Do I really need a realtor?

June 15, 2024 11:41 AM

A friend of mine didn't use a realtor but a broker I believe to buy their house. I've never heard of that before but I also met someone who she says her dad was a mortgage loan underwriter and "he wrote her loan" for her. So tell me, what is it that these people know that I don't? I don't have the cultural capital to learn this stuff from my family but I'm surrounded by people who buy houses like it's nothing.

If I find a place that I like, why do I need a realtor if I can just go to a mortgage broker? It sounds like two people I know have direct links to people who make this process easier for them and it's like inside baseball to me.

I'm not opposed to hiring a realtor. Just I find it wild that in all the info I read it's always hire a realtor and then I see people who don't and I'm wondering what am I missing?

posted by mxjudyliza to Home & Garden (22 answers total)

You don't know what you don't know, and it sounds like there's a lot you don't know about buying a house (there's nothing wrong with that; it's just the fact). As a buyer (and especially as a first-time buyer), there's very little reason not to have your own realtor/agent. You don't even pay them - their commission comes from the seller.

You're also conflating mortgages and the process of purchasing the home. If you need a loan, then yes, you'll need either a loan officer or a mortgage broker, but those are very different from your real estate agent.

Laws on all this vary by state, so the type of personnel you enlist can vary. I believe, for example, that some locations require a lawyer, but many do not.

As for what you're missing... I think your friends may be missing some humility. Many people think they can do something like this alone, and maybe that's possible. But you'll make your life easier by finding professionals to do the things they do well. Perhaps if you've already identified a place, you don't need a realtor, but even at that, they can be helpful in negotiation and ensuring the deal closes.
posted by hydra77 at 11:55 AM on June 15 [7 favorites]

It may be different in your area, but where I am (Toronto) a realtor for the buying party provides:

- access to properties that are on the market - they can call up and get the key code and take you through
- access to properties that aren't formally on the market (like my current home, which was a deal that fell through and we scooped it up)
- they present the offer to the seller's agent and negotiate on your behalf
- ideally they do a lot of educating - you have to remember they are motivated to sell you a house, any house, but our experience is that they also can be very honest about neighbourhoods, quirky things, what to look for, if you work with an honest one that wants your business long-term
- they can help connect you with mortgage brokers and real estate laywers

In my experience you still also want:
- either a mortgage broker or pre-qualification with a bank
- a good lawyer - in our first house we found that part of what looked like the lot was actually laneway and had to get that property line cleaned up first

Also in my experience, people who don't hire professionals often are fine, but it takes more effort. In real estate I find the people who are willing to do that either have a lot more money than I do to burn, are generally chill people, or are people who are good risk-takers and/or entrepreneurs. I'm fine being me and not them.
posted by warriorqueen at 12:02 PM on June 15 [11 favorites]

First, you need to say where you are or where you'd be buying a home.

But a real estate agent/realtor and a mortgage broker are two very different things, as far as I know, everywhere. A realtor helps you find a home and negotiate the terms of a sale. A broker helps you find and negotiate the terms of a mortgage. You do not need either of these to buy a home. You can negotiate directly with a seller (or their broker). You can get a mortgage from your bank or any other lending institution without using a mortgage broker. You can (I mean you probably can't, but some people can) just pay for a house outright without getting a mortgage at all.

Note that as a buyer, both a realtor and a mortgage broker are free* to you, since you feel like you don't know a lot, it probably makes sense for you to get a buyer's agent and a mortgage broker.

*there are people who make the argument that houses sold without involving realtors are cheaper because the cost of the realtor ends up worked into the cost of the house. I'm not sure I buy this because nobody every said "since I don't have to pay a realtor I'll sell for less than the comps." also there are people who make the argument that non-realtors suck at pricing and can over-price. I don't know if this is true.
posted by If only I had a penguin... at 12:05 PM on June 15 [1 favorite]

Buyer's agents are absolutely not free. The seller is paying 2-3% for the buyer's agent and that money has to come from somewhere. The seller will either mark up the place 2-3% to account for the buyer's agent, or all things being equal, they would accept an offer that's 2-3% lower to skip the buyer's agent.

