First Time Homebuyer -- Doing it Without a Real Estate Agent
February 26, 2015 9:48 AM   Subscribe

My wife and I will (hopefully) be buying our first home in the near future. We've identified a great place, however the sellers want to do away with real estate agents to save on the 6% commission, since they've already identified a willing and able buyer (us). Complication: I've never bought a house before and am nervous about not having someone to hold my hand. Advice? More details below.

Recently we had a stroke of luck and identified a property that currently belongs to a family with whom we share mutual friends. We've toured the house several times, love the neighborhood, it's in our preferred school district, and the sellers are motivated to sell at a competetive price due to an impending overseas move. After doing a lot of research on sales of comparable properties in the area, we verbally agreed on a tentative price with the sellers, should we move forward. We currently have a buyer's agent (with a non-exclusive agreement), but she wants 3% -- her half of the usual 6% that a seller's agent would split with her in a normal sale -- if she walks us through this sale. That represents about $15,000 -- and I'm not sure her services are worth that much to me. The seller is unwilling to pay it (and I don't blame them, they could easily price this house higher -- and probably sell it quickly -- to recoup what they'd lose in realtor fees, but then it would be out of our price range). I should note that the sellers' initial plan was to sell it via an agent, but our fortuitous meeting before the listing gave everyone the idea to just do it ourselves -- there doesn't appear to be some hidden agenda behind the seller wanting to avoid listing the house, aside from getting it off their hands quickly and with a minimum of disruption.

But I'm also afraid I'll live to regret that statement about her services not being worth the cost. I would plan to hire an attorney to take us through the final hurdles of closing, but I have no idea who takes care of hiring the appraiser, inspector, title company, etc. Since I only need someone to take me through the mechanics of the sale itself rather than a search for a new home, would a real estate attorney perform all these functions? What role does my lender play in all this besides paying out the cash at closing (assuming the appraisal is in order)? Am I an idiot to not use a real estate agent?
posted by Creamroller to Home & Garden (29 answers total) 10 users marked this as a favorite
I really think if you have never bought a house before, you need an experienced agent. Some transactions can be smooth, but when they are not, you need someone who is on your side and can help you think through all the things you don't even know you have to think about. Also, I really recommend reading some First time homeowner books. Good luck!
posted by gt2 at 9:53 AM on February 26, 2015 [10 favorites]

I have no idea who takes care of hiring the appraiser, inspector, title company,

You don't ever want anybody else to hire those anyway. Who do you want them to work for, the person who wants the house sold no matter what so they get their commission, or the person who has to live there and fix everything?

Go find your own, make sure they know they work for you. Title company, I think, is just whoever you and the seller agree to use. Yelp can be very helpful for those kinds of things.

A lawyer will make sure the deal is legal with regard to the sale, and will be less invested in whether or not you "should" buy the house and at what price.
posted by Lyn Never at 9:54 AM on February 26, 2015 [4 favorites]

Previously. You should be fine without an agent; just get a good real estate lawyer, whose fees will be much less than the agent and can probably recommend other service providers.
posted by Mr.Know-it-some at 10:00 AM on February 26, 2015 [14 favorites]

As a first-time buyer, the process can be a bit daunting and unknown, so you may want to consider using your buyer's agent.

I've bought two houses and sold one, and honestly, my opinion is that a real estate agent is somewhat useful for a seller, but not so much for a buyer. In both cases where I bought a home, the only thing I used a real estate agent for was to give him or her a list of addresses of homes for sale that I'd found on the internet previously, and asked the agent to schedule showings of those specific houses. They might recommend home inspectors, repair people, et cetera, but in the end, I did my own research on those kinds of people before hiring them.

There are very minor differences in the purchase process from state to state, but since you say you are hiring an attorney, he or she should be able to give you guidance on the process.

You already have an accepted offer (is it in writing?), so the rest of the process can be handled with the help of your attorney. Do a home inspection and negotiate with your seller regarding any issues found (generally: ignore problems you don't care about, and for problems you do care about, have the seller either fix it or come down on his/her price by the amount it would cost you to fix it -- and get estimates in writing for the work to support this).
posted by tckma at 10:04 AM on February 26, 2015 [1 favorite]

Where are you located? That can make a huge difference. Also, please confirm my math, $15,000 is 3% of $500,000, is that the purchase price? Because if I were spending a half a million dollars, I'd be pretty darn careful about how I go about it.

