Wintrust Financial : Tips for buying a house without a realtor

Purchasing a home is one of the biggest financial decisions of most people's lives.

To help them through this process, most buyers work with a real estate agent. In fact, in the last year, 88% of home buyers used an agent, according to the NAR 2020 Profile of Home Buyers and Sellers.

Using an agent is a smart idea because they help you through the home-buying process, including finding properties and negotiating the sale price and closing costs. Although realtors charge a commission, typically 5-6% split between the buyer's and seller's agents, it is usually up to the seller to pay these fees. There are also discount brokers such as Clever Real Estate that pair buyers with top-rated local agents and even offer home buyer rebates in qualifying states.

But do you need a realtor to buy a house? The short answer is no.

Buyers may choose to forgo working with a real estate agent for several reasons. They might be a real estate pro who already understands the market, or they could be working with a for-sale-by-owner (FSBO) seller. FSBO sellers will usually pay a buyer's agent commission fees, but some do not want realtors involved in the transaction at all.

This article will guide people who plan to buy a house without a realtor and provide tips on how they can be successful.

Get pre-approved for a mortgage

Whether you are working with an agent or not, step one of your home search should always be to get pre-approved for a mortgage. This will show the homeowners that you're serious about purchasing and show that you have the funding to do so.

Understand the local market

Once you've been pre-approved for a home loan, you'll have a better idea of what you can afford and where you should search. Sign up for your local MLS, dig into online listing platforms, and drive around areas of interest to get a feel for what's out there. It would help if you also researched actual home values in your neighborhood because listing prices are often different from final sale prices.

Understanding local crime rates, school statistics, and property or development history could help you during negotiations. It could also reveal if a neighborhood is actually a fit for you.

Find a property

After you've decided on an area, it's time to narrow in on a few properties. Lay out your budget, requirements, and top wants. Then, work backward from there.

Ask yourself, how far do you want your commute to work to be? Does it matter which school zone you're in? Do you need granite countertops, or can you renovate them later? Are you willing to sacrifice square footage for location?

While a realtor would help you narrow down properties, it is possible to do it on your own if you're willing, to be honest with yourself about your needs and finances.

Make an offer (with contingencies)

Once you've found the perfect property (or at least one that meets your criteria), you'll need to figure out how to make an offer on a house without a realtor.

In addition to researching the neighborhood, you should also search public records to gather intel on the property and the owner. This can reveal their motivations for selling or defects within the home.

With this in mind, pick the right price by comparing how much other comparable homes in the area have sold for, how long the property has been sitting on the market, and how much your lender is willing to provide. Just because you get pre-approved for a $250,000 loan doesn't necessarily mean you should spend the entire $250,000.

Your offer should also include contingencies such as:

• Mortgage contingencies: A mortgage contingency clause protects buyers if they cannot obtain funding from their lender.
• Home inspection contingencies: Always include an inspection contingency in your offer. If a home inspector's report reveals more damage than you expected, you will still be able to back out of the deal without losing your earnest money deposit.
• Home sale contingencies: If you are buying a house but have not sold your old one yet, making an offer on a house contingent on selling yours is advisable. These typically have a timeline of around 30-60 days, after which the contract will be forfeited.

Ask for a seller's disclosure

A seller's disclosure is a list of known defects with the home and can also let buyers know about any renovations that have been made to the home. Sellers must provide disclosure by law, but they may avoid disclosing certain issues if you don't know what to ask for.

Some things you might see in a seller's disclosure statement include:

• Lead paint, radon, or asbestos (Pro tip: sellers in every state who own a home built before 1978 need to tell buyers if lead paint was used)
• Water damage and mold
• History of termites
• Plumbing or electrical problems
• HVAC issues
• Structural damage
• Toxins in soil

Purchase title insurance

Buying a house without a realtor leaves you in a vulnerable position. To avoid inheriting any liens and encumbrances from the previous owner once the deal is done, make sure you buy (or the seller pays for) a new title insurance policy. Typically, the lender will require title insurance, but it is a good idea for the buyer to purchase title insurance for themselves as well.

Negotiate

If you want to understand how to buy a house without a realtor, then you'll need to know how to negotiate. It is OK to ask the seller for concessions during negotiations and see if they will pay for some of your closing costs. It is also important to know which closing costs the seller customarily pays. This can include transfer taxes, escrow charges, commission costs, and more.

Hire a real estate attorney

If you're not using a real estate agent, you should at least consider asking a real estate attorney to look over your contract before finalizing anything. A lawyer will help you sort out any grey areas and make sure the contract is written with your best interests in mind.

Close on the deal

Once the seller accepts your offer, it becomes a legally enforceable purchase agreement. The seller will agree to convey the deed to the home, and a purchase agreement will be created. A purchase agreement is signed by both the buyer and the seller and lays out the terms of the sale and agreed-upon amount for the property. Also, make sure you budget for closing costs, so you're not struck by any surprise fees.

Hopefully, this buying a house without a realtor checklist will help you strategically navigate the market and find the perfect home.

This article was written by Ben Mizes from Your Money Geek and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to [e-mail].

Are you looking to buy a house? Before you start going on showings, contact the loan officers at Wintrust Mortgage to discuss your options.