How To Buy A House Without A Realtor or Attorney – With the price of the competitive housing market soaring high with each passing day, it is no secret that a lot of home buyers are opting for DIY ways to get a home for a cheaper price. Realtor is a professional who helps in purchasing or selling a home. In most cases, people hesitate to pay the fees of real estate agents and want to complete the whole process alone. Buying a house without any agent or realtor is possible and in most cases is preferable as well.
As per reports of the National Association of Realtors around 11% of home buyers prefer to buy a house alone without including a realtor. Buying a home without an agent can save you money and enable you to shop on your own timeline. This guide will show how to buy your house without a realtor and make the process easier for you.
Recommended: Low Income Housing Tax Credit (LIHTC)
Highlights of this Post
What Are The Advantages And Disadvantages Of Buying A House Without Including A Realtor?
The primary advantage of working with a realtor or real estate agents is gaining from their expertise or knowledge. Choosing a home is one of the biggest purchases of your life and you need to make sure you are making the right choice. However, taking a DIY approach can also help to save a lot of money. Before purchasing a house without a realtor it is important to consider the pros and cons.
Pros
- Generally the seller is responsible for paying the real estate agent of the buyer which is around 3% of the listing price. But since there is no agent of the buyer they can accept a lower offer
- Real estate agents juggle a lot of clients at once and may not give you full attention. Buying a house without a realtor will help you gain full control over the home-buying procedure and will save much of your time.
- You get a clear vision of how to purchase a home without involving a real estate agent and gain a sense of satisfaction.
Cons
- Purchasing a home is a complicated procedure and requires a steep learning curve. Going without a real estate agent means you have to spend more time in the research yourself.
- A DIY approach means you have a tough time negotiating the price with the seller.
- Realtors have access to several listing services and know about the properties that are on the market. Without having a realtor you need to rely only on the third party listings and also schedule open houses alone.
Also read: Government Programs for Low-Income Families
What Are The Factors To Consider While Buying A Home Without A Realtor?
Purchasing a home without working with a professional or an agent can be difficult as you have to do all the work alone. Following are the responsibilities that you need to fulfill.
-
More Research To Gain Market Knowledge
A real estate agent or realtor has access to real estate property listings so they know which properties are on the market and what are their features. Experienced agents are familiar with their local real estate markets and can help you to find a desired house within your budget and needs.
They listen to your needs and requirements in a home and help you find a property that aligns with your price range. In case you are going without a realtor then you have to research yourself and gain more market knowledge.
-
Completing The Paperwork Alone
You need to complete the legal documents alone and pay close attention to the documents that you receive or provide to the seller.
Bidding on and buying a house involves a lot of paperwork, mortgage applications, title searches, contracts and so on. Anyone who is not familiar with the home-buying process has to spend a lot of time completing the legal paperwork.
-
More Negotiations
Realtors or real estate agents are negotiation experts and help people to seal their deals. Purchasing a home without an agent means you have to negotiate yourself and decide on how much to offer alone.
This can sometimes make you overpay for a home or lose out on a property that you want to buy. Working with an agent will negotiate on your behalf with the seller as well as the seller’s agent.
-
More Connections
Purchasing a home requires working with many third-party experts. A real estate agent can direct you to professionals like home inspectors and contractors and can make the home-buying process much easier and straightforward.
If you do not have an agent you need to research businesses and services on your own and this can be difficult to find the right help at the right time. For instance, you need to find a home inspector, lawyer, title company and contractors on your own.
Recommended: What is the Average Cost of a Real Estate Attorney?
How To Buy a House Without A Realtor?
Following are the outline steps that you need to prepare if you have decided to purchase a house without including a realtor.
-
Figure Out Your Budget
As a general rule of thumb buyers should limit themselves to houses that cost not more than three to five times their gross household income. If you along with your partner own around $100,000 annually then the property which you want to buy should not cost more than $300,000 to $500,000 based on your debt obligation. It is important to calculate your estimated payment and check if the mortgage of the house fits your monthly budget.
-
Apply For Mortgage
You need to know how much you’ll be approved for so you know which homes will likely be within budget. Keep in mind that if the area you’re interested in has a competitive market, homes will most likely go over list price. A pre approval for a better mortgage will give you an idea of how much home you can buy in as little as 3 minutes.