If you want to buy a house without a realtor, the usual path is through a lawyer. Sometimes lawyers are also licensed as real estate agents, which allows them access to standard offer forms and the local listing information. Those lawyers will usually charge hourly. However, preparing an offer is only a couple hours, at most, of a lawyer's time, and that is usually radically less than the cost of a buyer's agent. Around here, 2.5% is the common buyer's agent commission, and 2.5% of a $1M purchase is $25,000, which pays for many hours of a lawyer's time. For the lawyers that provide that service in my area, they will refund you the buyer's agent commission at closing or after closing.

If you do this, you will almost definitely pay hourly. That means if you have to make multiple offers, you will pay multiple times. If you want to go visit a house outside an open house, you will likely have to pay to do that. You can ask the listing agent to show you the house, but they may decline unless you sign an "agency agreement" with them (ie, use their services to buy the house). If you want advice about the neighborhood, you will pay for it. If you want advice on general contractors, you will pay for it - and the lawyer may not even know anyway. On top of all of this, unfortunately realtors are very protective of their income, and although this would be highly questionable to do, it's possible the seller's agent may subtly (or explicitly) discourage the seller from taking your offer.

If I were to buy another place, I plan on skipping a buyer's agent. My buyer's agent for my current place cost me $15,000, and the only thing they did was take me on one househunting tour and fill out some offer forms. As other people have said, there's no need to have a realtor to get a loan - in fact, most realtors tend to point towards banks they are friendly with rather than mortgage brokers that offer competitive mortgage interest rates. However, realtors do offer other services that may be valuable to you. I would just encourage you to view it as a cost, because there is no free lunch when you use their services.
posted by saeculorum at 12:22 PM on June 15 [1 favorite]

I also met someone who she says her dad was a mortgage loan underwriter and "he wrote her loan" for her.

If it makes you feel any better, this person's dad almost certainly violated his lender employer's conflict of interest policy.
posted by praemunire at 12:26 PM on June 15 [7 favorites]

(Also, another reason one or more of your friends might not be using a realtor is they're buying from family, or family friends. If the sale is effectively a pre-agreed inside deal and you're not shopping around, it's probably more cost-effective to skip the realtor and just hire an attorney.)
posted by praemunire at 12:28 PM on June 15 [2 favorites]

You don't need a real estate agent or a mortgage broker. A real estate agent shows you different properties and helps you find something you like - you can do this yourself if you do the legwork. The real estate agent might help you figure out what to offer as a purchase price - but you can also do this yourself, especially by reviewing recent sales on Zillow/similar. A mortgage broker helps you find a loan with a bank - you can also do this yourself if you do the legwork (like calling banks or looking them up online).

I bought a house without a real estate agent or mortgage broker. I found the house myself so I didn't need an agent for that. I found the mortgage myself by shopping around and using a credit union. I did hire a lawyer for ~$1,000 to review the contract and help with the closing and title process. I personally think a lawyer is much more helpful than a real estate agent or mortgage broker in a house purchase.

Realtors and mortgage brokers are middlemen (or "intermediaries") - you don't need to use them, but some people prefer to have someone help them find and consider different options. Just like insurance agents - you can buy insurance yourself or use a broker/agent. In general, by using a middleman, you are trading money (you pay them one way or another) for guidance and possible time-savings because they do the legwork/research. But they are not free - typically you pay them in some kind of hidden commission or spread that is built into the price of the product or sale. You can save money by not using them, if you know what you are doing.
posted by Mid at 12:44 PM on June 15 [1 favorite]

The seller is paying 2-3% for the buyer's agent and that money has to come from somewhere. The seller will either mark up the place 2-3% to account for the buyer's agent, or all things being equal, they would accept an offer that's 2-3% lower to skip the buyer's agent.

I just want to note in my experience, this really depends on how fast-moving the market is.

Here, when it's a busy market, you can't even get in to see houses in a timely way without an agent (depending on the listing agent's availability to show it). There's no shortage of buyers at the negotiating table, most of whom have agents, and if your offer seems more complicated for the sellers (or the sellers' agent) you can get ignored for a same or slightly better offer, just because you seem to be doing things differently. I think this is changing some, but probably not with older/more traditionally thinking sellers.

Another thing that happens here is the buyer's agent will advise on how much over asking the house will go for. Without that information you can really over/under bid.

