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Subject: Buying a House without a Real Estate Agent rss

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Eric Etkin
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(Hopefully) within a year I'll be in a position to afford a modest home after a divorce that booted me back to rental-ville last year. The only home I've ever owned previously was built on land me and the ex-wife purchased. We used a realtor, but this was about 8 years ago, involved only some land property (no inspections, counter-offers, etc.), and I remember nothing about the process.

So... That said, when looking to buy an existing home - do I NEED (or want) an agent? I know the buyer's agent traditionally is paid out of commision from the sale by the seller of the home, but in my observation this process seems... odd. And not in a good way.

For example, if the buyer agent is working for the buyer but is getting paid based on a percentage of the sale price of the home... isn't it in the buyer agent's best interest to negotiate as HIGH a price as possible? I have visions of offers and counter offers going back and forth between these two agents, where the price offered is rejected by both agents behind the scenes merely to ensure a higher commission.

In any other sales-based job, this relationship would be flagged as exploitative. I'm not trying to minimize the potential things an agent might bring to the table, but in terms of price negotiation, this whole system seems somewhat rigged.

Am I missing something? I want to trust this system, but as a single-income household and parent, I can't afford to mess this up.

For reference, I live in upstate NY (far, far away from The City).

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Well, indeed the agent want to sell as high as he can, but also want to sell. You will end up having a price mixed between that and the market value, 'cause it can't sell higher than someone will pay for it, but also no one can offer you a so much cheaper price, 'cause the different potential buyers will fight each other to get it, raising the price...

So don't mind, you will get your pocket burnt anyway
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Joe Salamone
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I think you, as the buyer, need to control the negotiation. The realtor is just delivering the message, but you are the one who should be establishing the price you are willing to pay. When we bought our first house, we went back and forth on the price and our final offer was within about $100 or $200 of what the seller was willing to accept. I was tired of going back and forth, so I told our realtor, "forget it, we will look for another house." Within 24 hours the buyer accepted our offer. All this over a couple hundred bucks. But I was just tired of going back and forth with offers and counteroffers.
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But remember: Neither realtor is getting paid unless the house sells. So your fears of some evil cabal working to jack up prices behind the scenes isn't realistic.

The entire realtor game is indeed a cartel, and one that I hope goes belly-up in my lifetime, but I've bought/sold property more than a few times, and in my experience the buyer's realtor is usually well-intentioned (if slightly dunderheaded) and useful for shepherding the process along. If you find one that smells fishy, by all means drop them and get another. They are certainly not rare, and (for buyers) the best ones are usually never that far in quality from the worst ones.




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Eric Etkin
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joe_salamone wrote:
The realtor is just delivering the message, but you are the one who should be the one establishing the price you are willing to pay.


This is the conspiracist in me talking... but how would I know the relators didn't just say "the seller rejected your bid?" If the whole process is structured to present a blind or third party between buyer/seller, how would you (or anyone) actually know?

Is the offer/counter offer transparent to both sides?
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jeff
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MOTHDevil wrote:

....as a single-income household and parent, I can't afford to mess this up.


That is why you go through an agent.

We used a young guy that was getting his feet wet in the field and was trying his hardest to do the best. He came highly recommended. He was the BEST. He conducted business with incredible respect and was available 24/7.

I remember him telling me I needed to get some stuff signed. I told him I was not available during office hours due to work. I signed the papers over a decent glass of wine while sitting on his living room couch.

He now has his own business and I think he is doing well.

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Your right, the way that realtors get paid is crazy when your a buyer. The commission is coming off the purchase price so they don't have an incentive to really try for a lower price other than to keep you happy, try to get you to send them business, and be ethical. That being said, if you can find a decent one, it only makes sense for you not to have one if the home your looking to buy is listed by-owner. If it is listed any other way, the listing realtor is going to be the one getting the money, so it doesn't save you anything.

I used a realtor when I've purchased both my homes and sold the first one. A decent one can help you avoid pitfalls. For example, when I sold my last house, I have a wonderful kitchen island in it. The buyer wanted it to come with the house, but it was furniture not a fixture, and they didn't have it in the contract and didn't even ask about it until after the inspection period was over. If they would have asked about it before the inspection period was over, we would have included it in the sale of the home. I knew my house needed a new roof soon, I'm assuming it failed inspection, but they waived the inspection for some reason. Once they waived that inspection, they couldn't get out of the contract without breaching it. A decent realtor would have told them to ask for the island in the contract, or, at a minimum, before the last opportunity for them to back out of the contract was over.