I've bought houses without real estate agents. For example, in Florida, most of the paperwork is done through the Title Company, so when I bought my condo from a co-worker we did that. It was very easy. My condo cost $35,000. This was not a high stakes transaction.

Of the four houses I've bought, I've only used a realtor once. It worked out out of sheer, dumb luck. Frankly, my luck ran out with the last house, which turned out to be a money pit.

With half a million at stake, I'd try to negotiate your realtors rate to 2%, since if there was a second realtor involved, they'd split the 6% commission anyway. 3% is no bargain, it's the going rate.
posted by Ruthless Bunny at 10:10 AM on February 26, 2015 [3 favorites]

I know a lot of people think real estate agents are just out for their commission and will do anything to get their house sold, and there are some like that. But really good agents are there for the long haul, not one sale. They get their best business through word of mouth from their clients that trust them. They know if they represent their clients well, you will go back to them when you sell and buy the next time and the next time and the time after that. Our first buy ended up being complicated and stressful and our agent held our hand the whole way. She was an agent we found through work friends and she had represented 5 other couples from our company. Ask your friends if they have someone they recommend. Real estate transactions can be smooth, but not always.
posted by gt2 at 10:10 AM on February 26, 2015 [3 favorites]

You don't need an agent and you definitely don't need a lawyer. You have a golden opportunity here to give yourself $15,000 in cushion on the biggest purchase of your life!!! Don't blow it! And don't be scared.

There are two major institutions interested in your purchase/sale going smoothly and strictly by the book: (1) your lender (I assume you're not paying cash) and (2) the title company who will write an insurance policy saying that, if the seller's don't actually have good title to the property for whatever reason, the title company will pay you (or someone) money; the title company also holds your earnest money in escrow for you and handles the paperwork-signing at the closing, where you sign all the financial and legal documents.

They literally will not let you screw up. The bank's appraisal process ensures you aren't overpaying; the title company gets the deeds drawn up, the paperwork all filled out correctly, makes sure taxes are paid or that you'll pay them, and on and on.

Here's what you do:

(1) Call a bank that will lend you money to buy this house. They want your business, so treat them like you'd treat someone you're paying a lot of money ("closing costs" are mostly comprised of the costs and fees associated with financing your purchase) to do a specific job. This person will either approve you for the amount or they won't.

(2) Use a form real estate purchase contract designed for the sale/purchase of a single-family residence (these forms are pretty specific--e.g., for vacant land, for apartments, commercial space, etc.). Your state may have an organization that provides these for free. My state has the Texas Real Estate Commission which provides any form an agent would use for free--agents aren't lawyers and they cannot modify these forms at all. They get $15,000 to fill in the blanks you could fill in yourself. Not sure how to fill them in? Do some research online or call your mortgage person or the title company where you'll put your escrow money and where you'll close the deal on closing day. You'll give the seller a check for the option fee (see below) and you'll send a title company of your choosing your check for earnest money--this shows the seller you're serious and, if you back out the deal prematurely after the option period has expired, you may lose this money. It's usually tied to a percentage of the sale price--e.g., a $300k house might have $3k in earnest money, but seller may want more. Make sure you make the contract contingent upon your securing third-party financing. This is your biggest out after the option period--if you can't get a loan, you don't have to buy the house. Easy-peasy.

(3) After you and seller sign the contract and you send the earnest money to the title company, and during your option period--you put 10 or some number of days in that blank in the contract, right?? :) --you basically can walk out of the deal and only pay the option fee. This is the nominal sum you put in the blank next to the option period, usually a hundred bucks or whatever you and sellers are comfortable with. This is the time period during which you schedule an inspector to come out. They're just checking to make sure major components are working, the house is up to code if it's newer, there's nothing huge that's wrong, etc. Google home inspection companies your city and call a few to find out how much they charge. They'll want to know square footage so they can quote you, but some are just a flat fee, say $500 bucks. You pay this person cash and it's your expense. You'll get their report a day or so later. Read it carefully and if anything spooks you, you can back out and lose your option fee and consider it a lesson learned: don't judge a house by its granite countertops. You'll fill out a form that says you're exercising your option and that's that. If you want sellers to repair something (not likely since they're doing you a pretty big solid by selling by owner), you get them to promise to do this by changing the contract's sale price, writing what they'll fix, etc.

