Realtors, who needs 'em?
February 18, 2009 10:18 AM   Subscribe

We're considering purchasing a home by ourselves, without using a buyer's agent. General pros/cons? And if it's possible to save on commissions by doing this, how should we introduce that idea into the process?

From what we've read, buyers' real estate agents are useful for:
  • finding houses to consider, booking appointments
  • providing advice during the price negotiations
  • overseeing the paperwork at the end.
all three of which (in this buyer's market) seem completely do-able by ourselves, with the aid of zillow/, lots of reading, our shark-like negotiation skillz and a competent lawyer and inspector. Partly, we've been unimpressed by realtors we've seen in the past; but mostly, it doesn't seem worthwhile to pay 3% of the home price (=~$6-9K!) for services we've got pretty much covered already. (I know both commissions are technically paid by the seller... but if nobody needed to pay that 3%, then the home price could be 3% lower, right?)

Some great general advice here and here, but if anyone has firsthand experiences of going buyer's-agent-less, or suggestions on how to navigate the process, let's hear them! More specifically, though, I was wondering-- if we'd like to try to get the unused 2-3% buyer's commission taken off the home price (or refunded us by the seller's agent?), how and at what point in the negotiation process should we bring that up? Are seller's agents likely to be resistant, even though it theoretically doesn't represent any real difference to them, since otherwise we'll just bail or get a buyer's agent anyway? Any suggestions on working this maneuver out to everyone's satisfaction?
posted by Bardolph to Home & Garden (19 answers total) 2 users marked this as a favorite
Presuming the homeowners have already exclusively contracted for X amount of months with a broker/agent to list, show and sell their property, I don't understand where your "I don't have a buyer's agent so I am saving you money!" comes into play.

The buyer's agent gets paid by sharing the commission with the seller's agent -- the commission the homeowner and the listing agent have already agreed to.

The seller's agent may love you, because you're doing all the footwork and he/she doesn't have to split any of his/her commission with a buyer agent, but that doesn't seem to effect the homeowner in one way or the other.
posted by jerseygirl at 10:28 AM on February 18, 2009

We're going through this - one caveat we have a very good friend who's got an agents license (he's a contractor who flips homes not a traditional agent) who would refund us the difference if we needed to.

But we have every intention of just assuming there's a 3% reduction in price when we begin to negotiate.

Agent's fees are always negotiable, including the sellers agent's fee. They will sometimes take a percentage off of their fee to get a deal done, especially in this market.
posted by bitdamaged at 10:29 AM on February 18, 2009

Be really careful. I know people who paid easily $20,000 more than they should have by thinking they'd save money doing it on their own.
posted by 2oh1 at 10:32 AM on February 18, 2009

The listing agent and buyers agent split the commission. With no buyers agent, you're only making the listing agent more money and putting yourself at a disadvantage. An agent isn't likely to lower the sales price just to cut their commission. Unless you will be targeting only FSBO's (for sale by owner), then get an agent. They can actually be useful if you get a seasoned, knowledgeable agent.

Um, bitdamaged, the fee refund you are describing is a RESPA violation. Not charging the entire fee in the first place is fine, but no money should be transferred outside of closing. You should probably keep that little bit of information closer to the vest in the future, or better yet, don't do it at all.
posted by curlyelk at 10:45 AM on February 18, 2009

Are you a FTHB? If so, I would strongly recommend using an agent. I just bought my first house last summer, and I also thought that agents were just for doing really simple stuff like you describe.

It's hard to even convey how much work our agents did on our behalf, that we would not have had the first clue -- or any time whatsoever -- to do ourselves. Most of that had to do with some bad things that came up on the inspection, and getting contractors out to get bids on the work that needed to be done to our satisfaction before we'd purchase, but it turned into so much more than that and lots of negotiating needed to be done, tons of back-and-forth and paperwork &c. Then that first purchase contract had to be terminated because the seller went back on his agreement to do the work, and we had to deal with that whole mess, getting our earnest money back AND putting an offer in on another house at the same time. And then that second house (the one we ended up buying) was being sold through a relocation company which was a really confusing process and I would not have even known half of what I needed to do without having someone who had been through that process before.

