Is it easy for a first time homebuyer to buy a house without a realtor? Or is this completely risky and stupid? What kind of problems could occur? And also, how much would this save for a house around $250-300k ? What are typical realtor fees? And do people ever just go without a realtor but then get a lawyer to overlook the paperwork prior to signing? If so, how much does that cost and is it cheaper or more expensive?
by the way – I’m mainly referring to For Sale By Owner places … so the seller would NOT have an agent.
I had a great answer, but then you added the details about for sale by owner. That changes things.
This is not like buying a car for sale by owner – there are a lot more rules, things you have to pay for to make sure you’re not getting scammed. What kind of problems could occur? Some guy could take your money, pretend to transfer the title to you, let you move in, and then sell the house again (this time legally) and you would have no legal right to the house.
I have no idea whether going with a lawyer would be cheaper/better. You could always call one and ask what the fees would be or if they charge a percentage of the sale. That might make up your mind for you. The thing with a lawyer – they’ll probably take their fee up front, while a realtor will build it into the cost of your mortgage so you won’t need as much money up front.
April 17th, 2010 at 5:10 am
In my area realtors charge between 6 & 7% of the selling price, which is paid by the seller. You would have to have an attorney involved to make sure all your rights are protected. Using a realtor or not, there is no cost difference as the seller pays the realtor costs. I do not know what the other fees invoved would be.
References :
April 17th, 2010 at 5:17 am
Easy and not at all stupid. The realtor works for the seller, not the buyer. And they charge the seller a lot for doing that but their work is simply marketing the property. You and the seller could instead share that saving.
If you and the buyer are already in contact then the realtors work is done. The remaining work is for the surveyor, lawyer and bank.
References :
April 17th, 2010 at 5:26 am
Yes and yes.
It’s easy. And it’s stupid.
You need your own representation. The agent representing the seller is doing just that–representing the seller. You need an agent to help you develop a strategy, determine a price, construct an offer, and so on.
How much would it save by not using a Realtor to buy a house? Exactly $0. Zero. Nada. Zilch. Nothing. The commission is paid by the seller. The seller signs a listing agreement with his/her agent. The commission specified there typically is divided between the listing agent and the agent representing the buyer. So, whether you use an agent or not, the seller has already agreed to pay his/her agent the commission. You save nothing. (By the way, Graham–above–is incorrect. There’s no way to "save" on the Realtor’s commission. You as the buyer have no right or ability to interfere in the contract signed by the seller and the seller’s agent. Whether the seller agreed to pay his agent 3%, 6%, or 9% is between the seller and the agent. And the seller owes that amount whether or not you use a Realtor.)
Typical Realtor fees? For a buyer, nothing. For a seller, it’s negotiable. Something in the range of 5%-7% is usually what happens, but it can be higher or lower.
People who attempt a real estate transaction without a Realtor typically are sellers. In that case, at least in theory, they can save the commission. Usually, it doesn’t work out: About 85% of the people who start off trying to sell a home themselves end up using a Realtor or else they withdraw the house from the market. Of the remaining 15%, some do save some money. On the other hand, some of them accept a price that’s lower than what a Realtor could have gotten them.
Yes, people sometimes don’t use a Realtor and then get a lawyer to review the paperwork. But you should have a lawyer review the paperwork in any case, whether or not you use a Realtor.
The cost for legal review varies, depending on the lawyer. Probably somewhere between $500 and $1,000. It really shouldn’t cost any more–or less–whether or not a Realtor is involved.
So: Use your own Realtor when purchasing. It’ll cost you nothing. Have your Realtor make the contract contingent on legal review by a lawyer of your choice. That’ll cover all your bases.
Hope that helps.
References :
April 17th, 2010 at 5:56 am
Never buy from the seller’s agent. There are seller and buyer’s agent. Select a competent and experienced "buyer’s" agent. This agent will represent your interests. They will receive 50% of the selling agent’s commission, paid by the seller. Always use a buyer’s agent. It costs you nothing. It also provides you with legal recourse if needed. Do not listen to the rookies answers. Do not use a buyers agent that is not a top rated agent. There are a lot of real estate agents that do not have the experience that will benefit you.
