If you’re preparing to buy a home, you might be looking for a real estate agent to lead you through the purchase process, but it’s possible to do it alone. In fact, 11% of buyers chose to go this route last year, according to the National Association of Realtors.
Buying a home without a real estate agent can save you money and allow you to shop on your own timeline. But you’ll need to weigh this decision carefully.
Should you work with a real estate agent?
The main appeal of working with a real estate agent is benefitting from their expertise. A home is possibly the biggest purchase you’ll ever make, so there’s a lot on the line. But on the other hand, taking a DIY approach could save you a lot of money. Before you buy a house without a real estate agent, consider the advantages and disadvantages.
Pros of buying a house without a real estate agent
- You’ll save money. The seller is responsible for paying the buyer’s real estate agent, typically around 3% of the listing price. But because the seller doesn’t have to pay that fee when there’s no buyer’s agent, they may be willing to accept a lower offer.
- You’ll have full control over the home-buying process. Real estate agents typically juggle several clients at once, so you might not get a lot of their attention. Going straight to the seller for answers and negotiations removes a step from the process and could save you a lot of time.
- You’ll become a real estate armchair expert. Homebuyers have plenty of online resources to help them discover homes on the market and understand the negotiating process. Once you successfully close on the home, you’ll have a clear vision of how to buy a home without a real estate agent along with a sense of satisfaction.
Learn More: Off-Market Homes: How to Find Pocket Listings
Cons of buying a house without a real estate agent
- There’s a steep learning curve. Home sales are complicated, and real estate agents have a lot of experience that helps you through the process. Going without one means you’ll spend more time doing the research yourself.
- You’ll have a tougher time negotiating. You’ll need to spend time coming up with a good offer price and figure out where you can negotiate. If this is a weak spot for you, then you might not save as much as you expected.
- You’ll miss out on some inventory. Real estate agents have access to the multiple listing service (the MLS), so they know which homes are on the market. Without this, you have to rely solely on third-party listings and schedule open houses yourself.
When to consider buying without a real estate agent
Despite a few drawbacks, buying a house without a real estate agent could make sense in a few scenarios:
- You know the seller. This might simplify the transaction. Just be sure you’re both clear on the price, closing date, and contingencies. Also, discuss whether the seller will leave behind any furniture or fixtures—and get all of these details in writing.
- You’ve taken out a few home loans in the past. At this point, you know the process and what’s involved — so you might feel more comfortable buying a house without an agent.
Read More: Buying a House For Sale By Owner (FSBO)
How to buy a house without a real estate agent
Here are the steps you can expect to take when buying a house without a real estate agent:
1. Figure out your budget
As a good rule of thumb, you should limit yourself to houses that cost no more than three to five times your gross household income. So if you and your partner together earn $100,000 per year, then your house should cost no more than $300,000 to $500,000, depending on your debt obligations.
Important: You should also calculate your estimated payment and check if it fits within your monthly budget, especially if you have any debts.
For example, let’s say you take out a $300,000 mortgage with a 20% down payment and a 7% interest rate. Your payment would cost around $1,996 a month. But you might decide to buy a cheaper house — with a lower monthly commitment — if you have a high student loan payment and need more wiggle room in your budget.
2. Get pre-approved for a home loan
Once you have a budget in mind, the next step is getting a pre-approval to check whether you can borrow that amount. A mortgage pre-approval is a letter from a lender showing how much a borrower can take out. It helps you shop for homes within your budget and tells sellers you’re serious about your offer.
3. Find the right home for you
Next, think about what’s important to you and narrow the home search to a few neighborhoods.
Look at listings online to see what’s on the market and details about the home.
Once you find one you like, contact the seller’s agent — their email address or phone number should be on the listing — and visit it in person.
4. Look over your seller disclosures
It’s important to find out everything you can about the home before making your offer. One document that can help is the seller disclosure, which lists known issues about the home and other information, such as remodeling projects.