But yeah that depends on the market - here things have slowed down so it might be a bit easier lately. But when we were buying, that's how things were moving. Also, agents work differently in different areas.
posted by warriorqueen at 12:49 PM on June 15 [2 favorites]

If you're in CA (based on previous ask) I wonder if "broker" here means real estate broker, not mortgage broker? Which is actually a step up from using a regular realtor.
posted by advil at 1:00 PM on June 15 [4 favorites]

Possibly better link, though not CA-specific.
posted by advil at 1:03 PM on June 15

Let me make it really clear for you.

A real estate agent helps you look for, choose, and negotiate the price for the property. They get paid out of the sale price of the home (generally half the sales commission which is from 4-7% of the sale price). A broker is second tier licensed professional with a higher license grade than a real estate agent. Either can help you. Agents work for brokers in brokerage offices.

A mortgage broker helps you find a way to pay for the property. They get paid a bounty for your business, by the lender. You don't pay them directly.

A solicitor / lawyer / title company manages the money transfer between all the involved parties and helps complete and file all the extensive paperwork correctly so no one gets fucked out of the property or the money they are due. They get paid by the buyer, as part of closing costs.

The above is correct for the US and Canada. Not sure about other locales.
posted by seanmpuckett at 1:23 PM on June 15 [7 favorites]

Buyer's agents are absolutely not free. The seller is paying 2-3% for the buyer's agent and that money has to come from somewhere. The seller will either mark up the place 2-3% to account for the buyer's agent, or all things being equal, they would accept an offer that's 2-3% lower to skip the buyer's agent.

I don't think this is right for a few reasons. First, around here the seller doesn't pay the buyer's agent. The seller's agent pays the buyers agent. So the seller's agent will have negotiated a usually 5% fee with the seller. The listing, as viewed by the realtor (the realtor can see listing details.nit visible to non-licensed realtors) will say what portion the sellers agent will share with the buyer's agent. Usually half. So if the buyer has no agent the seller's agent just keeps it all. I'm.pretty sure if the seller has no agent and the buyer does the seller's agent is just SOL but I'm not sure how that works the buyer's agents obviously has no contract with the seller so they have no means to "make" the seller pay a commission.

On the point of marking up or accepting a lower offer, even if you were in a place where the seller pays the buyer's agent, nobody prices real estate that way. Real estate is proced based on the marked and comps. If your house is worth 1.2 million you can ask for another 5% to pay the real estate agents. And you'd be stupid to say "well I'll sell without an agent and sell for less" if you could sell without an agent and sell for market value. If people will pay 1.2 million for your house why would you leave $60k on the table insteadvof pocketingbthat money? Especially when the house your uprising into will be 2.3 million and they're not going to cut you a 5% break?

Of course the price of agents is built into real estate prices but that's at the market level.
posted by If only I had a penguin... at 3:10 PM on June 15 [1 favorite]

Buyers without agents ask for a 2.5% (or whatever) discount to reflect that there is no buyer’s agent commission. I have done this. Whether the seller will accept, or whether this matters at all in the mix of all the other things that go into a price negation, is going to vary by place/time/market/etc. But it is a super normal thing for buyers to try to get the price reduced because they have no agent - I didn’t invent it myself!
posted by Mid at 3:37 PM on June 15

Buyers without agents ask for a 2.5% (or whatever) discount to reflect that there is no buyer’s agent commission.

Then it's really going to matter where you are because around here the fact that you ad no agent would in no way affect the size of the commission paid by the seller.
posted by If only I had a penguin... at 3:46 PM on June 15 [2 favorites]

To make it specific - if you have a $1m asking price, the seller’s agent is expecting a commission of ~3-5%, depending on the market, which will need to be shared with the buyer’s agent for roughly 1/2. So the overall commissions on the sale are like 50k. The seller is expecting 950k net. If I bid 900k on the property without an agent, I can say that ~25k of the discount should come out of the commission (the seller’s agent still gets the 25k they were expecting). The seller receives $875, or 75k less than expected. My 10% discount becomes a 7.75% effective discount to the seller. This might work or might not work, depending on the market etc. But it is a standard move. The main point is that the seller’s agent shares some of the “downside” of the discount, because they were never expecting to keep the whole 5% commission anyway. This is often a separate deal that needs to be worked out between seller and seller’s agent. I bought my house this way.
posted by Mid at 4:12 PM on June 15

There's an easier way around all of these discussions about buyer's agent fee. You don't need to make a complex offer that involves the seller's agent renegotiating their fee.

