Should We Buy on Our Own
or Use an Agent?
When they first begin looking for a home, many buyers ask “can’t we do this on our own? Do we really need to use a Real Estate Agent?” The answer is yes, you can do it on your own. There is no law that prevents you, as an individual, from buying property without professional Real Estate assistance. You can search for homes, arrange showings, and even negotiate on your own (although, in some localities, the actual contract for purchase will need to be drawn up by an Attorney). The real question may be “do we want to do it on our own?”
There is a misconception among many first time home buyers that by using a Real Estate Agent, they will be subject to paying a commission. In virtually all situations, this is not the case. The commission for the sale of a home is paid for by the seller, not the buyer. If you went to your local appliance store and bought a new refrigerator, you wouldn’t expect to pay a commission to the salesperson. The same applies when you buy a house–it is the seller of the item (in this case a house) that is responsible for paying to have it sold.
If you do decide to “go it on your own,” your choices will obviously be very limited. The only homes that you can buy without any Agent assistance are those that are “For Sale By Owner” (FSBO)–generally a small percentage of the market. These are home owners who, for whatever reason, have decided not to use an Agent in the sale of their house. It may be because they think they can get more return by not paying a commission, or it may be because there was no Agent who would take their house listing at the price they demanded. Many Real Estate analysts have found that the selling prices of FSBO homes are equal to–or higher–than those listed by Agents. A problem arises when, as a “do-it-yourself” house buyer and without the benefit of a Comparative Market Analysis, you need to make a determination whether or not the house is worth the asking price. How do you decide? There is too much money potentially involved to make a “seat of the pants” decision. In this case, you will need to either secure an independent appraisal to determine a realistic price range for the property or develop your own determination of value.
The next mistake that many buyers make, when they find that their choices are so limited by only dealing with homes for sale by owners, is to jump into the “listed” market by checking advertisements and calling Listing Agents directly or visiting Open Houses. There is not a dime to be saved with this strategy (the seller is still going to pay a commission) and you run the risk of ending up with no representation, since the Listing Agent is duty bound to represent the seller. Please see the discussion on Agency. It is crucially important that you understand how it applies when you buy a home.
A checklist on the advantages of “On Your Own” or With an Agent
“On Your Own”
With an Agent
|1.You can try to find a “For Sale by Owner” who is willing to sell at a reduced price.||1.A much wider choice of properties–every home that is listed with any Real Estate Agency.|
|2.You are completely in control of the pace of the process.||2.If represented by a Buyer’s Agent, the availability of a Comparative Market Analysis to see how the price of the house compares with the current market.|
|3.For better or worse, you are your own representative.||3.An Agent is has experience in negotiation.|
|4.You can do your own research, market comparisons, find inspectors and closing agents, etc.||4.Can offer choices and suggestions in Home Inspectors, Closing Agents, etc.|
|5.The Agent can follow up in all of the details related to the Closing.|