-
Research The Neighborhood
Check the neighborhood properly when purchasing a house. It is important to know the average selling price of houses in the area and take into account what you value in a neighborhood.
For instance, if you’re looking for a neighborhood with access to high-rated public schools or good public transportation. Narrow down your search by neighborhood and then look for homes or properties for sale.
-
Find A House
Once you have decided on a particular neighborhood it is time to look for homes on the market. You must find a property that aligns with your budget and needs and keep a list of houses that may be the right fit for you.
Online listings generally include the agent or the owner’s phone number including a list of upcoming open houses. In case there are no scheduled open houses you can contact the listing agent of the seller and request a tour in person.
-
Ask For Seller’s Disclosure
A list of known problems with the home is known as a seller’s disclosure which enables the purchaser to know about the remodeling work that the seller had previously done on the house.
The center of the house is responsible for telling you about the pertaining issues on their property. In some cases, they may avoid disclosing the issues as they are not legally bound.
Following are the factors that you can expect to see on the disclosure statement of the seller
- History of issues or damage from wood-boring insects or termites
- Structural issues with the property
- Presence of radon, lead paint or asbestos
- Toxins in the soil
- Plumbing or my heating or electrical system issues
- Mold and water damage
-
Make An Offer
If you have found a desirable home and are satisfied with its structures and conditions it is time to make an offer with the seller. Deciding how much to offer for a property can be challenging especially if you are doing it alone without including a realtor.
You can consider the price of other properties in the area where you are considering buying your own, how long the home has been existing on the market including the condition of the home. You can include the following in the offer letter.
- The address of the home
- The legal name of the person buying the home with you for instance a family member
- Any contingency you are requesting
- Requested seller concession for instance cash toward closing or discount points
- Copy of your mortgage approval letter
- Date you are expecting to close
- Items that you want to include in the sale for instance window dressing and appliances
- Date you want to move into the home
- Deadline for seller to respond to your offer letter
In case the home is for sale by the owner you can submit the offer letter to the seller directly or else you can negotiate the terms and house prices with the agent of the seller. The seller can accept, deny or return the offer letter with a counteroffer.
-
Hire A Home Inspector And A Lawyer
A home inspection will cover the surface-level elements of the property including the structure, plumbing, heating system and more issues. It includes an upfront cost generally between $280 to $400 to learn there are no major problems with the home.
Few states require home buyers to get an attorney for finalizing the home sale and for transferring the title. Even if it is not mandated by the state, having a lawyer by your side will help you to deal with legal gray areas and a lot of paperwork.
The home inspector will carefully evaluate the condition of the home including the foundation, major system walls, floors, ceilings, roof and windows. They will send a report with the notes, recommendations and photos.
-
Negotiate With The Seller
If the home inspection reveals any problem with the home following are the few ways through which you can negotiate with the seller.
- Ask For Necessary Repairs: You can ask to repair the problems with the property directly to the seller before your closing date
- Ask For Reimbursement :You can ask to reimburse the cost of repairs from the seller and this will guarantee that you will get work done from professional contractors. However, it can be challenging to make the seller agree to pay a bill if they do not know the exact cost of repairs.
- Ask For Discount: You can ask the seller for a discount or reduction on the sale price if there are many repairs to be made to make the property in good condition.
-
Cancel The Sale
If you are unable to reach a solution with your seller and the issues are a deal breaker for you it is advisable to cancel the sale and go for other property in the neighborhood. You must deal with your seller in writing and keep a record of written exchanges or emails that happened between you and the neighbor.
-
Finalize Your Mortgage
Getting mortgage quotes from multiple lenders will help you to get the best loan term and save on the cost. As per a survey by Freddie Mac home buyers can save an average amount of $3000 over the life of the mortgage when they compare it with at least five mortgage lenders. You can compare several lenders, find the best deal and secure a mortgage. It takes around 30 days on average to close the loan.
-
Close On The Home
Once you reach an agreement with the seller it is time to close on the loan. Once the appraisal and underwriting are cleared your mortgage lender will send you a closing disclosure telling you the terms of the loans, the interest rate on the closing cost and many more costs.
On signing the loan and other closing documents you will become the official homeowner of the property. By law, your mortgage lender will send you closing documents three days before closing.