A decent realtor can also help you find good inspectors. Frankly, I think shopping around for you mortgage will end up saving you more and get prequalified.

Remember too dealing with realtors, you can negotiate a lower commission, and I've also seen realtors take less to get the sale to go through so they get paid something.

Also, do your own research and don't be afraid of making a low offer. Homes are worth what people will pay for them. The home I'm in now was badly listed and I was able to buy it for much less than the listing price. Don't be afraid to put in an offer that you think is right. The worst thing they can do is say no and then you move on to the next house. You have to be comfortable with the price you offer.

Good luck,
Matt
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jeff
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MOTHDevil wrote:
joe_salamone wrote:
The realtor is just delivering the message, but you are the one who should be the one establishing the price you are willing to pay.


This is the conspiracist in me talking... but how would I know the relators didn't just say "the seller rejected your bid?" If the whole process is structured to present a blind or third party between buyer/seller, how would you (or anyone) actually know?

Is the offer/counter offer transparent to both sides?


That is why if you don't have a referenced realtor from a friend or family member you meet with several until you find one you have a gut instinct that tells you that you like the person.

It's the same hiring an accountant. You have to sometimes find the person that you feel like you can honestly trust and know "has your back"

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Eric Etkin
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AvidHunter wrote:
MOTHDevil wrote:
joe_salamone wrote:
The realtor is just delivering the message, but you are the one who should be the one establishing the price you are willing to pay.


This is the conspiracist in me talking... but how would I know the relators didn't just say "the seller rejected your bid?" If the whole process is structured to present a blind or third party between buyer/seller, how would you (or anyone) actually know?

Is the offer/counter offer transparent to both sides?


That is why if you don't have a referenced realtor from a friend or family member you meet with several until you find one you have a gut instinct that tells you that you like the person.

It's the same hiring an accountant. You have to sometimes find the person that you feel like you can honestly trust and know "has your back"



The landlord for my apartment building is a younger woman who has been an agent since she was essentially out of high school. Do you guys see her as a good candidate, or a potential conflict of interest?
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Ian Klinck
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I can only speak for here in Canada (Ontario, specifically) - I don't know if rules/processes vary much in the States, or even Province-to-Province/State-to-State.

The standard commission is 5%, which is paid by the seller, and split between the two agents. The buyer doesn't pay anything to the agent directly. (Of course, the buyer pays for the house, which is where that money comes from... )

I would always use an agent to buy: They do a lot of the initial searching/filtering to find something that suits you. (A good agent will learn what you want pretty quickly, and point out some things that you likely haven't thought of...) They'll make the arrangements for you to see the houses, and they'll be able to help you with negotiations.

A selling agent also looks after advertising, running open houses, making sure all the legal details are taken care of, etc. They work for their money, too.

Also, agents are going to benefit more from your referrals if you're happy than squeezing a few more hundred dollars out of you in commission...

It is important, though, to find an agent you can work well with - good personality fit, etc.
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I don't see a conflict of interest.

I actually see that as a bonus. Her being your landlord, she would know exactly the timing of everything and most likely give you an easier transition for ending your lease and the time you have to move out.

Unless she is a pain and not a nice person.

If you have always found her to be a good landlord and got along well with her then ask her is she wants a shot at it. Gauge her reaction and she if she runs with it.

I know when I hire a realtor I want them to be hungry and willing to work for me.

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Daniel J Isom
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MOTHDevil wrote:

The landlord for my apartment building is a younger woman who has been an agent since she was essentially out of high school. Do you guys see her as a good candidate, or a potential conflict of interest?


She's probably a fine candidate because she wants to get paid and will likely have little problem filling your apartment. The nice thing for her is she'll know exactly when you're leaving.

As for buying a house without an agent, my wife and I probably could have done this with both of the houses we've purchased. The first time we just called a real estate agent that was selling at a different open house because we were 23 and had no idea what to do. We then sold that house in Syracuse by owner because there was no way we were going to break even if we paid the 7% of the sale price on a house we only lived in for 2 years.

We moved to Delaware and only got an agent because he knew the area and we didn't. He was great but my wife and I found the townhouse that we ended up buying ourselves. It doesn't hurt to have a real estate agent as a buyer but the next time we'll go without one and get a better deal since they'll be saving 3.5% at least.
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Eric Etkin
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disom wrote:

We moved to Delaware and only got an agent because he knew the area and we didn't. He was great but my wife and I found the townhouse that we ended up buying ourselves. It doesn't hurt to have a real estate agent as a buyer but the next time we'll go without one and get a better deal since they'll be saving 3.5% at least.


