Do I need a realtor??

[jerome99]

My wife and I are beginning to look for a new home. We have no urgency to buy, but have begun to look.

We are only looking in an area of 2 or 3 miles due to a number of reasons, schools, work commute, family etc.

We have being looking at homes that come up in the last couple weeks and have a couple we want to look at.

My question is whether we need a realtor or not. We know the area well as we live there now and I have lived here for 15 years. We are just up-grading.

Thanks in advance.

[tj-longterm]

Nobody needs one and you can sometimes negotiate a lower fee with the selling realtor if you don't come with one. Further, if you know the area, it's unlikely that they'll be able to help you find properties that you couldn't find by spending your own time looking.

However, realtors can be very helpful, especially if you are not particularly experienced in real estate (and real estate law). We sold our house to someone without their own realtor. It became a huge mess and lawsuits were very nearly filed and we and our realtor probably could have won if we had decided to pursue it. The main cause was actually the buyers and their lack of knowledge -- if they had their own realtor, they would not have made the mistakes that they did. Separately, if only the seller has a realtor, you can also be assured that the contracts will be as one sided as possible in ways that may not be as obvious to you (so if you aren't using a realtor, have your own real estate lawyer look at everything before you sign it).

The main thing to keep in mind is that the incentive for the realtor when you're the buyer is to get you to buy quickly (and to buy), rather than to buy at the best price. A 10% difference in price isn't a huge difference in commission, and they'd generally rather the deal go through (and some studies seem to suggest realtors may not be getting as good of a price as they could, even if it's not fully conscious by the realtor). So, you may be wise not to fully let on the "maximum" you're willing to pay, so that they'll fight harder to negotiate a lower price for you. But good realtors do still represent your interests and help to make sure you don't get screwed. If you're going to own the home for a long time, the small amount you might save by not having a realtor is small in comparison and can be looked at as an insurance fee to help you not mess up.

[genjix]

My wife and I are beginning to look for a new home. We have no urgency to buy, but have begun to look.

We are only looking in an area of 2 or 3 miles due to a number of reasons, schools, work commute, family etc.

We have being looking at homes that come up in the last couple weeks and have a couple we want to look at.

My question is whether we need a realtor or not. We know the area well as we live there now and I have lived here for 15 years. We are just up-grading.

Thanks in advance.

I purchased a coop with no realtor and no headaches. I knew the neighborhood very well and used redfin to find property listings and open houses. since the sellers realtor didnt have to split any commissions, he was very motivated to convince the seller he was representing to my offers. I also had a very good idea of what I wanted. In the beginning of my search, i did use a realtor but I told him exactly what area I was looking for, and all my other demands like hard wood floors, king size bedroom, first floor, a certain maintenance fee I was not willing to go above and near the subway. I told him if he showed me anything else he would be wasting his time, and he did try to show me some that didnt meet my criteria so he wasted both of our times and I actually knew more about the properties then he did. You just need an attorney and a home inspector once you decide to put in an offer.

[jerome99]

Thanks! What will I use the attorney for? Draft a contract offer?

[greensky]

jerome99, here are my tips for dealing with an agent...

An agents salary is directly tied to how much you pay for a house. The more you pay the more they get. In my experience agents are much more willing to get the seller to pay closing costs (doesn't come out of either agents commission) than they are to lower the selling price.

Since you're a Boglehead I'm assuming you probably have 20% down. Never let your agent know this. Just say you are going to do an FHA loan so you can pay 3% down instead. Also avoid telling them your 'max price'. That's going to end up being what you pay for the house.

[pennstater2005]

My wife and I purchased without a realtor. We drew up a contract with the owners with stuff we both wanted in it. Then we hired a real estate attorney, called a home inspector, and got the ball rolling on the financing. We honestly did very little after that until the attorney called us to sign the documents. We had a pleasant, smooth experience.

[genjix]

Thanks! What will I use the attorney for? Draft a contract offer?

To make sure the contract is safe and in your best interest. For example, the sellers attorney drafted a contract and I had my attorney review it, he made some changes and added a few things like "no known incidents of bed bug infestation withing in the last x years" etc. stuff like that so your protected.

[tj-longterm]

We drew up a contract with the owners with stuff we both wanted in it. Then we hired a real estate attorney, called a home inspector, and got the ball rolling on the financing. We honestly did very little after that until the attorney called us to sign the documents.

I highly, highly recommend you consult an attorney from the beginning. Just because this person got away with only using an attorney for closing and not the initial contract doesn't mean you'll be so lucky.

[energy2025]

Speaking from experience, realtors are not worth the emotional hassle they cause while "making a deal"

First time when we bought the house, we were referred to a realtor but ended up buying in the wrong part of the town Vs. where we had initally started looking. This was 7 years ago and as bogleheads we all know what happened to the housing market after 2006. Given, we the buyers were at fault at going with the decision, but it is realtors job to make sure the clients dont end up in a bad neighborhood or atleast understand the differences between demographics, schools, taxes, etc..

