Real Estate Matters: Buying a property without an agent could cost you
Q: What do you think about buying a property without a buyer’s agent? What tips would you share for home buyers who do not want to use an agent?
A: Every year, a relatively small number of homes (roughly 11% in 2018, according to the National Association of Realtors) are bought and sold without the use of a real estate agent. Some buyers approach sellers directly. Some buy direct from companies (so-called iBuyer companies like Opendoor, RedfinNow and Offerpad) that buy homes from sellers and flip them.
These days, we’re hearing from a greater number of younger buyers who believe they can handle the home buying experience entirely on their own, with the help of the internet. Often, these buyers (mistakenly) believe they’ll save money by purchasing a home without an agent, because the seller will only pay a half commission, instead of the full commission.
But that just shows ignorance of the process. Sellers who have listed their homes generally pay between 4% and 6% of the sales prices as a commission to the listing agent. The listing agent, in turn, typically pays the buyer’s broker around half of the total commission. No buyers agent means the listing agent doesn’t have anyone to share in the commission. So, unagented buyers unwittingly allow the listing agent to pocket the entire commission.
Unagented buyers make other mistakes in the process that can cost them money, like not understanding how pricing works in a neighborhood, not understanding how to make a viable offer, and not understanding the relative value of specific amenities to a particular property. These mistakes, among others, can inflate the value of a property, causing an unagented buyer to offer more than they should.
Competent agents can help buyers avoid these mistakes, which is why we think all buyers should use one. But there’s no law that requires you to use an agent. You certainly are within your rights to buy on your own.
The purchase of a home is generally the largest single financial transaction that most people will make during their lifetime. While we can’t compare buying a home with getting medical advice, we have heard stories of people trying to diagnose their illnesses without seeing doctors and others who make repairs to homes that would have been better left to professionals.
So, yes, you can buy on your own. And you might overpay, buy the wrong home or make other homebuyer mistakes. Ilyce has written several books that list some of the most common homebuyer mistakes and you might want to look them over.
But if you’re determined to do this on your own, here’s a list of several common home buying mistakes that you might encounter:
1. Overpaying for a home. If you think you can understand the real estate market solely by viewing homes on the internet, you might miss out on the very nature of what makes real estate unique. Where a home sits on a lot, within a street, within a block, within a community and within a town can make all the difference. Subtle differences can make all the difference in what a home is worth.