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The Risk of Buying a Home Without a Real Estate Agent

No Buyer’s Agent Equals Increased Risks

If you are thinking about buying a home, chances are you have questioned whether you need a real estate agent or not. Real estate agents in film and television are often portrayed in a negative light, which naturally leads to a perception that they may be untrustworthy. There are also no laws requiring you to use an agent, so what’s the point? Why bother?

In reality, trying to buy a home without a real estate agent can carry risks and lead to issues that you may not be aware of. There are plenty of good, honest agents out there who focus on what is best for their clients. The benefits of having a fantastic buyers agent are immeasurable.

Buying a home is a big deal – maybe the most significant transaction you ever deal with. You should be aware of the risks before you decide to buy without representation, because you may discover that the potential problems of going solo outweigh the possible benefits. Buying a home without a real estate agent can be financial suicide if you’re not careful!

Buyers need to keep a few things in mind. An exceptional buyer’s agent represents your best interests. The agent owes the buyer undivided loyalty, confidentiality, reasonable care, obedience to lawful instruction and accountability.

The best buyer’s agents put your needs above their own. When you go out to purchase your home without an agent, you lose all of these things.

Well, the simplicity of this arrangement is more of an illusion than a reality. Potential problems of buying a home without a Realtor include:

Overpaying for the home.

The price of the FSBO home is set by the owner, who may or may not have any idea what the actual value of the house is. Homeowners are notorious for overestimating the values of thier homes. The owner could set any price, and you will not have a way to verify the validity of that price on your own. 

Anyone who has half a brain understands that you have better odds of spotting Bigfoot than you do of seeing an accurate Zillow home value. Some sellers don’t know any better. If it looks too good to be true, it probably is! Other sellers just pick a number out of a hat based on what they need or want for their home. One of the significant benefits of having a buyer’s agent is someone in your corner who can analyze market value for you. Overpaying is a substantial risk of buying a home without a real estate agent.

Disclosures

In some states, sellers do not have to disclose problems with their homes. In states where this is the case, it is known as Caveat Emptor or “let the buyer beware.” Real Estate agents, however, are held to much higher standards.

If a real estate agent knows about some problem with a home must be disclosed! There are very few instances where a real estate agent can avoid disclosing a condition that would make a buyer think twice about purchasing a home.

For example, if the seller’s basement floods every spring a real estate agent would have to disclose this to any buyer who was interested in the property. Agents are not allowed to have a “blind eye” when it comes to potential issues they have discovered.

Some sellers in states where non-disclosure is allowed will try to sell their home for sale by owner. A percentage of these owners may even market thier home as bieng sold as is. A big red flag should go up if you are purchasing a home from a for sale by owner and they are selling as-is!

Inspection problems.

A home inspection report can be hard to decipher for the average person. The inspector is going to list every potential problem so that the report may include 20-50 points of concern. Some of these may be things you need to worry about, while others may look like a big deal but in fact they are not.

Understanding what inspection requests are unresaonable is a service a top shelf buyers agent provides. A real estate agent looks at these reports all the time, so he or she knows how to pick out the important stuff – the stuff you will base your negotiations on.

Without an agent, you will also not be aware of the different types of inspections that are advisable for your area or for that matter picking the right home inspector to begin with. You may need to do a mold inspection, a radon inspection an inspection for insect infestation, or some other special inspection. Miss the necessary inspection, and you may wind up with a home with real issues.

No knowledge of the neighborhood.

The Benefits of a buyers agent:

One of the biggest advantages of a Realtor is that he or she is an expert on the neighborhoods in the area you are buying. School districts, property taxes, HOA rules, commutes, property values, etc.

Knowing how to pick the right nieghborhood is important. The neighborhood you choose can have a significant impact on value, as well as re-sale potential down the road.

You are not just buying a physical home; you are buying property in a particular area. Considering how much money you are spending, it is worthwhile to know what you are getting, and if it fits your goals for ownership.

A knowledgeable local buyers agent helps with giving you the big picture whether it is a small town or big city.

Appraisal Problems

When you overpay for a property, as mentioned above you can run into appraisal problems. The difficulty with a home appraising goes up exponentially when you are dealing with a buyer and a seller who are not using professional real estate agents.

Often it is the blind leading the blind. Not using a Realtor can create real estate appriasial problems that must be overcome.

Can you imagine having your home under agreement, getting an offer accepted on a for sale by owner only to find out it doesn’t appraise for what you are purchasing it for?

