Buying a House Without a Realtor: Is It Risky?

Most people wouldn’t consider buying a house without a realtor. In fact, nearly 90% of homebuyers purchased their house through a real estate agent last year. This isn’t to say that it’s illegal to purchase a house independently. It’s just much more difficult, especially if the buyer’s never been through the process before. That’s why those who do forgo realtors are either realtors themselves or directly related to the seller.

Leaving realtors out of the equation is also riskier because it leaves homebuyers without guidance and advice. Ultimately, this decision leaves more room for error and can result in costly mistakes. One wrong move and a buyer can pay thousands more than originally anticipated. 

So, should the typical homebuyer purchase a house without a realtor? Weighing the pros and cons can help them decide whether its worth the risk. 

Enjoy the Benefits 

There are a few scenarios in which buying a home without an agent can be beneficial. For instance, those who know the area well or prefer to work alone might enjoy completing the process themselves. Taking such a self-sufficient approach does come with a few key advantages. 

Save Money 

Many people hesitate to hire a realtor because they don’t want to shell out more money than they have to. Meanwhile, agents and even friends and family assure them that the seller pays the realtor’s commission. In most cases, however, this simply isn’t true. Sure, it might not seem like there’s a fee, but most sellers factor realtors’ commission into the listing price, so the buyer ends up paying it anyway. 

Real estate commissions are negotiable, but they typically fall between 4% and 5% of the home’s selling price. That means if the home is worth hundreds of thousands of dollars, paying a commission on it could cost buyers tens of thousands of dollars. Thus, cutting out the middleman and acting as their own agent can save homebuyers a ton of money if they do everything else right. 

Direct Connection

Some sellers refuse to negotiate fees with a buyer’s agent as they prefer to deal with buyers directly. In this case, working alone might score some people a better deal on their new home. However, they must have stellar negotiating skills if they don’t already know the seller and want to secure an excellent price. 

Removing the real estate agent from the homebuying process is also appealing to those who prefer direct contact and fast results. Skip the hassle of relaying messages and the anticipation of waiting for callbacks by establishing a direct connection with the seller. Taking complete control of communications ensures that both the buyer’s and seller’s thoughts are heard, needs are met and offers are clear. 

Boost Confidence 

Buyers who want to sharpen their negotiating skills, flip homes or master the homebuying process can boost their confidence by working independently of a real estate agent. After all, everyone starts somewhere so, if an aspiring realtor wants to get their foot in the door, they must go it alone eventually. 

In this case, buyers should prepare to make a few mistakes and spend a little extra money along the way. That way they can learn, grow and do better when it comes time to make another home purchase. 

Understand the Risks

Of course, purchasing a home without a realtor isn’t without its fair share of risks. Buyers should understand both the advantages and disadvantages of this approach if they’re to make the best decision for themselves and their families. 

Knowledge Gap 

Most homebuyers can’t match the knowledge of a local real estate agent. With limited access to listings and an incomplete picture of neighborhood property values, it’s unlikely that buyers will find the home of their dreams at a reasonable price. 

Even if they do, they’re at risk of being taken advantage of because they don’t understand all the ins and outs of negotiating, making an offer and closing sales. They’re also more likely to overlook details like property taxes, homeowners association rules and the local school district. 

Complex Negotiations

Once a buyer finds a home they’d like to make an offer on, they’ll be responsible for negotiating the price, terms and conditions — a job typically reserved for realtors. Those who are ill-advised or unfamiliar with real estate negotiations may very well drop the ball during this essential step. 

With so many moving parts, there’s a lot of room for error. If the buyer lowballs the seller, they could lose the house altogether. On the other hand, if they make too high of an offer, they may end up overpaying and even spending extra on unexpected repairs after moving in. 

Overpaying 

Speaking of overpaying, realtors tend to have a better idea of a home’s true value and will often negotiate for a lower price when they know that a seller’s asking for too much. Local agents make it their business to evaluate current home prices, along with the prices of homes that have recently sold, to determine fair market values. 

Even repeat buyers may lack experience with this kind of in-depth analysis, so it’s often wise to hire a realtor to do the calculations instead. This way they only pay the seller for whatever the home is worth — no more, no less.  