Is an agent going to be useful in terms of finding suitable houses? In a internet-capable world of offerings like Zillow, do agents provide homes that I wouldn't be able to find myself?
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I used a buyer's agent in my first purchase (12 years ago), none in my most recent (last fall). The buyer's agent saves a *LOT* of work, is not paid by you, and if you get a good one they will negotiate better than you could ever hope to do on your own. I'd recommend using one.

My most recent purchase was harder because the seller also had no selling agent (FSBO). He told me up front "If you use a buyer's agent I will not be willing to negotiate as much because I'll be losing so much money to them." If I'd had a good agent, I would have gone ahead anyway, but I didn't, so I decided to go without. Lots of time and headaches spent.
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When we bought our first house, it was a new house and we bought from the builder. While it went reasonably smooth, there were a lot of times I didn't know what was going on, and it almost came back to bite us later (although some of it was a bad mortgage, too, which the agent doesn't really help with directly).

With the house we just bought, we had an agent. Granted, in our case, it was also a friend, and she is only a real estate agent part-time (she still has a kid not in school yet), so her motives weren't just for money, but it made the process pretty smooth. All the paperwork, contract changes, negotiations, etc, were nice.

Granted, a lot of the negotiations were on our selling end, but there was just enough on the buying end that I was glad we had her as a sounding board for things, and in the end, I'm glad we went with her as our buying agent as well.

If you know (or are willing to research) the process, and are willing to work with the seller's agent directly, you may be OK (the seller's agent may like that, too, as I think they get the whole commission that way, but I'm not sure).
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MOTHDevil wrote:
disom wrote:

We moved to Delaware and only got an agent because he knew the area and we didn't. He was great but my wife and I found the townhouse that we ended up buying ourselves. It doesn't hurt to have a real estate agent as a buyer but the next time we'll go without one and get a better deal since they'll be saving 3.5% at least.


Is an agent going to be useful in terms of finding suitable houses? In a internet-capable world of offerings like Zillow, do agents provide homes that I wouldn't be able to find myself?


Yes and no. They can know about a house before it really hits the market but other than that using the various websites and all their search option you're better off searching yourself. That's what we did, we found most of the houses and he set up the appointments to go see them. It helped that he also did appraisals on the side so he knew what to look for when it came to repairs and stuff so we didn't waste extra time looking at houses that were over priced.

The buyers' agent is really there for paperwork, negotiating, and knowing the area in which they are selling (school districts, tax info, crime areas, etc.)
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Eric, you don't NEED an agent when buying. But a good one can do a lot of leg-work for you to help identify houses that fit your criteria (they have databases etc which they can search easily, that you and I don't have access to). (And as noted above, hugely helpful in closing.)

As for conspiring to jack up the price - unlikely. They want the inventory (the house) to sell as quickly as possible so they can get their commission and can concentrate on selling the next house. If they conspire to raise the price by say $10,000 on you, well that's like $300 each to them. Probably not worth the effort.

Good luck. Buying a house is a rather gut-wrenching experience!
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Just so you know, the number I've always heard is 6% for the agent (or, if there are agents for both the buyer and the seller, they each get 3%). I've heard of agents voluntarily taking less to assist in a sale, but this isn't common, and in reality this equates to 6000 for every 100,000 of house - significant to the final purchase price, yes, but since it's sixty bucks for every thousand, it's not likely that the agent would conspire against you to raise the price by a few thousand just to make an extra hundred bucks; my bet is they'd be happy with good sized commission and just want the deal to be done (and you to be happy, as a good agent will understand and value the importance of word-of-mouth referrals!).

Now, with that said - over the years in the Air Force, I've had the opportunity to work with agents both as a buyer and a seller. I've found the vast majority of agents to be very helpful - working to find properties I might like, setting up viewings, determining fair pricing levels, providing help with questions, tracking down info on the house, digging up info on taxes, utility bills, etc (yes, generally stuff you can do yourself if you're willing to do the legwork, but it can be helpful). This is also sort of dependent on finding someone you like and can work with - I have an agent in Oklahoma I've used exclusively for about 10 years for property concerns; I trust her completely and have valued her help in buying, selling, and renting houses over the years. Contrast that from the agent I worked with briefly in New Jersey - pretty much worthless, just desperate to sell me any house she could as quickly as possible, and very annoying (and, also, very quickly kicked to the curb!)

