000 home and this would be equivalent to a $300,000 offer from a 2nd buyer who is using an agent. This is because a $291,000 offer with no buyer agent commission is equal to a $300,000 with a 3% buyer agent commission. In other words, the net proceeds would be the same to the seller in either case. Check out this resource to learn more about how buyer agent commissions work.
Control and transparency
One of the most difficult aspects of buying a home is that consumer home buyers lack control and transparency into what's happening with their offer, their inspection, their appraisal, their mortgage or their closing. This is because the agent controls the flow of information for most of these steps.
When you represent yourself and decline to hire an agent, you now become the primary point of contact for showings, offers (and counter-offers), inspection findings, closing date, etc. To many consumers, this is an empowering feeling because now there is no intermediary and you control the process from start to finish.
Not getting ignored
One issue that can frustrate many homebuyers is lack of attention from their real estate agent, waiting for them to respond or occasionally even getting ignored by their agent.
Keep in mind that a busy agent may be handling multiple clients at the same time. Agents need to juggle multiple clients to earn a decent income. The downside is that you may not be their highest priority, especially if they have clients that are working with other buyers or sellers that have more expensive properties. If your agent also works with a lot of home sellers, they'll have to juggle listings as well, which can be time-consuming and distract from giving you their complete attention.
Risks of going solo, without an agent
There are several advantages when it comes to hiring real estate agent. First off, Realtors are licensed and are bound by state laws. Experienced agents are very familiar with the language and terms of the purchase contract because they've used in many, many times. A good agent may help you structure an offer in a more competitive way that could help you win in a competitive, multiple offer situation.
Access to resources, contractors and other pros
Agents can also provide access to resources that may improve your overall experience. For example, an agent may have lenders, inspectors, contractors and attorneys in their contact list. This means if that you won't have to find a home inspector or a a closing attorney (or title company) on your own.
Experienced agents also have access to local loan officers that may be helpful in securing a mortgage for a unique purchase situation like a jumbo loan or a bridge loan. For conventional, 30-year mortgages you'll likely be find shopping online for rates.
Negotiation experience
Just like with any other major purchase transaction, a good negotiator is a must. Generally, an experienced real estate agent to know the market and can use this data to help you get a better deal on the house. They are aware of the latest market trends and how market conditions might impact your offer price on a home. Sometimes your buyer agent can have a candid pricing conversation with the listing agent - a conversation that may be more difficult for you to navigate on with the listing agent by yourself.
Knowledge of home repair findings
Once you go under contract and perform the inspection, you'll likely find a handful of items that need to be addressed before closing. Assuming you are not purchasing the home "as-is", you'll want to know if these items are serious enough to necessitate repairs or monetary concessions in lieu of repairs. A good agent will be able to get these items fixed by the seller or have the seller agree to provide a cash contribution towards repairs at the time of closing.
Conclusion: To hire or not to hire?
The answer depends on your knowledge of the local market, your financial resources, your ability to do independent research and also your level of comfort managing a complex transaction. If you’re looking for hand-holding, guidance and step-by-step management of the transaction, then hiring an agent may be your best choice.
If you want some degree of guidance but don't want to sacrifice the embedded costs of using an agent, consider SimpleShowing's home buyer refund program - which credits buyers with up to half of the agent commission towards closing costs. (1.5% or about $5,000 on average).