References :
Builder, developer, real estate investor
April 17th, 2010 at 6:43 am
I had a great answer, but then you added the details about for sale by owner. That changes things.
This is not like buying a car for sale by owner – there are a lot more rules, things you have to pay for to make sure you’re not getting scammed. What kind of problems could occur? Some guy could take your money, pretend to transfer the title to you, let you move in, and then sell the house again (this time legally) and you would have no legal right to the house.
I have no idea whether going with a lawyer would be cheaper/better. You could always call one and ask what the fees would be or if they charge a percentage of the sale. That might make up your mind for you. The thing with a lawyer – they’ll probably take their fee up front, while a realtor will build it into the cost of your mortgage so you won’t need as much money up front.
References :
I watch HGTV. I took business law in college. That basically qualifies me as an expert in these matters.
April 17th, 2010 at 7:32 am
What if someone came up to you and said:
I want to work for you for free. I’m going to search for a home for you, drive you around town, screen houses so you don’t waste your time, and provide a researched list of home inspectors, lenders, home warranty companies, title agencies, etc, to you. I’ll even tell you which ones have done good work in the past. I’ll deal with all the paper work and work totally on your behalf. And I’ll do it for free for as long as it takes to find a home you want or until you decide you don’t want to work with me anymore. And guess what it won’t cost you a dime. Even when you find a house and decide to buy it guess what, it still won’t cost you anything. The agent is typically paid by the seller.
I’ve seen so many people have nightmare scenarios because they thought they were saving money by not using an agent. Some really heartbreaking scenes, like the home that was infested with mold (they didn’t get a home inspection), or the family that was evicted due to not buying the correct title insurance to protect against undiscovered liens (they saved a whole $250 dollars by buying the cheaper title policy). Or the buyer that was saving money because they dealt directly with the for sale by owner, only to discover they overpaid by about 20k. (hint: a good agent won’t let you over pay for a home).
Buying a home without an agent is probably about the most financially irresponsible thing anyone can do. A good agent will work with you for free and work damn hard to make sure you’re a return customer. Do your research and find a well respected professional in your area. They’ll take good care of you and make sure you don’t pay too much and that you’re protected. Be careful there are a lot of bad agents out there. Ask family, friends and coworkers for references.
I’m a seasoned real estate professional. I am a state certified real estate appraiser. I’ve worked in real estate for over 20 years and I wouldn’t buy or sale a home without an agent representing me.
References :
20 years in real estate appraisal and property management
April 17th, 2010 at 7:56 am
Do not be fooled by some of the previous answers. If you find a realtor to show you houses that are listed with a brokerage, that realtor is the SELLER’s agent as well. Technically, they are the listing broker’s sub-agent. This relationship is by law in most states. They have a legal duty to represent the seller not you. There are cases where you can hire a buyer’s agent. In this case you will pay the agent separately from the transaction and often on an hourly or fixed fee basis. If you are not paying an agent directly you do not have a representative.
Given that, the chief benefit of an agent is to show you properties you would not be able to find on your own. This may be a valuable service and you will have to decide if the property listings on the internet are sufficient for your needs or if you other knowledge.
You absolutely do not need an agent to prepare agreements including a sales contract. Your attorney (and you absolutely need one in this sort of transaction) can do that. In fact, if the agent does anything other than fill in the blanks of a contract (at your direction) they may be breaking the law by practicing law without a license.
References :
April 17th, 2010 at 8:44 am
I think you might be able to skip the realtor…but make sure a lawyer helps with this. You are a first time buyer, and there are things about the process you simply don’t know.
The lawyer can also make sure that the title is clear, etc, so that your property will be unencumbered. He can also check the language in any paperwork, so you know exactly what you will be getting into. Penny wise and pound foolish is a bad way to go.
Realtors charge about 6 percent, when last I checked. And frankly—with the market the way it is, I’m not sure you wouldn’t do better with a realtor. They know they properties, and the motivated sellers.
Good luck.
References :
April 17th, 2010 at 9:27 am
I would call that pretty stupid, but you do what you think is right.
References :
My head
April 17th, 2010 at 10:08 am
It would be best to use a Realtor that is very experienced. I would suggest using a Realtor that someone you know has used in the past and knows how they work.
References :