Buying a House Without an Agent: Why It May Be a Good Idea for You

It's certainly not right for everyone, or every situation. But it is worth considering. Assuming, that is, you want to spend less while getting more....

LOOKING TO BUY A HOME? WANT TO SAVE MONEY?

People have known for a long time that you don't have to use a real estate agent to buy a home. The 3% commission that the seller pays to the buyer's agent? It's real estate's dirty little secret. In this internet age, when everyone knows what's for sale, savvy buyers know how to leverage that 3% to their advantage. Which means they pay less.

Use A Real Estate Lawyer Instead

If you go this route you'll also get - bonus! - superior representation. Here's how it works. A real estate agent provides two types of services: 

  1. Real estate brokerage services. These services include tours of homes and opinions of value. 
  2. Legal services. The sale of a home is a legal transaction. Brokers are allowed to engage in the limited practice of law needed to create a contract, such as drafting an offer. But they aren't lawyers.

Pre-internet, only brokers knew which houses were for sale. But today, with listings available online, everyone knows whats on the market. Throw in the latest robust pricing tools that use Big Data, and many buyers don't need real estate brokerage services. That is so 20th Century!

But they still need legal services. And when those services are provided by a lawyer, instead of a real estate agent, the consumer wins. Because the fact is, buyers benefit from legal services that go beyond writing up a contract (which is pretty much all a real estate agent is allowed to do). For example, only an attorney should help you with:

  • The Preliminary Title Report - An attorney will interpret this report and explain what is shows about title to the property. If there is a  problem, an attorney will see that it is resolved to your satisfaction.

Insider's Tip: Don't rely on the title company's review. As an insurance company, its interests overlap with yours, but there are some things important to you that it might not notice. For example, maybe you have to share your driveway with a neighbor. That's something you want pointed out to you before you buy.

  • Your Closing Documents - Curious to know what you're being asked to sign? Wondering what it means to you? With an attorney, you'll get those answers. These documents generally aren't negotiable, except for the deed. But there's value in understanding the process.

Seattle Tip: The Warranty Deed by which a buyer takes title is drafted by the Closing Agent. If drafted incorrectly - which sometimes happens - it can undermine the legal protections to which a buyer is entitled. An attorney will catch and correct this error.

  • Your Due Diligence -  A lawyer brings a useful eye to this process. If there are landlord/tenant issues (like an existing tenant, or a requested seller lease-back) or land use concerns (because you're planning on changing the property), an attorney can be invaluable.

At the end of the day, buying a home is a legal process. It just makes sense that an attorney would be able to help.

How you can save 3% of the Purchase Price

When you find the house and then hire an attorney to help you buy it, you can use the seller-paid commission to get a better price. Here's how.

First, for this to work, you have to be looking to buy a home on the MLS (which is almost always the case). That's because, for a seller to list on the MLS, she must offer a commission to a buyer's agent (as well as pay her own listing agent). That commission is - strangely enough - almost always a uniform 3%. 

If your attorney drafts the offer and you don't have a buyer's agent, then there is no "selling agent" and no "selling office commission" to be paid. So an offer at 97% of list price is, to the seller, a full 100%. In other words, an offer of $485k on a $500k house, using a lawyer and without an agent, is a "full list price" offer to the seller. At less than list, the savings are harder to measure, but clearly they remain significant.

To put yourself into a position where you can capture these savings (plus get the benefits of an attorney), you need to do some serious work.

It's Not for Everyone - and It's Not Easy

Best for One Buyer: As an initial matter, this process works best when you are the only possible buyer. For a home new on the market, where there is low inventory (like much of the country, including Seattle) it's tough to compete with other buyers when you're using a lawyer and not a broker. Tough, but not impossible.

Access to the Home: Still on board? Your next challenge is getting inside the home you might want to buy. You can find a possible winning home for sale online, and you may even be able to "tour" it via an ever-more-common "virtual tour." But who's kidding who. Before you can buy a house, you have to get inside it. It turns out you do need minimal brokerage services after all (but doggone it, you're not going to pay 3%!)

For tours, you have three options, all of which have their drawbacks:

  1. Open Houses
  2. The listing agent
  3. Other brokers

Open houses as a general rule aren't often enough. The listing agent may or may not be too happy to help. And with any other broker, you should confirm that the the only service you need - and presumably are willing to pay for - is access. You may be able to find a real estate broker who can assist with this sort of "a la carte" or "unbundled" real estate brokerage service. Ask around. 

Bad Karma? Finally, you will have to step on some toes. Specifically, the toes of the listing agent. Here's why:

The seller has signed a contract with the listing agent. The seller has agreed to pay 6%. If there is a buyer's agent, then the listing is obligated to share it. But if there is no buyer's agent, then per the terms of the contract, it belongs to the listing agent.

You will of course be buying the house without using an agent. But you are also putting your nose into someone else's business, and asking them to take a pay cut. Expect at least a tiny of ill will.

That's from the listing broker's perspective of course. FWIW.....

Are you willing to tackle all of these challenges? OK, you're on your way to significant savings and superior protection - welcome aboard! It's gonna be a great ride.