The Pros & Cons of Buying a Home

without an agent

Buying a for-sale-by-owner (FSBO) property carries with it some additional buyer concerns. A FSBO property is one where the seller is not represented by a Realtor. Before becoming a Realtor, I both sold and purchased homes ‘by owner’. I’d like to protect you from the things that can go wrong on the buying end if you don't have good information and competent guidance, including problems with disclosures, property defects, easements, zoning, financing, insurability, neighborhood restrictions, covenants, and closing delays.

Let’s say, you’ve found your dream home on your own and you’re serious about buying it. Next, consider ….

Price: Who wouldn’t want to get their dream house for less than the going rate? But often buyers are just as likely to be offering too much as too little. Your job is to get an idea of what the place is really worth before you start talking money.

Some buyers believe that unrepresented sellers will pass along their savings from an agent's commission -- usually about 6% of the price. The Truth: The seller may be a little more flexible on price when selling by owner, but they're not likely to give you all the commission savings or they'd be no better off than if they had let a real estate agent take care of everything.

Some sellers choose to be unrepresented after an agent tells them they won't be able to get as much as they wanted for their house. Many price their home based on what another homeowner is asking down the street. A neighbor can ask millions of dollars, but it doesn’t mean they’ll get it.

Get "comps" or sale prices of comparable homes that have sold in the past six months in the neighborhood from a Realtor. Your offer should be based on those comparable prices, not the asking prices. You can look at web sites, like zillow.com, but keep in mind that they are only within 10% of accuracy about ½ of the time. Work on facts, not fiction.

Also, put yourself in the best buyer position by getting a mortgage pre-approval before you make your offer. It can help legitimize your offer and you're more likely to get a better price if you are willing to close quickly and easily.

Negotiation: Buying from an inexperienced seller who is handling everything by himself can be frustrating but can also be profitable if you are prepared.

People usually try to sell a house on their own to net more money. In reality, most unrepresented sellers net less than those sold by a Realtor. Often they underestimate the time, cost and complexity of going it alone. They end up tired and frustrated of the process, ready to be done with it. Help them solve their problems, and you may be rewarded.

Identify what is most important for the seller and try and give it to them in trade for something else. For example, if you think allowing possession after closing is something the seller needs, maybe you can trade that for a lower price.

The selling price is not the only area of negotiation. You should know which costs are customary for a seller or buyer to pay in our area. Date of possession and financing options can have a huge affect on your bottom line. Never rely on oral agreements, such as "all appliances will remain with the house." Get it in writing.

Keep all conversations as neutral as possible. Because the seller doesn't have an agent, there's no liaison to buffer the bargaining process and present offers with an informed, realistic perspective.

An owner isn't an agent, so don't ask possibly offensive questions or make negative comments about the house or its condition. A casual statement about "ugly carpet" can be hurtful enough to keep the seller from negotiating with you. It's difficult to get a good deal if the seller doesn't like you.

On the other hand, don't become too friendly with the seller. Sentiment and personality conflicts often cloud judgments. It is not in your best interest to let emotions guide the financial process.

Most people find it difficult to negotiate on their own behalf and feel better when negotiating is done by someone else. An intermediary can help take the personalities out of it. An agent can present the reasons for your offer and might be able to say things that the listing agent or homeowner haven't thought of or considered.

If you do decide to buy a home without a realtor, hire a real estate attorney to help you draft the purchase contract. Factor into your costs how many extra hours of the lawyer's time you will require because you’re buying a house without an agent. If that's too expensive, a title company can do some of the legal legwork, but they're less prepared to work on complicated transactions.

Home’s Condition ( and what you don't see): Buyers, at a minimum, should be aware of our disclosure laws. Some unrepresented sellers have been known to take advantage of the less formal process by concealing problems or flaws. You may well want to hire an attorney or agent just to brief you on the disclosure requirements.

Always get a disclosure before making an offer. You want to know about material facts and potential problems upfront before money changes hands. After closing, it is pretty difficult to get compensation from a seller who has just moved cross-country.

You can also request copies of recent electric, gas or water bills and bills for any repairs. Who did them and when? If you’re looking at a 15-year-old home and the roof hasn't been replaced, that's probably something you need to consider.

Make any deals contingent in getting satisfactory report from a home inspector that YOU select and pay. Get your own inspection (and separate termite/pest inspection) done, even if the seller has already done them. Never sign away your rights to inspection, even if you know the seller won't agree to make repairs.

Do a final walk-through after the house is vacant, on the day of closing if possible. You don’t want to walk into your new home and find defects that had been hidden by furniture or damage caused when the sellers moved out.

Finally, ask the owner to provide a home warranty which range from $250 to $850. The home warranty (basically a private insurance policy) covers the electrical, plumbing and heating systems for one year. If the home is 15 years or older, you definitely want it. 

Paperwork: If you've agreed on a deal, don't give your earnest money directly to the seller. It should be put into an independent, third-party escrow account by your agent in agreement with the seller. You don’t want to become one of the horror stories where a buyer gives an earnest money check to a seller only to find out that the seller contracted with other parties and skipped town with everyone’s money just before the bank foreclosed on the property.

The sales contract spells out all the terms of the deal prior to the closing. Again, if you don’t have an agent representing you, hire a real estate attorney before you sign.

Some contract points to consider: Does it allow you to opt out if the home inspection isn't favorable? Does it allow for renegotiating the price or canceling the contract if the house has conditions the seller hasn't disclosed? What will happen if there are title problems? Is the closing schedule realistic? What if you can't obtain financing that's acceptable to you? What if the property the lender’s appraisal value doesn’t agree with the sale’s price?  If the contract is canceled, what happens to the deposit and earnest money?

Earnest money is given when you sign an offer to purchase. Until the property closes the deposit belongs to you, not to the seller, unless your offer says otherwise. Unfortunately, some unrepresented sellers think that the deposit money is theirs to spend before closing. If the seller spends the deposit money prior to closing and the transaction falls through for valid reasons --such as financing or repair issues, the buyers may have to fight for a refund. Make sure your contract dictates what happens to the funds if the transaction doesn't close.