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. No law 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 a closing attorney). The real question may be, “do we want to do it on our own?”
There is a misconception among many first-time homebuyers that they will be subject to paying a commission by using a real estate agent. 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 home) that is responsible for paying to have it sold.
Restrictions of not having an agent
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 homeowners 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 because no agent would take their house listing at the price they demanded. Many real estate analysts have found that FSBO homes’ selling prices 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 decide whether the house is worth the asking price. How do you choose? 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.
When they find that their choices are so limited by only dealing with homes for sale by owners, the next mistake that many buyers make is to jump into the “listed” market by checking advertisements and calling listing agents directly or visiting Open Houses. There is no 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.
What does a buyer’s agent do / what are their responsibilities?
To better understand how a buyer’s agent helps you when buying a home, you should start by knowing the buyer agent’s responsibilities and how they operate during the process. Here are some of the different things that a buyer’s agent can do for you:
- Exclusive buyer’s agent: While some agents represent both sellers and buyers, some represent only the buyer. In this situation, you directly connect with someone looking out for your best interests and navigate on your behalf.
- Negotiating your purchase costs: When you buy a home, you want to be sure the home you buy is within your budget constraints. Often, you can negotiate the cost of a home, but having a buyer’s agent can give you the option of obtaining the best price.
- Helping you find the right home for you: A buyer’s agent can learn your home buying needs and wants and look for a home that best fits what you’re looking for. They can then schedule open houses to tour the homes on your list and get a better idea of what you want.
- Understanding of market and value: The market changes often; a buyer’s agent can help you look at other homes that have sold in the area and issues that may exist in the potential home. This helps the buyer determine the market value and how you can get the best price for it.
- Setting up inspections: Your agent can help you get a professional home inspection so you can identify any potential problems with the home before you go through with the transaction. Agents typically have connections and resources that you would not have on your own.
Some of the above tasks can be handled without an agent, but if you have never gone through the process before, you may not be sure what to look for, and you may find yourself missing out on essential steps or information.
With an agent or own your own: Which to choose?
Of course, if you are going to hire a buyer’s agent, you need to know how you will benefit. However, there are very few cons that you do need to know about as well so you can make the best decision for yourself. Before you hire a buyer’s agent, you should look into all aspects of how they can help, so you know that you’re making the right decision for your situation.
Below, we’ll detail some of the advantages and disadvantages you can experience when hiring a buyer’s agent:
Go with an agent
- More bang for your buck: With an agent’s ability to negotiate and find the best market possible for your budget, you could potentially get a better home for less money because of this knowledge.
- Resources you may not have access to: Buyer’s agents can access various resources and listings that you may not be able to have on your own. This opens up your options even further, helps you make the right decisions, and sets you up for a successful transaction.
- Negotiations and paperwork: Some of the negotiations and closing paperwork can be confusing. Going through it on your own can bring up issues that you don’t recognize and won’t know how to fix. A buyer’s agent can help you with it every step of the way, giving you peace of mind in the process.
Go at it on your own
Although we do not advocate for going at it on your own, it is an option many homebuyers take. It also has a few advantages that we do want to cover. First, if you find a home for sale by its owner, you can negotiate directly with the seller and potentially get a reduced rate. Without an agent’s experience or fees, the seller may unknowingly sell their home for below market rate.
Another reason for not having an agent is that you are in more control. You control the pace, the timing, and just about every part of the home buying experience.
Another benefit related to this is that you get to do your research, competitive market comparisons, etc. For better or worse, this means you will be highly invested each step of the way. You also get to find your own inspectors and closing agents.
You Need a Buyer’s Agent. Here’s why…
While there are a few disadvantages that you may feel are present when hiring a buyer’s agent, it should not deter you from hiring a professional. A buyer’s agent is usually the best option for you because you don’t have to worry about many of the issues that may arise. This peace of mind is priceless, and you’re able to get help with some of the more complicated steps along the way. Without a buyer’s agent, you can run many risks that can make your home buying experience more challenging.
You want to get the most out of your budget and desires. A buyer’s agent understands that, and they will go through every step to get the most out of your loan. They’ll help you negotiate and close on the deal to ensure you are satisfied with what is one of the most significant investments in your life. Make sure you choose a buyer’s agent you can trust, and you’ll be in a good position moving forward.