How to Invest Without Using a Real Estate Agent

Using a real estate attorney instead of an agent comes with its share of advantages.
Seth Kniep
Jul 8, 2021
Real Estate Investing
An offer from a buyer who is not represented by a real estate agent can save a seller tens of thousands in commissions. This helps the offer to stand out in today's extremely competitive market. But most buyers are not advised to work alone. If you decide not to use an agent, you should still consider consulting with a real estate attorney. For a small fee, an attorney can guide you through the complex paperwork and alert you to any problems.

Advantages of Buying Real Estate Without an Agent

Most often, a seller pays 5–6% in total commission, split by the buyer's agent and the seller's agent. If a seller accepts an offer from a buyer that doesn’t have an agent, they will not owe a buyer's agent commission, and the total commission paid by the seller is halved. In this hot seller's market, this could make all the difference and help you to win the deal. By helping the seller to save money, you may also end up helping yourself.

There's another advantage of working without an agent: it’s educational.

There's no faster way to learn the ins and outs of the real estate game than by taking the lead on your own deals. You'll master market research and negotiation in the process. You may become so proficient that you decide to become a licensed real estate agent yourself. This will allow you to represent yourself and earn commissions on every deal you do.

If you decide that you want to buy a property without the help of a real estate agent, follow these eight steps to save thousands on your purchase and close more deals.

Find a Real Estate Attorney

The first step is to find a qualified real estate attorney in your area. You won't need their help until later, but you must begin building this relationship now. Real estate moves fast. You want everything in place so that when you find that perfect property, you can pounce on it and get the deal done.

Get Preapproved

Whether you're using an agent or not, you'll need to get preapproved for a loan. This will give you a better sense of your budget and show sellers that you are a serious buyer. It will also make it easier to get the loan finalized when it's time to close. You should take this time to explore your financing options, including FHA loans. For investors with limited funds, the 3.5% down payment required for an FHA loan makes real estate investing more attainable.

Do Your Market Research

After you get preapproved, start researching your market. Check Zillow, Trulia, and Redfin to get a sense of current trends in your chosen location. If you're investing in a short-term rental, you'll also want to check data from AirDNA and Mashvisor. Both websites provide valuable, hyper-local data on Airbnb and VRBO performance. They provide metrics including average occupancy, average daily rate, and rental growth. Armed with this knowledge, you can make prudent, rational investment decisions.

Tour Properties

Hone in on a few of your favorite properties, and schedule time for property tours. You don't need an agent for this — simply call the seller's agent yourself and arrange a time for a tour.

When touring a property, don't just focus on the positives. Scrutinize the property and keep an eye out for potential problems. Is there evidence of water damage? Does the stove work? Do the floorboards squeak as you walk across them? Are there telltale signs of foundation problems? Typically, a realtor would be paying attention to these things for you. Because you're on your own, you need to have a keen eye and look for these problem spots yourself.

You'll also want to be wary of something called “dual agency.” This is where the seller's agent offers to represent you as well. Dual agency, colloquially known as "double-heading," appeals to agents because it allows them to earn both halves of the commission, effectively doubling their earnings.

However, dual agency is not great for buyers. There is an inherent conflict when a single agent claims to represent the best interests of two opposed parties simultaneously. Though not illegal, dual agency is ill-advised for most buyers.

Choose a Property, and Settle on an Offer Price

Once you've found the perfect property, it's time to decide how much you should offer. Without an agent offering you guidance, you'll need to learn how to set an offer price on your own.

Realtor.com can tell you if your market is currently a buyer's market or a seller's market

  • In a seller's market, there are more buyers than sellers. This creates competition amongst buyers and drives prices up. 
  • In a buyer's market, there are more sellers than buyers. This gives buyers their pick of properties and drives prices down.

Many parts of the country are experiencing a strong seller's market. If you really want a property, you may want to consider offering as close to the asking price as you can. A buyer's agent could provide some valuable guidance here. Since you're working on your own, you'll have to trust your gut and hope you don't get outbid.

Make an Offer

This is where your attorney comes in. An offer to purchase real estate is more complicated than many people might realize. A purchase offer is a contract that contains, among other things, the offer price and a list of contingencies. 

Contingencies are conditions that must be met for the deal to close. One example is the inspection contingency. If an inspection reveals serious problems, the inspection contingency gives the buyer a way out of the contract. If this contingency is omitted, a buyer could find themselves trapped in a bad deal. By helping you get your contingencies properly spelled out, your attorney adds serious value.

Negotiate

Your initial offer won't always be accepted. You may go back and forth with the seller through several rounds of counteroffers. Your attorney can analyze counteroffers and ensure that you aren't put in a bad spot by something sneaky buried in the contract language.

Close the Deal

After your offer is signed and accepted, it will be time to submit an earnest money deposit to escrow. You'll have the home inspected, and the lender will conduct an appraisal on the home. Based on the inspection results, you can negotiate any repairs or back out of the deal.

If the lender is satisfied with the appraisal, you will sign your loan documents, and the deal will close. 

Should You Buy Without an Agent?

Buyer's agents provide a service that is free for buyers. A buyer's agent would incur a fee of around 2.5–3% for representing you, which the seller would pay. According to recent data from the National Association of Realtors, 88% of buyers take advantage of the free help offered by buyer's agents.

If you decide to work with a real estate attorney, you will have to pay them out of your own pocket. Typical prices for a real estate attorney vary based on location and clientele. Brian Lohse, in the Chicago area, charges a very affordable fee of around $500–$1,000 to assist buyers. Greg Glaser, an attorney in California, charges a flat fee of $3800 to represent buyers. Fred Glick of Arrivva charges a flat rate of $8750 for his premium services.

First, ask yourself why you want to forego the help of a buyer's agent. There are a few situations where it makes sense to do this:

  • You can sometimes buy the house at a lower price (since the seller will not have to pay a buyer agent commission). 
  • You can close more deals as the seller is saving money. 
  • You are buying directly from a family member who you trust, and you want to help that family member avoid paying any commission.
  • You are or were a real estate agent; you understand how to close a deal.
  • You have a friend or family member who is a real estate agent and will offer you free guidance.
  • You have worked without an agent before and have experience doing deals in this way.

The median home price in California broke through $800,000 in April of 2021. A buyer's agent in a transaction for an $800,000 home would earn a commission of around $24,000, paid by the seller. By eliminating the buyer's agent, the seller no longer has to pay this large commission. The benefits of using a flat-fee attorney instead of an agent increase for more expensive properties. For example, a $1.6 million home would require that a commission of nearly $50,000 be paid to the buyer's agent. In this situation, a buyer without an agent would be even more attractive as they stand to save the seller some $50,000. It's up to the buyer to decide if it's worth paying an attorney to make their offer more attractive to sellers.

If it's your first time buying a home, or if you're new to an area, you should strongly consider working with a buyer's agent. If you have real estate experience and know your local market well, you may not need an agent. Working without an agent will not save you money directly. However, it keeps the seller from paying a commission to a buyer's agent, which, in turn, makes your offer more competitive.

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Seth Kniep

Married a pearl. Fathered 4 miracles. Fired his boss. Turned a single dime into $104,857. Today, a self-made millionaire, Seth and his team of 8 badass coaches teach entrepreneurs how to build passive income on Amazon.

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