(4) If you still want to go through the deal after the option period's over, next the bank will schedule the appraisal and appoint the appraiser. You just make sure you're there (or the sellers are there) with comparative sales that support your price if you're worried about appraisal coming in too high (bank won't finance over that amount unless you have lots of cash in addition to your down payment) or too low (bank won't let you overpay).

(5) If you get this far you can do another AskMe. :) I hope you're realizing that it's really, really not hard to purchase a house: there are so many people interested in seeing you through to closing because there's a LOT in it for them and they're actually working FOR YOU. Look at your mortgage's principal-to-interest ratio if you don't believe me!
posted by resurrexit at 10:15 AM on February 26, 2015 [11 favorites]


Do you have a signed contract with your broker? If so, have you checked to see what it says about whether she only gets paid for properties that she introduces you to? Or does she get paid if you buy a house, any house, within a certain amount of time after signing the contract? In a lot of nonexclusive contracts, your broker only gets paid if they show you the house, but you'll want to double-check whatever you signed. Your real estate lawyer should be able to advise you on this.

As for having both an agent and a real estate lawyer -- usually, the agent does on-the-ground stuff like corralling signatures from buyer/seller, coordinating documents from the homeowners association, ordering certifications/inspections from local authorities, calling to set up times for key exchanges, etc. Basically, non-legal annoying stuff that you don't want to pay a lawyer a couple hundred bucks an hour for, or that lies outside of what a lawyer on a fixed-fee arrangement has agreed to do.

The lawyer does stuff like review title, draft or review the deed, check the settlement sheet, and answer your questions about "what does this section in the document mean" and "why do I have to sign this?" Good ones will also act as the heavy if you need one, and will keep an eye on your broker.

By the way, some of the most fraught residential housing transactions I've ever done have involved situations where the sellers and buyers knew each other socially, but were not super-close. . .
posted by joyceanmachine at 10:30 AM on February 26, 2015 [3 favorites]

you definitely don't need a lawyer.

I would respectfully disagree, and not just because I work for a real estate lawyer.

there are so many people interested in seeing you through to closing because there's a LOT in it for them and they're actually working FOR YOU.

As I've said in many AskMes here, the only person who is actually working FOR YOU is the person YOU are paying out of YOUR pocket.

The bank, the title company, any realtors - they only get paid if the house gets sold. They're going to get you to closing no matter what - even if it ends up not being in your best interest.
posted by Lucinda at 10:32 AM on February 26, 2015 [6 favorites]

You don't need an agent, but you do need a real estate lawyer. Even if you have an agent, a real estate lawyer is, in my beleaguered experience, a HUGE difference before, during, after, to prevent issues that everyone else ignored that come up 8 years after ...
posted by Buttons Bellbottom at 10:42 AM on February 26, 2015 [2 favorites]

Seconding the point above about checking what your contract with the broker says. You may have no choice here.

If you do have a choice, I would say go without. In my experience (buying a Manhattan co-op apartment and later selling it), the broker during my purchase was most useful in preparing the co-op application, which doesn't apply here. It was also helpful to get the broker's opinions on different properties and their listing prices, and helpful to have her negotiating on my behalf for a purchase price. I think the rest of the things could be done by you with some referrals from your lawyer (I personally think you should hire a lawyer, and depending on where you live, you may in fact be required to get one anyway).

If you're really nervous about this and want the broker anyway, negotiate down to 2% instead of 3%. I think you can make a good case for this: much of her work won't even apply in this situation. She doesn't need to search for and send you listings, she doesn't need to set up showings (and by the way, buyers sometimes search for months or even YEARS), she doesn't need to negotiate the purchase price. All of that is already done. She's saving a TON of work and time. It will be a quick commission for her. Hell, I would try to negotiate for 1.5%, really.
posted by sunflower16 at 10:43 AM on February 26, 2015

You don't need an agent and you definitely don't need a lawyer.