These documents are as follows
- Closing disclosure
- Mortgage, security instrument or deed of trust
- Promissory note
- Additional document that transfers the house ownership.
On the day of closing you along with the agent of the seller will walk through the house to verify there is no new damage, all the appliances and systems of the home are still working and the home is clean and maintained.
When might you decide to buy a house alone without a realtor?
There are situations when it may make sense to consider buying without a real estate agent. However, this doesn’t mean you should avoid using lawyers and title companies. Following are the ways on how to buy without a real estate agent so you’ve got all your bases covered.
You’re a real estate agent yourself
If you’re licensed as a real estate agent, previously worked as a real estate agent, or are working with a relative who’s a real estate agent then you’ve got all the skills and the experience you need. The question is, do you want to take the time to do it all yourself when you can have another agent do all the legwork.
You’ve bought lots of other homes or properties
If buying and selling property is kind of your thing, then you’ve more experience than most people. There’s a good chance you already have a relationship with a real estate agent who can give you some pointers if you need them.
You have a direct connection to the seller
If you’re buying a home from a relative or a neighbor, this would be considered a direct connection. You don’t need to do any of the house hunting and you should already know the area deeply so this could be a good opportunity for you and the seller to avoid paying any real estate agent’s commission. Don’t skip the home inspection and make sure your lawyer includes contingencies in the purchase contract to cover any repairs that may be needed. It’s no good to discover you’ve bought a money pit with no legal recourse, it’s even worse when that money pit came from someone you know.
You’re buying a new construction home
About 6% of buyers buy houses directly from the builders or his agent. An interesting fact about new construction homes is that just because they’re new, doesn’t mean they won’t need repairs. As the first person to live in the home, you’ll have a front-row seat to any builder errors and flaws, so make sure to get the home inspected and ensure a lawyer looks over the contracts.
Neither you nor the seller want to pay your agent’s commission
While forgoing a buyer’s agent could seem like a money saver, if the home you’re interested in buying is For Sale By Owner (FSBO) there may be a serious problem with the home that the owner is trying to avoid disclosing to an agent. A seller who’s not using a listing agent and is reluctant to pay commission for a buyer’s agent could be a red flag. This is a situation where an inspection is imperative, and you’ll also want a good lawyer to make sure you’re protected in all kinds of worst-case scenarios.
Also read : Free Home Repairs For Senior Citizens
Conclusion
Buying a home without a realtor can be a viable option for a lot of people especially if they’re familiar with the market and know the worth of a property. This will also be possible if you’re familiar with the seller or if you are buying the property from your family member. It also depends on which state in America you are currently living in. This is because a lot of states require home buyers legally to hire a real estate agent or attorney to oversee the closing of your house. However if you are a first-time homebuyer or inexperienced and find the home buying process complex then having an agent or attorney by your side will be crucial.
Visit the rest of the Get Government Grants to read articles about government and non-government financial assistance. In case you are struggling with housing issues, check our article about Federal Government Housing Grants For Low Income Families
Frequently Asked Questions
Are There States That Require A Real Estate Lawyer Attorney To Participate In The Buying Process?
Yes, seven states in the United States of America require buyers to have a real estate lawyer or attorney in a mortgage closing procedure such as Connecticut, Georgia Delaware, Massachusetts South Carolina North Carolina and New York.
Will I Save Money Without Hiring A Realtor?
Yes, you can save money without hiring a realtor. The seller in real estate transactions has to pay 6% of agent commission fees- 3% each for the real estate agent representing the seller and the agent representing the buyer. Buyers who do not have a realtor can ask the seller to lower the home price.
What is a pre-approval letter?
An official document called a pre-approval letter states how much you’ll be able to borrow for the purchase of a home based on the information you provided in your pre-approval application. Your final loan amount will be verified through the full underwriting process, but the pre-approval letter is still a valuable and accurate tool that will greatly increase your chances of winning an offer on the home of your choice.
What is a contingency in real estate?
A contingency is a condition in a purchase contract that needs to be met by you or the seller before you’re obligated to buy the home. Contingencies protect both parties in a real estate transaction and often include clauses that allow you to back out of the sale if you’re unable to secure financing or if the home fails to pass inspections.