Inspection Problems 

A home inspection report is often difficult to decipher for the average person. Many times, the inspector will list dozens of potential problems or points of concern. Some of these items might be worth worrying about. Others look more serious than they actually are. Luckily, a realtor knows how to differnetiate between the two and make fair negotiations based on their findings. 

Homebuyers that hire an inspector and try to decipher their notes without a realtor risk working with too little information. They’re also more likely to ignore inspections that are advisable for particular areas, including radon, mold and insect infestation inspections. In this case, they may uncover — and be stuck paying for — major issues after purchasing the home. 

Disclosure Issues 

In some states, the seller doesn’t have to disclose problems with their home. For example, people in Alaska and South Dakota don’t have to disclose murders or suicides that occured on the property unless they happened within the past year. Other states, including Delaware, only require the seller to disclose these kinds of details if the buyer submits a written request. 

Most buyers are unaware of these loopholes and often face disclosure issues without a realtor on their side. That’s because the law often holds agents to higher standards. Even in states that don’t require full disclosure, it’s unlawful for a realtor to withhold or obscure information if the seller explicitly asks for it. 

Paperwork and Regulations

Real estate law is incredibly complex and varies from city to city. Nonetheless, buyers and sellers must abide by the industry’s rules and regulations to avoid potential troubles later on. 

Therefore, those who are unfamiliar with the terminology in contracts and closing documents should hire an agent to assist them throughout the process. They’ll also help remind the buyer to complete paperwork before deadlines so they don’t miss out on their dream home or accidentally agree to pay more than they intended to. 

Tips for Buying Independently

Homebuyers that understand the risks of purchasing a home independently and feel comfortable completing the process alone can certainly do so without the help of a realtor. However, they may benefit from following a guide or making a to-do list to increase their chances of securing their dream home. 

Do the Research 

Purchasing a home is a time and energy-intensive process, regardless of the buyer’s level of expertise. Realtors might not get paid hourly, but they often spend countless hours exploring local markets, earmarking viable listings and interacting with sellers’ agents. Buyers must do all of this on their own, so it pays to do a fair amount of research. Surf the web, scan local listings and chat with experts within the industry to find the best potential homes. 

Get Preapproved 

Sellers are less likely to take independent buyers seriously, even more so if they fail to get preapproved. Getting a mortgage prequalification or preapproval letter lets the seller know that a lender is ready to fund the purchase. It also aids in the process of finalizing a mortgage, which can reduce hangups and improve seller confidence. Thus, preapproval can often put buyers in a better position to negotiate and help them stand out from the crowd. 

Get Title Insurance 

Title insurance is crucial for buyers because it protects them and their lender from sellers who don’t — or previous sellers who didn’t — have free and clear ownership of the property. If the buyer fails to get this insurance, they could end up paying off liens or even losing the house later on. Typically, a closing agent launches the process of securing title insurance during closing. However, independent buyers will have to complete this step on their own.  

Hire an Attorney

Depending on the state and city in which the home purchase occurs, the buyer may have to hire a real estate attorney to handle legal transactions and disputes. Often, an attorney is less expensive than the commission paid to a realtor. Plus, they can offer legal advice, something that realtors aren’t legally able to do. At the very least, a lawyer will make sure the transaction is legal and look out for the buyer’s best interest, just as an agent would.  

Find an Inspector

Many homebuyers don’t know how to find a reliable inspector. Others fail to request the right types of inspections. Both mistakes can cost them thousands down the road. Therefore, it’s crucial that buyers research online and ask around to find highly reputable experts. Read reviews, request recommendations and compile a list of potential inspectors before settling on one — or however many are required to examine the home. 

Prepare to Negotiate 

Buyers who decide to go it alone may be able to negotiate home prices with the listing agent since they’re saving the seller from paying a realtor’s commission. In most cases, they’ll lower the price or be more willing to consider a lower offer. Agentless buyers may also negotiate by building contingencies into their offers so they can cancel the contract if everything is not to their satisfaction. 

Weighing Your Options

Buyer beware! The homebuying process is complicated and there are lots of moving parts. In many cases, buyers feel more confident navigating with an agent by their side. However, this option might not be best for everyone. 

Homebuyers should weigh their options and consider every angle before deciding to forgo a realtor. However, if they feel confident enough to go it alone and have determined that the benefits outweigh the risks, there’s no reason not to go for it. After all, they can always change their mind and hire a realtor as long as their still navigating the early stages of buying a home.