Second time, last year, we again went through a realtor but not through a referral to buy a house. We sort of interviewed the realtor and liked the person. In the process when we wanted to sell the house and were looking for new house, we decided we didnot want to sell the house to begin with. This was only 2 months into the search and we may have seen about 5 houses with the realtor. The realtor got so mad and started sending emails like you are missing the opportunity, you need to get out of this neigborhood as you have already lost so much value, etc...

Finally, we still went ahead sold the house and bought the house due to various reasons.. but the experience was not smooth. Also make sure if you use a realtor, you use your title company, etc... as they all are interconnected and get some portion of it.
Infact, I lost trust in the realtor, that I reviewed each and every document and made sure that they were not in any way incorrect.

The 2 experiences have taught me so much on residential real estate and realtors that I firmly believe any decent person with litle bit of due dilgence can make a house transcation without any expert "realtor".

My recommendation would be to just have the docuents reviewed by attorney prior to the closing and deamnd that you receive the closing docs atleast 2 days in advance to review.



Thanks,
energy

[Atilla]

You absolutely do not need your own Realtor. The Internet, some research time and common sense/knowledge of your local market are all you need.

Your professional inspector you hire after you have offered but before you buy is your friend. Use him to uncover every little fault and attach a price to it. Take this to the sellers and use it like a hammer. Pound pound pound.

And get someone to look over the paperwork before you sign.

[pennstater2005]

We drew up a contract with the owners with stuff we both wanted in it. Then we hired a real estate attorney, called a home inspector, and got the ball rolling on the financing. We honestly did very little after that until the attorney called us to sign the documents.

I highly, highly recommend you consult an attorney from the beginning. Just because this person got away with only using an attorney for closing and not the initial contract doesn't mean you'll be so lucky.

I agree wholeheartedly. We sort of knew the people we were dealing with which I should have mentioned. Using an attorney from the beginning of the process is a good idea and had I been more experienced I would have done.

[Yipee-Ki-O]

You do if you want to hear: "It's a great time to buy a house!"

[rickmerrill]

If you already know the area and what you are looking for the realtor adds little value. You can get an offer agreement off the web or if they have a realtor that person will be glad to help - it's a simple form. The company you get the mortgage from will help you with all of the money stuff. All you need an attorney for is to go over the legal documents. I've bought/sold this way three times. It's pretty simple stuff really and you learn a few things if you DIY.

I haven't heard of any home inspectors that were all that good at catching the big things like foundation issues or hvac problems; it would take someone with an engineering background and a lot of experience. Many are good at finding broken toilet seats and bulbs that need replacing. Ask them what their guarantee/liability is - that will tell you something.

[gd]

My house inspector (recommended by the Realtor(r)) was a fraud, pure and simple, expert at glossing over important stuff and drawing attention to trivial items to appear useful. I would never use a Realtor(r) to assist me in buying property again, unless they were some sort of legally-solid buyer's agent and had convinced me of their usefulness beforehand, maybe by a careful discussion about specifically how they had been of use to previous clients.

[fishingmn]

I don't agree with a lot of this advice - yes, I'm a Realtor in MN.

First of all, every state is going to be different so that's an important consideration.

Here are the issues I see in the above answers -

- Assuming the home you are looking at is listed on MLS, seller pays the real estate commission for both the listing agent and buyers agent. Therefore, you really don't pay for the commission when buying - the seller does. The first response says that if you use the listing agent you can sometimes negotiate a lower fee. Most Realtors won't do that. In addition, if you don't have your own Realtor and want to rely on the listing agent you are now in a Dual Agency arrangement. This must be agreed to by all parties and at that point the Realtor can't offer any pricing advice to either party. If you have your own agent then that person works on your behalf and can negotiate on your behalf.

- While I suppose there are bad Realtors out there I take offense that all Realtors get lumped into a category of only working for their own interests.

- "since the sellers realtor didnt have to split any commissions, he was very motivated to convince the seller he was representing to my offers" Again, this is illegal in Minnesota under Dual Agency and our fiduciary relationship and would subject us to losing our license with the Dept of Commerce. When representing both parties I can't "convince" anyone about pricing - the price negotiations is totally up to the buyer/seller to figure out

- Many states use attorneys to draft contracts but many other states have standard forms that are used for every real estate transaction that are approved by the Department of Commerce

- "In my experience agents are much more willing to get the seller to pay closing costs" Having the seller pay closing costs has much more to do with the buyer's situation than anything. Yes, they are very common today but it has to do more with buyer's not having a lot of extra cash. Personally, I don't like the practice of paying commission on seller pad closing costs and almost every Realtor will agree to a commission restructure to take these out if asked (which I do all the time when representing a seller)

- "I'm assuming you probably have 20% down. Never let your agent know this." Find a Realtor you trust. A Realtor has to at least know if you are doing Conventional or FHA. You must submit a pre-approval letter with any offer that states this and there is a Financing Addendum that goes with any offer that is dependent on the type of financing being used.