The OP doesn't identify where this transaction is taking place, but there are some states where they are absolutely, positively, legally required to have a lawyer, independent of whether or not they want a lawyer. This is one of those "check your jurisdiction" issues.
posted by thomas j wise at 10:44 AM on February 26, 2015 [4 favorites]

I cannot tell you what direction to go with, but I will say that in my experience, joyceanmachine hit it on the head:

"By the way, some of the most fraught residential housing transactions I've ever done have involved situations where the sellers and buyers knew each other socially, but were not super-close. . ."

We bought a neighbor's house who we knew socially and it was pretty much a disaster. We went agentless and used the seller's agent because the sellers had already made a contract with him. If we could redo, we would have had an agent to support and fight for us because that agent surely did not.

There is a HUGE something to be said (especially when it's your first home) to have someone who actually knows what they are doing working for you.

On reading, seconding sunflower16's suggestion to negotiate.
posted by lil' ears at 10:45 AM on February 26, 2015 [2 favorites]

By the way, since I see you've ID'd resurrexit's answer as "best answer", you should be advised that practices differ widely across jurisdictions. In fact, sometimes they differ not only by state, but by county and municipality on very, very basic things.
posted by joyceanmachine at 10:57 AM on February 26, 2015

Absolutely yes to a lawyer, no to an agent.
posted by odinsdream at 10:58 AM on February 26, 2015 [3 favorites]

Nthing yes to lawyer, maybe to an agent. But make sure it's an experienced lawyer who has done many deals in your specific locale; you want someone who has an understanding of common causes of conflict protect your interests.
posted by snickerdoodle at 11:06 AM on February 26, 2015 [1 favorite]

++ Lawyer, no agent. The contract that the lawyer sets up will outline the necessary components (inspection, mortgage contingency, appraisal), and your deadlines for completing them. Work backwards from there. Some of the documentation and signatures and paperwork WILL be onerous, but not onerous enough that I'd buy a car for a stranger for it (ie $15k of value). The mortgage usually takes the longest, so start there.
posted by Dashy at 11:28 AM on February 26, 2015 [3 favorites]

I'll just chime in again to say that a lawyer (or a law office--there are some really good paralegals out there!) will definitely be involved at some point in this transaction--a deed will have to be drawn up. However, in most jurisdictions this is handled through the title company, who hires an attorney to draft its deeds for them. This may not be the case in your jurisdiction, so do please find this out from the title company. If you're shopping for a title company, ask them this when you call.

Also, if you can't locate a standard form real estate sale contract like I've mentioned above, I'd absolutely recommend calling up an attorney. They can do this for a lot cheaper than an agent--with an agent, you're paying them 3% or 6% or whatever for the information to which they've given you access: the MLS, comparable properties, etc.
posted by resurrexit at 11:31 AM on February 26, 2015

My dream is to be in your position. Lawyer yes, agent no.
posted by cacao at 11:41 AM on February 26, 2015 [2 favorites]

We did this on our own on our first house. It was fine. Ressurexit is kinda right in that the banks won't let themselves get screwed. But they may have more of a tolerance for error because there is someone (you) standing in between them and the loss of a ton of money. And, say, $20k isn't going to break them they way it might a normal person.

Real Estate Agents are exteremely overpriced, especially now that their #1 value (bringing homes to the attention of buyers) is done for free (or a couple hundred bucks) by the internet. But they aren't entirely worthless. You can probably explain your situation and ask how much they would charge to get everything in order for a purchase.
posted by the christopher hundreds at 11:48 AM on February 26, 2015 [1 favorite]

Thanks for all the helpful info for consideration. I'm in Virginia, if that matters (Fairfax County), thus explaining the exorbitant home price for a first time buyer. I just feel like the main value a buyer's agent brings to the process is locating properties to show and helping to negotiate the price. But I take the points about buying from acquaintances and having a professional in place to lean on when things go off the track. I probably wouldn't overthink this so much if I didn't live in such an expensive place!
posted by Creamroller at 11:56 AM on February 26, 2015

Will add to the chorus of yes, lawyer; no, agent. I found my lawyer's input invaluable, particularly as a first-time buyer, and he was the one person in the whole process who was really on my side (since that was basically what I was paying him for). He also found me a great inspector.
posted by ferret branca at 12:01 PM on February 26, 2015 [1 favorite]

I have done a house sale (FSBO) with just an attorney. This is doable without an agent. However, an agent can be helpful. I am not sure if you are locked into the strict 3%, but I would seek to negotiate a lower fee. The agent will have to pay out around half to their firm. The fee can also be rolled into the mortgage. The other side raises the price by the amount of the fee and then pays the agent out of the proceeds. The mortgage is for whatever it would be without the fee plus the fee.