If you have a very straightforward transaction, you may be able to act on your own behalf, but just thinking about trying to go through the process without an agent gives me the willies.
posted by rabbitrabbit at 10:52 AM on February 18, 2009

Response by poster: jerseygirl/curlyelk-- so, if I understand correctly, the Seller's Agent normally charges a total commission of 6%, of which SA keeps 3%, and BA gets 3%. But if we were to offer the SA the choice between (a) reducing his/her total commission to, say, 3.5% or 4% (all take-home), and lowering the house price commensurately, or (b) having us walk, or hire a buyer's agent who'd just take the extra 3% for himself, you're saying most sellers' agents would choose (b)? Isn't there any way to put it so the agent sees the first one as the win/win it is?

everyone-- these are great perspectives, and yes, we are first-time homebuyers, so it's hard to tell before entering the process how much added value we can expect to get from the use of a buyer's agent on a relatively straightforward home purchase. thanks for the insights-- keep 'em coming!
posted by Bardolph at 11:17 AM on February 18, 2009

I really think taking a FTHB course would immensely benefit you.

The homeowner and the listing agent have a contract in place to sell that house for X% commission and they negotiate it as part of the contract. There is no set rate, so throw 6% out right now.

Second, the seller's agent has NO authority on their own to lowering the house price to save their commission. This isn't the agent's house, this is the homeowner's house.
posted by jerseygirl at 11:35 AM on February 18, 2009

Experience when things get hairy... "free" buyers Realtor makes it worth it.
posted by thilmony at 11:39 AM on February 18, 2009

I just bought a house in September as a first-time homebuyer, and we didn't use an agent. For us, it worked out great.

As you mentioned, Zillow and other sites are excellent tools for DIY-ers. That's where we found our house. It was almost accidental--we weren't looking to buy right then, but there was an open house the next weekend, and by the time we left, we were convinced that we really wanted the house. I spent the next day looking at mortgages and got us pre-approved.

We contacted the seller's agent and said that we were interested in the house but wanted to see it again. She set an appointment, came over, opened the house up for us, and let us look around.

Two days later, we called and said we were still interested, but that since we weren't working with an agent, we'd like them to drop their asking price by the 3% that our agent would have received. (Their agent still got 3%, and the 3% that our agent would have gotten stayed with the sellers.) They agreed, and we said that we'd call them the next day.

We called the next day and made an offer. There were a few go-rounds of us making an offer and them counter-offering. We'd set our upper limit early on and agreed that if they were offered $xxx,000 and refused, we'd walk away. We ended up getting it for less than our maximum, and everyone was pretty happy, I think.

Our inspection was done through a company that our mortgage company selected. Issues that came up during the inspection were fairly minor, and were repaired (at the seller's expense) by either the sellers themselves or the company that had originally done whatever work was now damaged.

The seller's agent's goal is to sell the house. They're not going to walk with more than 3% regardless of how it's done, and if you walk away from the sale, they'll have nothing (until someone else buys it). 3% now is, for most people, better than 3% after another two months of work. The agent for our sellers was nothing but nice and helpful to us. Don't be afraid to ask the seller's agent questions or for assistance if you need it.

It's my opinion that if you're willing to spend time doing legwork for yourself, a buyer's agent is unnecessary. Yes, it meant that I spent some time on the phone with various companies and contractors arranging to have things done, and it meant that I spent time combing over real estate sites and going to see houses that were totally inappropriate, but not having an agent saved us several thousand dollars, and to me, that's worth a chunk of my time.

With that said, if you have special requirements for your house, or you hate looking at real estate listings, or you're really set on having a four-bedroom, three-bathroom Tudor with a first-floor laundry room, a master bathroom, an eat-in kitchen, and a finished basement, you might be better off going with an agent who can focus your search more effectively.

Feel free to meta mail me if you have questions. Ultimately, we had a fantastic experience buying our house, from searching for it to closing on it, and if we ever have to buy another house, we'll be doing it unagented again. For us, part of the fun was the joy of the hunt.
posted by MeghanC at 11:43 AM on February 18, 2009

I just realized that I wasn't clear--when we called and said that we were interested, we called the homeowners. Their number was one of the numbers that was listed on the datasheet about the house.