Many/most fee-based real estate agents/lawyers will simply refund the buyer's agent fee to you after you pay their fees. So, essentially you bid 100% of what you want, but you only have to pay 97% of it (because 3% is refunded back to you). Net result - offer is simple, but you get to avoid paying the buyer's agent fee.
posted by saeculorum at 4:22 PM on June 15 [1 favorite]

Response by poster: This is in California, U.S. I'm only conflating the two because like I said, my friend didn't use a realtor and I had no idea people could buy a house without a realtor. They used someone who brokers loans. So I assume that is not a realtor.
posted by mxjudyliza at 6:40 PM on June 15

A good real estate agent can help you avoid pitfalls and land the house you want in a competitive market. For instance, once while touring houses, my agent noticed that the electrical panel was an older one that was subject to a class action lawsuit long ago and I would probably wind up wanting to pay to replace it. She also once told me that a house listing I sent her would be a poor choice because it was a low quality flip. She recognized the flipper's work. And most importantly, she helped me land a house that had such a competitive buying situation that they didn't even want to let me in to see the house. They had received something like 7 offers in the first day and were calling it. My agent helped me strategize the strongest offer I could, and talked the selling agent into looking at my offer, and I got the house. (At the time, the strategy involved a large earnest deposit and an escalation clause.)

Over the years she has also helped me when I needed recommendations for good contractors.

If you can find a fantastic real estate agent by word of mouth, that can make a huge difference and be well worth the cost.
posted by happy_cat at 7:04 AM on June 16 [3 favorites]

You could represent yourself if you have two things:

1) past experience buying & selling homes and a fairly thorough understanding of the process
2) familiarity with the neighbourhood that you're shopping in
posted by ovvl at 1:27 PM on June 17

I don't need to hire someone to help me buy a bike because I know a bunch about bikes and what I want and don't want, and I can consult my very bikey close friends for anything I don't know.

Even though I have bought two houses and gotten a few mortgages and refinanced a few times, I absolutely would hire a realtor to help me sell my house and buy another. There's no way I want to navigate such an important, large purchase without someone I have hired and am paying to be my expert and advocate.
posted by bluedaisy at 4:12 PM on June 17 [1 favorite]

If it is not already clear, there is no legal requirement to use a real estate agent when buying a use. ("Realtor" is a trademarked name for real estate agents who are members of a specific national organization. Like using kleenex when you mean tissue)

However, there a number reason why most people usually do usually use a real estate agent, mostly related to their greater level of experience in the process of buying and selling homes. I have bought five homes in my lifetime. My favorite agent helps people buy or sell 30 homes in a year. As you saw above, they get paid by the seller but if you make an offer directly (without an agent) you may be able to negotiate a lower price since the seller doesn't have to pay your agent a commission. At the same time, if you don't use an agent, you lose out on the benefits of having the agent show you homes, advise you on your purchase stategy, they can represent you in communication with the seller (great if you aren't a skilled negotiator) able to provide standard forms for each stage of the process, have connections or referrals to everyone else that you need to hire to complete the process (inspectors,title companies, lawyers, mortgage brokers) and help you make sure the deal closes properly.
posted by metahawk at 4:34 PM on June 17 [1 favorite]

I think this thread summarizes the pros and cons of using brokers well. Note that the original post was asking - why don't some people use brokers? - and that's the perspective I was trying to give as someone who has done it without brokers.

There's no way I want to navigate such an important, large purchase without someone I have hired and am paying to be my expert and advocate.

I think this is an important aspect of the decision to use or not use a broker. I haven't met a real estate agent that I feel has been my expert and advocate - the ones I have used, in general, have been most interested in getting deals done, and they haven't offered any advice beyond what I could figure out on my own with some reading and Zillow-following. Of course your mileage may vary depending on the specific broker you find and use, and some people report having great experiences with brokers, so this is definitely not a question/issue that can be addressed for all buyers and all brokers with one answer!
posted by Mid at 6:50 AM on June 18 [1 favorite]