- "it is realtors job to make sure the clients dont end up in a bad neighborhood" What's the definition of a "bad neighborhood"? Realtors are bound by Fair Housing laws and can't discriminate. I can point out where to look up police reports and talk about perceptions of schools but one person's bad neighborhood might be another's desired location.

As a buyer, the only time I would think it might be reasonable to not use a Realtor is if you are buying from a seller who is doing a FSBO (For Sale by Owner). In that case you may save since neither of you are paying any commission. Of course, the risk is that you don't have someone watching out for your interests and negotiating on your behalf. That said, the appraisal may give you an out if the negotiated price is too high.

People have bad experiences with lawyers, accountants, doctors, mechanics .... Doesn't mean that they are all bad or that you should do your own surgery

[epilnk]

You don't need one, and I think the benefit is limited, but there's little real downside either. Just don't assume a buyer's agent is negotiating on your behalf - they are paid by the seller. Also housing prices are set by comps, which means that all realtors benefit at all times from higher sales prices, whether directly or indirectly. All of the incentives are toward one goal, to get you to pay as much as possible as quickly as possible. That's not a moral defect of the realtor, it's an inherent flaw in the system. As long as you are under no illusions, however, I think it would be better to work with a realtor than alone, at least for your first house.

[robjer]

Sorry, jerome, but based on your questions (especially "what do I need an attorney for, to draft contract?"), I believe you should definitely sign with a Buyer's Agent. I don't think you have enough knowledge of the paperwork required--particularly if you are going to have a mortgage. Cash sale, maybe you could figure out on your own. At least in Missouri it is the seller who pays the entire commission and the buyers part of the closing costs are half the title fees and a few filing fees with the county recorder of deeds.

[Normchad]

As others have said, you can do it all on your own. I don't recommend that though.

We used a terrific realtor when we sold our last home and bought the current one. On the selling side, she did a great job staging and marketing the house. I have no doubt we made an extra 10-20k on that transaction alone because of the realtor.

On the other hand, the people we bought our new house from did not use a realtor. We had been in the market for six months, so we knew what things should be selling for. These folks obviously Did not. They asked way under market price for the home and did a terrible job negotiating. I feel they should have easily got 50k more than they did. I'm sure though they have no idea how badly they screwed up, and would probably go the FSBO route again without hesitation .

A crude indicator, but we sold our home for ~$130/sq ft and bought the new one for ~$90/sq ft.

Our realtor definitely earned every penny.

[mrspremise]

I used a realtor to purchase my home (my first) and don't regret it at all. I did have a good idea of my "must haves" and "nice to haves," and familiarized myself with the area I was interested in ahead of time. In fact, when we went to him I already had a list of houses I was interested in seeing. I found him extremely valuable. He was able to organize the showings which would have taken me a lot more time than it did him, he was able to find out why the house we liked had been on the market for as long as it had (the owner's wanted to do a lease back until their own new house was move-in ready), he urged us to counter offer at a lower price than we would have on our own (which got the owner's to meet us in the middle), and he was able to refer us to reputable inspectors which vastly cut down on my research time. It removed a lot of hassle out of the process, we got a better price on the house, and there's no guarantee I would have negotiated half the seller's commission had I even been inclined to do so (I don't make these kind of deals for a living and she does).

I honestly think the agent scenario mostly benefits the buyer, since as other's have mentioned they're happier to have more transactions at a lower price than sell get a better price and have it sit longer. I saw a lot more downsides to not having a buyer's agent than benefits. That said, I would recommend you do your own homework about what you want and where you want to live as the agent has more at stake on you buying a home quickly than you being happy in the long term with it.

[fishingmn]

You don't need one, and I think the benefit is limited, but there's little real downside either. Just don't assume a buyer's agent is negotiating on your behalf - they are paid by the seller.

Just not true.

Here in MN this Disclosure document (Agency Relationships in Real Estate Transactions) is required for every transaction and lays out exactly where a Buyer's Agent's loyalties lie -

"A Buyer may enter into an agreement for the broker or salesperson to represent and act on behalf of the Buyer. The broker may represent the Buyer only, and not the Seller, even if he or she is being paid in whole or in part by the Seller. A Buyer’s broker owes to the Buyer the fiduciary duties described on page two."

These legally required fiduciary duties are loyalty, obedience, disclosure, confidentiality, reasonable care and accounting for funds.