Bottom line: like all things, it depends on who you're working with. For the most part, though, I've had more good experiences with agents than bad. Overall I'd recommend going with an agent, especially if you haven't been in the market before (or, maybe accurately for you, haven't been in there for a while).
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When my wife and I bought our first house 4 years ago we went through three agents. The first two were "part-time" agents. The first guy actually wanted to be a professional photographer. We were second on his list of priorities so we parted ways. Same for the second who was a soccer mom who expected us to arrange our house hunting schedule around her children's schedule.

Our third and final agent was a full time agent with 20 years of experience (we specifically called and asked for a full time experienced agent and so should you). In retrospect I couldn't imagine going through the whole experience without her help. My wife was not able to get off work for our first big house hunting day so it was just her and myself. She didn't try to sell me houses but more showed me reasons why we shouldn't buy houses we were looking at. She had an experienced eye and would point out things that were wrong with houses. Red flags to avoid.

Yes it was sort of a cabal but in a good way. For example we used a home inspector our agent recommended. However she actually recommended three different inspectors and we chose which one we wanted. The guy rocked. Knew what he was doing and it showed. We also were having trouble with our lender who was not being very responsive. She recommended lending agent who was fantastic. He did more work in the first 48 hours before we even talked to him on the chance that we might call him than our previous lender had done in 2 months.

So yeah this was a cabal but two things to keep in mind. First these folks get most of their work through referrals so it's only natural that they would have business relationships with each other. Secondly if you start with a solid and experienced agent they will know quality people they've worked with before such as her list of home inspectors. We could have just looked online and picked one but instead we got a list from her of 3 she was confident in because of previous experience. We would have chosen basically a name out of a hat.

So I highly recommend not trying to go it alone but use an agent. An experienced full-time agent is a must in my opinion.
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I have bought only 2 homes in my life. Both times I used a well-researched Buyer's Agent. I would not do it any other way.

One thing for sure to never do: never directly call the agent on the sign outside a home. That person of course works directly for the seller, and must serve the seller's interests first. Of course, they will say "I can represent you too... it's called dual-agency" or some such thing. Just don't even start down that path.

Here is a good place to start: Nat. Assoc. of Exclusive Buyer's Agents

As far as worrying about them trying to hose you behind your back, I guess you would also have to worry about your dentist ("You need a crown!"), your mechanic ("You need to rebuild your transmission!") or anyone else who might have more knowledge than you, about something you are required to spend your money on.

Oh wait, you did mention an ex-wife, right? zombie
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jeffreyac wrote:
Just so you know, the number I've always heard is 6% for the agent (or, if there are agents for both the buyer and the seller, they each get 3%).


6% is probably the max. and is surely negotiable. I believe my wife and I were quoted 5% the last time we bought a house, but we negotiated it lower (I think to maybe 4% or possibly even 3.5%, but that was before the housing market took a nose dive and they were probably making plenty of money and willing to take lower percentages). I'm not sure how the brokers split up the commission.
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Eric Etkin
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If the commission payment is coming out of the seller, what's my motivation for negotiating a lower rate?

BTW, Everyone: Thank you - this has been very helpful.
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When were looking at houses a couple of years ago, our agent showed us a print out that showed us the commission percentage on each home in the area. The majority were either 6% or 7% but he flat out told us that most agents start at the top of the list and work their way down depending on what their clients want. It's kind of messed up that they would do that but I think the responsibility of finding a home is more on the buyer than it is on the agent these days.
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MOTHDevil wrote:

If the commission payment is coming out of the seller, what's my motivation for negotiating a lower rate?

BTW, Everyone: Thank you - this has been very helpful.


There is no motivation to negotiate a lower rate on your end, that's on the seller. If you're not using an agent to buy, you might be able to save a little on the purchase price because they aren't paying the other half of the percentage.
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disom wrote:
MOTHDevil wrote:

If the commission payment is coming out of the seller, what's my motivation for negotiating a lower rate?

BTW, Everyone: Thank you - this has been very helpful.


There is no motivation to negotiate a lower rate on your end, that's on the seller. If you're not using an agent to buy, you might be able to save a little on the purchase price because they aren't paying the other half of the percentage.


To clarify, we were selling our home and buying a new one. So, the rate we negotiated was on our sale, not on the purchase. But it's all a big party of "money in / money out" and all I really cared about is the net cash I ended up with at the closing!

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