What if the seller won’t budge. When you are buying and selling a home in the same time frame, an uncooperative owner can create major havoc!

Think for a moment what happens when you have nowhere to go because the home you are buying is going to fall apart due to an appraisal. This is one of the significant risks of the purchase of a home without a real estate agent in your corner to protect your interests.

Laws, regulations, and paperwork.

Real estate law is complex and varies from state to state, city to city and county to county. You must obey the letter of the law to avoid potential legal troubles later on. You need to know how to read a contract before you sign it. You need to complete all necessary paperwork correctly, accurately and submit it by deadlines. Legal mistakes and missteps in your paperwork can lead to serious, long-term and expensive headaches.

If you are not using a buyer’s agent when purchasing a home, it is highly advisable to have an attorney represent you.

Buying From A Seller’s Agent or “Dual Agent.”

Equally as bad as not using a buyer’s agent when purchasing a for sale by owner is going directly to a seller’s agent to buy a home. Lots of buyers think they are going to get some kind of “special deal” by going directly to the seller’s agent.

Instead, buyers are dealing directly with someone who’s obligation is to the seller. Having a dual agent is no better either because they agent is a slave to two parties not exclusively representing either.

When facing off with a real estate agent selling you a home, you are going toe to toe with a pro. It is unwise to assume you know as much as the agent. Ultimately, you will be at his or her mercy, hoping that you will be treated well and fairly. Some potential problems include:

Dealing with a salesperson.

When you have your own agent, you are insulated from the persuasiveness of the other agent. Your agent knows what you want and need, and he or she knows how to avoid being taken in by salesmanship.

Paying too much.

Unless you are working in the real estate industry in the area you are buying, it is unlikely that you have the ability to determine the true value of the homes you are looking at. With an agent, you have a pro who can tell you when something costs too much.

Without an agent, you are extremely likely to pay more for a home than you would with an agent working for the seller. After all part of sellers agent’s job is to get their client the most money! Here in my area, Meterwest real estate values can change by a staggering amount from town to town for the same exact house.

Expecting a deal on commission.

The commission on a home sale is split between the seller’s agent and your agent. Many buyers who avoid hiring an agent are hoping that the seller’s agent will discount the commission because there is no buyer’s agent to pay.

How likely is it that the seller’s agent will discount the commission, though? Let’s just say that it would be unwise to assume that the seller’s agent is going to make many adjustments for you as a buyer without an agent.

There are some agents who are adamant about not discounting the commission. Even if they did, does it make sense to save a few thousand in commission only to overpay for the home by ten thousand instead? You do the math – it doesn’t work!

Negotiating.

What skills of yours are most developed? Unless you are an incredibly unique individual, your answer will relate to the skills you have practices most. First will probably be work-related skills, since you are practicing 40 hours a week at least. Next would be your hobbies.

Real estate agents negotiate for every client they work with, month after month, year after year. They know every factor that influences affect home values, every pressure point that is likely to deliver a response. You, on the other hand, are new to this. When you go to negotiate with the seller’s agent, you should not expect to come out the winner.

All The Rest

The difference between a buyers and sellers agent is staggering. When you go directly to a sellers agent you lose the ability to have someone who is your confidant. Those who think of a buyer’s agent as a taxi cab driver are missing the whole point of having a buyers agent. The smallest role a buyer’s agent serves is showing you homes! Again when you go to a sellers agent you give up the following:

  • Loyalty to you and you only!
  • Confidentiality –  a sellers agent by law has to pass along to a seller anything relevant you tell them.
  • Accountability – an agent working for the seller is not accountable to you.
  • Obedience to lawful instruction – a buyer’s agent must follow your instruction unless it is breaking a law.

 Final Thoughts

In most circumstances, is does not make a lot of sense to forgo using a buyer’s agent. Keep in mind in the vast majority of circumstance you DO NOT pay a real estate agent to represent you when buying a home. Real Estate commission is almost always paid for by a seller. Is it possible you will run into a for sale by owner that won’t pay a buyer’s agent fee – sure. In a case like this where you would have to compensate a buyer’s agent all you need to do is make your offer taking this into consideration.

The best buyer’s agents do a lot for their clients. Without a buyer’s agent, your odds for problems go up greatly. Keep in mind there are good and bad buyer’s agents. You would be wise to make sure you do a thorought interview of buyerws agent you’re considering hiring.