The disclosure varies with each state, but some of the items listed might include:
- Structural issues
- Problems with the home’s plumbing, heating, or electrical systems
- Presence of lead paint, radon, or asbestos
- Toxins in the soil
- History of damage from pests such as termites or rodents
- Mold and water damage
Tip:
While every state can set its own rules, all sellers nationally must disclose the presence of lead-based paint. This type of paint was outlawed in 1978, so you won’t need to worry about it if the home was built after that year.
5. Consider working with a real estate lawyer
Some states require homebuyers to hire a real estate attorney to finalize the transaction. Typically, the mortgage lender will pay for these services and include the price in the closing costs.
An attorney can help you generate and review the paperwork needed at the tail end of the home-buying process, so you might benefit from hiring one even when not required. For a single real estate transaction, expect to pay around $500 to $1,500.
6. Make an offer
Come up with a fair price on the home and put the offer in writing. Offers can quickly turn into binding agreements so make sure you have an attorney take a look before making one — or you could be on the hook for some serious cash. Here’s a quick review of what’s involved in making an offer:
- Gather information on the home you want to buy. Write down the square footage and the number of bedrooms and bathrooms. Include renovations or other features that might increase the value of the home, such as a kitchen remodel or a pool.
- Research local home sales. Research the price of homes that recently sold in these neighborhoods and how they compare to the one you’re looking to buy. You’re looking for “comparables” or “comps” so you can make an appropriate offer. The homes should have a similar footprint and have the same number of bedrooms and bathrooms as the homes you’re looking to buy.
- Calculate the price per square footage. For example, comparable homes measure about 1,500 square feet and cost around $200,000. The price per square foot is about $133. Use this number to guide your offer price. Ideally, the offer should fall under the amount you’re pre-approved for, so you have room to negotiate. When preparing the final number, be sure to subtract the amount of the buyer’s agent fee — and explain why — since the seller won’t have to pay for it.
- Include contingencies if applicable. Common contingencies include a home sale contingency, which means you must sell your current home before moving forward with this purchase, and an inspection contingency, which means you can back out of the sale if you’re not satisfied with the inspection report.
7. Get an appraisal and hire a home inspector
Although it comes with an upfront cost (typically $280 to $400), hiring a home inspector can help you ensure there are no major problems with the home. The inspector will evaluate the home’s condition, including major systems, the foundation, floors, walls, windows, doors, ceilings, and roof. Afterward, they’ll send you a report complete with notes, photos, and recommendations.
Important: The inspection only concerns the home’s condition, so it’s different from the home appraisal, which evaluates the home’s value. Your mortgage lender will pay for the appraisal (typically around $312 to $405) and pass on the price to you through the closing costs.
8. Negotiate with the seller
Once you read the inspector’s report, you might want to negotiate with the seller for repairs. You can ask the seller to:
- Make repairs, based on the inspection report
- Provide a seller’s credit for the expected cost of repairs
- Lower the sales price to account for significant repairs
Tip:
Keep records of emails or other written exchanges between you and the seller, and get the final negotiated price in writing. If you can’t reach an agreement, you also have the option of canceling the sale.
9. Finalize your mortgage
Getting multiple mortgage quotes gives you the best shot at finding good loan terms and saving on costs. In a Freddie Mac survey, homebuyers saved an average of $3,000 over the life of the loan when they compared at least five lenders.
Once you compare several lenders, find a good deal, and apply for the mortgage, it takes about 30 days on average to close the loan. Expect a longer process during high-volume months, though.
10. Close on your new home
Now you’re ready to close on the home — but make sure you read through the paperwork carefully before closing day. Also gather a cashier’s check to cover closing costs, a government-issued ID, and proof of homeowners insurance.
By law, your lender should send you the closing documents three days before closing. These usually include:
- Closing Disclosure
- Promissory note
- Mortgage/security instrument/deed of trust
- The deed, which is a document that transfers property ownership
On closing day, you and the seller’s agent will walk through the property to verify there’s no new damage, that all the home’s systems and appliances are still working, and that the home is generally clean. Then you’ll head over to the closing location, where you’ll sign for the home.
