One of the bigger expenses when it comes to buying real estate is the commission charged by the realtor. Most of them charge around a whopping 6%, which might seem small at first, but when you realize that you’re buying and selling homes for hundreds of thousands of dollars, that fee can take a serious chunk out of your savings. Yet, the conventional wisdom is that a real estate agent is a necessary evil when it comes to buying a house or land, right? Well, not necessarily! You can learn how to buy real estate without a realtor with the help of this guide, saving you thousands upon thousands of dollars.
All you really need is a lawyer
Of course, a realtor will try to use scare tactics to convince you that you should use their services. There are a lot of legal pitfalls when it comes to buying a house, and a real estate agent’s goal is to make you believe that they are the only person who can guide you through the red tape. This isn’t true, however. Instead of looking to a realtor who’s going to be getting a fat commission off of whatever you buy, you can focus on hiring a lawyer to get you through the legal part of purchasing a home.
The benefit behind a real estate lawyer is that they are significantly cheaper in the long run. They will handle all of the paperwork, answer questions, handle taxes and fees, assistingyou with the critical part of closing the deal. The best part is, their price range is somewhere in the $1000 - $1500 range, which makes them a real bargain compared to the large fees that come with a real estate agent. Some real estate lawyers charge a flat fee, others charge hourly, but if you do the math, a 6% commission of a $300,000 house is $18,000 total. Even if we doubled the lawyer’s fee, their pricing wouldn’t even come close to that commission size!
Going on the hunt
You aren’t alone if you realize that buying your home without a real estate agent is the way to go. In fact, between 15-20% of homes bought in the United States were purchased without a realtor. So what do you need to get started? We’ve already covered the most important part of the arrangement – getting the lawyer, but there are a few other things that you are going to need to handle on your own, mainly the home search.
A real estate agent is going to provide you with two things, negotiation and housing options. Since you’re taking the responsibility in your own hands, you will need to provide both. Fortunately, thanks to the internet and the digital economy, finding houses or land to buy couldn’t be easier. You can just hop online and begin browsing for the house in the area that you want.
Research is one of the most important parts of the house search. It’s not enough for you to find a house that you think is pretty, you must be willing to put in the hours to make sure that the house has a clean background. This will take more time, but remember, since you’re skipping the realtor, you are the one who has to do your due diligence. One great place to look for deals across the USA is our assetcolumn.com, as they have great deals on properties all over the country.
There are certain types of sales that might be restricted from you since you are without a realtor. Your best bet when it comes to buying a home is to look for once that is known as for sale by owner, or FSBO, for short. These are homes that are being sold by the owner, without the need for a real estate agent. This is fortuitous for you, since it will be you and the owner primarily working together to come to an arrangement.
The advantages of working with a FSBO is the fact that you can negotiate with the homeowner directly, and since they are doing all of the work themselves, they might not have the same level of interested people that a realtor would have. This scarcity means that you might end up with the upper hand in the negotiation stage.
Negotiating for the house
Negotiation is a subtle art that takes lots of skill and practice. Since you’re going to be the one in the driver’s seat, you’ll need to make sure that when you’re dealing with a FSBO, that you have a comprehensive strategy to how you want to approach making the offer. The first thing to remember when it comes to negotiation is that the word “no” is one of the most valuable things that you can hear. The whole goal of opening a negotiation is to get to the no. Why? Because once you have an idea of where the owner refuses to move on, you can begin to haggle upwards from there.
For example, if the house were being sold at $220,000 and you offered $190,00, you would probably get a no right off the bat. This creates an anchor point in the conversation of where you set your offer and now any increase from there looks like it is in the favor of the seller, but in reality just because you offered $190,000 doesn’t mean that you were expecting to pay that much. Instead, you should have about 3 price points figured out in your head before you begin the negotiation game.
Of these three price points, the final one should be what you really what. For example, on the $220,000 home, your first price is $190,000, your second is $200,000 and your third is $210,000. By haggling hard on the first two price points, when you finally buckle and agree to the third price, your opponent will feel like they have gotten the upper hand by moving from your hard anchor point ($190,000) to a much more acceptable price ($210,000) while in reality, you were willing to pay the $210,000 the whole time.
In addition to this anchor method, you are going to need justification for why you feel that you should pay below the FSBO's asking price. This means that you need to know your facts and do the research ahead of time. Try to build your case as if you were a prosecutor, who needs evidence to put the bad guy in jail. Each piece of negative information that you can learn about the house will go toward justifying your lower price. For example, if in your research you discovered that there was extensive flooding in the area a few years ago, you could use that as a talking point in the negotiation.
Another valuable piece of negotiation ammunition is to discern what the seller’s reasons are for moving. If he’s in a pinch because he got a job somewhere else and needs to go, he will probably be more eager to sell than to make the most amount of money possible. If the owner is selling because of some kind of economic shift in their life, they might be more stringent when it comes to going lower on the price. You’ve got to know
Regardless of how you negotiate, there are a few things that you should be careful when approaching. Remember, an owner will be dealing with you a lot differently than an agent. An agent will have very little emotional skin in the game because buying and selling homes is all part of their life. An owner, on the other hand, will most likely have some kind of emotional attachmentto their house. That means if you aren’t careful, you could end up blowing the entire negotiation by offending them. Therefore, it is important for you to be respectful, kind and make sure that your initial offer isn’t insultingly low. In general, if you go too low in a negotiation right off the bat, you will come off as insincere or disrespectful.
Closing it out
Once you have reached an upon price and you’ve made the offer, you’re then going to need to file all of the paperwork to close the deal. This is where your real estate lawyer is going to come in handy. There can be a ton of paperwork for you to sign and a lot of it is very complex. Fortunately, a real estate lawyer won’t have a problem guiding you through all the documents, explaining everything to you in detail and providing you with the documents that you will need to sign.
After you have taken care of all the paperwork, congratulations! The home is now yours! You can then begin thinking about what you want to do with your new property and best of all, you can soak in the joy of knowing that you didn’t pay a large commission to a real estate agent!
Bringing it all together
It can be intimidating when you decide to strike out on your own and represent yourself in the real estate game, but it is very doable. More and more people are realizing the immense benefits of the do-it-yourself mentality of the real estate game, benefits such as:
- Not having to rely on a 3rd party’s timeline to buy a house
- Saving fortune on commission costs
- Getting to negotiate face to face with a house owner
- Having an intimate connection to the buying process without having to blindly trust someone else’s words
- Learning a valuable skill that you can use over and over again
At the end of the day, few things are more stressful and costly than buying your own home, but when you take matters into your own hands, you might be surprised at just how much you can save without a realtor!