$15,000 or less is a lot of money when buying a new house. Can get furniture, etc with it. However, if it is amortized as part of a 30 year mortgage at a 2.9% rate, that is a cheap way to finance peace of mind and an insurance policy of having the agent walk you through your part of the transaction.

I would just hire a lawyer who will do the same thing, but the agent will be more hands on the little things and will stay on top of the seller for items big and small. Your lawyer can also recommend an inspector, a title company and even sometimes local service providers.
posted by 724A at 12:06 PM on February 26, 2015

I purchased my non-listed house from a co-worker in November 2013 in Arlington, VA. I decided to go with an agent because I really did need someone to walk me through all the paperwork, and in retrospect, this was the correct decision. I said I wasn't going to pay more than 1.5% though and he was ok with that.
posted by longdaysjourney at 12:36 PM on February 26, 2015

I buy houses a lot of houses, and I NEVER use a realtor. But I always use a lawyer.

A realtors primary job is to find properties. If you found one on your own, then you do not need a realtor.

A lawyers job is very different. A lawyer is there to make sure that there are no unforeseen hiccups in any of the legal documents. By the end of this deal, you will have signed a mountain a paperwork, and it is all written in legalese. Are you planning to read those documents? Would you understand the documents even if you did read them?

Some people suggest hiring a realtor to help you with the paperwork, but realtors do not actually understand the legal language in document, as they are not lawyers. Also, a realtor may well be more expensive than a lawyer in this case. Realtors take a percentage of the sale. Most real estate lawyers can review a deal in a few hours, and charge you like $500.
posted by Flood at 1:22 PM on February 26, 2015

Find out if you're required to have a lawyer in VA for a home purchase. If not, interview a few title companies to run the paperwork for you.

Often your bank will dictate the title company where the closing will take place, but it's a suggestion, and you might find one with lower fees or that you like better. (In Georgia, where I now live, you MUST close with an attorney, it depends by jurisdiction.)

Who is funding the purchase? Bank, credit union? Speak to your mortgage specialist/loan officer about what you'll need to do this. As I said before I've done 3 transactions without a realtor and they were all smooth and straightforward.

Fairfax county is one of the most expensive markets in the country and if you feel that you have a handle on this, I think you can safely navigate this yourself.

You will need to hire your own home inspector, and make sure you have a plumber put a camera down the pipes to insure that everything is sound. I didn't do this and it was a HUGE, horrible, expensive thing.

Your financial institution should walk you through the process. This is not their first rodeo.

posted by Ruthless Bunny at 1:56 PM on February 26, 2015

I'm just as independent-minded as anyone, but I absolutely had a buyer's agent representing me during my first house purchase. There are sooooo many things you don't know yet, and ways you'll get taken advantage of. Maybe just a lawyer is OK, but I think for your first time you should just get an agent like everyone else.
posted by intermod at 2:33 PM on February 26, 2015

There are two essential consultants in most transactions: the buyer's lawyer and the title agency. Title insurance is crucial, to insure against the unknown. The title agency will often be able to handle the details of the closing.

The buyer's lawyer is there to ensure that all of the legal requirements are met.

An agent, realtor or otherwise, is very commonly used by the seller, and only occasionally used by a buyer in my experience. Neither is essential.
posted by yclipse at 3:11 PM on February 26, 2015

(IANAReal Estate Professional, Lawyer, Etc.) You need someone to help you write up the offer. Typically, the offer is contingent on Inspection, Appraisal, Lending. Get the most thorough inspector you can find. Get an independent appraisal. Make sure someone qualified looks over the offer, which is a contract.
posted by theora55 at 8:01 PM on February 26, 2015

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