When we called their agent to make a formal offer, we'd already agreed on a price with the homeowners. They'd consulted their agent, but it gave us a chance to talk to them about how much we loved the house--it was a hundred year old colonial that they'd clearly put a lot of effort into restoring, and they later told us that part of the reason that we got it (especially at the price we got it for) was because they didn't want to see it turned into a duplex or anything like that. So with that in mind, I'd also suggest talking to the homeowners (instead of their agent) as much as possible.
posted by MeghanC at 11:47 AM on February 18, 2009

Me and the Missus just did this, and we were FTHBs, and though it went swimmingly, ours was a bit of a special case - it was a FSBO, the seller really wanted to sell, there was no haggling about the price, it was in move-in condition, we already had financing available, etc. So take the following advice with those caveats in mind: make sure that you get a receipt for earnest money and an independent appraisal (which you'll probably need if you're getting financing from a bank), and it wouldn't hurt to run the whole thing by your friendly neighborhood real estate lawyer - pay the $200 for a consult, let him see the contract as presented by the seller, get his opinion on it.

And good luck! Despite the market, if you're getting it at a good price, and you're looking at it as a home moreso than as an investment, it's a great time to buy a house!
posted by eclectist at 11:47 AM on February 18, 2009

I really think taking a FTHB course would immensely benefit you.

Revisiting this, that sounded condescending and I didn't mean it to.

Taking courses (in my case, I actually took the real estate license course for the state) was ridiculously helpful for us when we bought our first home. We also bought a ton of FTHB books too that further explained the process and had a lot on negotiating.

And truth be told, when we buy again, we won't use an agent on our behalf. Our agent didn't do anything and his uselessness ended up annoying me in the longrun. Get a damn good real estate lawyer from jump street, get pre-approved for financing, and be well armed with information and facts about the process. You'll be fine.
posted by jerseygirl at 11:57 AM on February 18, 2009

What are you really saving? The buyer's agent's commission is paid by the seller...
posted by olddogeyes at 12:14 PM on February 18, 2009

Um, bitdamaged, the fee refund you are describing is a RESPA violation. Not charging the entire fee in the first place is fine, but no money should be transferred outside of closing. You should probably keep that little bit of information closer to the vest in the future, or better yet, don't do it at all.

I am by no means a lawyer. Isn't this the whole premise behind redfin's business model?
posted by bitdamaged at 12:31 PM on February 18, 2009

better link
posted by bitdamaged at 12:39 PM on February 18, 2009

The seller's agent's goal is to sell the house. They're not going to walk with more than 3% regardless of how it's done

Not true. If the buyers don't have an agent, the broker typically keeps 6%. That said, its very possible to negotiate on commissions in this market.
posted by baphomet at 3:12 PM on February 18, 2009

Just my two cents-the Mr. and I just closed on a house together this week-the 4th house purchased by one or the other of us in our lives. It was a for sale by owner. We used a great friend as a realtor, and did agree to pay him a commission ourselves (long story, but basically the sellers were taking a loss on the house already, and our realtor had worked with us looking at places for months-we didn't feel ethical walking away and not giving him any $). Anyway, although we weren't totally thrilled about paying him at the beginning, we were very, very glad we had at the end. This house was in great shape, and our financing was largely secure, but there were still almost constant issues that would've taken us huge amounts of time as we moved very, very slowly towards closing. The well water needed to be tested. THe sellers failed to make 4 separate appts to meet the water testing folks. The results took forever to get back, so new documents extending the closing window had to be signed several times. Blah blah blah. Yeah, it probably would've worked without a realtor, but it was worth it for us in the end.
posted by purenitrous at 8:35 PM on February 18, 2009

The real estate market is in bad enough shape these days that you should be able to negotiate at least 3% off even with a realtor. We bought our house for 20% off the original purchase price by having our realtor submit a lowball offer and telling the seller to take it or leave it - we would not negotiate.

I don't think that we would have had the confidence to do this ourselves, but our realtor was a fiercely confident woman.
posted by Ostara at 7:49 AM on February 19, 2009

I bought my condo without a buying agent. I had access to the proper MLS listings for Toronto, so I could look up all sorts of places. Having a buying agent would have been nice because they would have been driving me around, making appointments, and doing a lot of this leg work. If you know a GOOD agent, there is really no downside to not having one. If you are selling, then things are different.
posted by chunking express at 4:46 PM on February 19, 2009

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