Home Buying in Chicago>Question Details

Carlo Ruth, Other/Just Looking in Chicago, IL

Buyer wants to work without a realtor?

Asked by Carlo Ruth, Chicago, IL Wed May 22, 2013

Any basic advice to give folks who are looking at buying a home through a friend and not using a realtor? Their concern is saving money on the transaction, of course, which is understandable. But they should be aware of the risks involved as well. I'm not a real estate professional, but I run into this type of buyer fairly frequently and I'd like to be able to advise them better. Thanks.

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25
The seller normally pays out any commissions, not the buyer. By not having professional representation the buyer may end up paying more in price than necessary.
0 votes Thank Flag Link Wed May 29, 2013
Its free to use a Realtor on the buy side. The seller pays the fees so its beneficial to use a Realtor since Realtors will have the knowledge of all aspects of the transaction and can advise the buyer along the way and save them money in the long run by negotiating the price. A buyer will not have access to the info needed to make a proper offer and will typically pay more than they have to for a place.
0 votes Thank Flag Link Tue May 28, 2013
Here is the deal... "friends" have been selling other Friends things forever... here is the issues with that whole thing and my Advice... This is the best way for "friends" to become enemy's... If anything goes wrong... The friendship is over and the hating begins. I have seen great friendships end over the buying of a car or something else that broke or was not in great shape. Friendship is one thing... purchasing a house is another.
You want to save money? do it the right way to begin with and you will save a fortune and a friendship.
0 votes Thank Flag Link Mon May 27, 2013
Usually sellers are responsible for paying the commission on behalf of the buyer. I would seriously recommend working with a professional realtor in order to avoid mistakes and problems the buyer can run into while searching for a home.
0 votes Thank Flag Link Mon May 27, 2013
ESPECIALLY on the Buyer's side....
0 votes Thank Flag Link Mon May 27, 2013
Thanks to everyone for their thoughtful responses. Good fodder for convincing people of the value of having a realtor, even from the buyer's side.
0 votes Thank Flag Link Mon May 27, 2013
The buyer should have a realtor involved for their best interest, they want to make sure home is worth the amount seller is selling it for as well as the price that they are paying is competitive with the neighborhood for the condition, size, home amenities, neighborhood amenities, etc. In addition, Buyer should have an attorney to make sure everything is okay with titleand other legal matters. In addition, if this friend is not the owner, a realtor/broker ,trustee of the estate, or have power of attorney they should not be involved in the selling of this home. Hopes this helps you.
0 votes Thank Flag Link Mon May 27, 2013
What do you mean "buying a home through a friend"? Is this "friend" actually the seller? If not then how will this friend help? Sellers selling without an agent are looking to save paying the fee. So is the person trying to buy for sale by owner. They can not BOTH save the money.

On another note, the buyer ALWAYS "pays for" the commission. It may come out of the seller's proceeds but that seller had a bottom line of what they would net AFTER fees and commission. So the Buyer is just financing that commission.

The others who wrote here are right. This is too big an investment not to get (and pay for) the expert advice of both an Agent and a good Real Estate Attorney., Your friends might get away with this but then again... they might pay dearly for trying to save a buck.

Deb
0 votes Thank Flag Link Thu May 23, 2013
Sellers are normally responsible for paying the commission of both the listing and buyers agents. The buyer should take advantage of this so that he/she has a guide in the buying process.
0 votes Thank Flag Link Thu May 23, 2013
Sari,

That is misleading statement to say that the seller could lower the price by 2.5%. In that scenario the listing agent would simply get paid the full commission instead of splitting it with a buyer's broker. The seller pays the full commission either way. Great deal for the listing broker but not the buyer!
Web Reference: http://Www.markmalave.com
0 votes Thank Flag Link Wed May 22, 2013
Contrary to what many are saying here it does cost the buyer to use an agent. If the buyer's agent wasn't getting compensated the seller could lower the price by 2.5% (generally). The real question is whether or not the buyer is getting value for their money. If they consume 20 hours of their agent's time and that agent makes $10,000 then they effectively paid that agent $500/ hour. No agent is worth $500/hour. But if they consume 200 hours of that agent's time then they got a great deal.

So the alternative for buyers like this is to get their own agent, pay them hourly, and have that agent rebate the entire commission to them. They pay for exactly what they get. We offer that to people so you can have them call me at 312-738-0232.

Using a friend??? Very bad idea. Reminds me of a movie with a lawyer named Vinnie.
Web Reference: http://LucidRealty.com
0 votes Thank Flag Link Wed May 22, 2013
What is the perceived financial disadvantage of NOT using an agent to buy a home? Are your friends experts in the home-buying process? There are many things that unrepresented buyers do that wouldn't happen if they were working with a professional. In my experience, most unrepresented buyers pay too much to begin with, and they don't have a team of people working with them to protect their interests. It's not like they're writing a check to an agent, so as others have said, what's the argument instead using the services of an agent (who is paid through the listing commission anyway)?
0 votes Thank Flag Link Wed May 22, 2013
Why would anyone in the world want to sell their own home? The obvious answer is to save the real estate commission. Why in the world would a buyer purchase a home on their own? I don't know. As a buyer you can use a realtor and benefit from all their expertise at no cost to you. Both parties can not save the same commission. I could go on and on about the benefits of using a realtor, but you asked for basic advise, and that is about as basic as I can get.
Nick Radakovich Home Sales Realty
0 votes Thank Flag Link Wed May 22, 2013
Carlo,

I am not sure saves a buyer money. You should now that broker typically will change from 6% to 5%. The reason is so they can offer the cooperative broker between 2.5% and 3%. If your friends go directly to the selling agent the selling agent will simply collect the entire 5% to 6% and will fall under dual agency. Remember the saying the cheap can end up expensive.

1. I recommend a buyers broker not associated with the property.

2. They need to have a good real estate attorney.
0 votes Thank Flag Link Wed May 22, 2013
Suggest that they have an attorney approve any paperwork before they sign anything. Not much more to say. It happens at times.
0 votes Thank Flag Link Wed May 22, 2013
Hi Carlo , this situation happen a lot .

Would you trust in your friend to do surgery to you ? or you will hire a doctor ?

They are not going to save ! they will be ending losing a lot ....the listing agents love it when people came without realtors ....and the listing agent will take 2X commision plus NO representation
0 votes Thank Flag Link Wed May 22, 2013
Every Buyer should have an agent as the buyer's agent gets a split of the commission and they should have someone represent them! It is already in the listing, so it does not change anything.... It's free to them and they should take advantage!
0 votes Thank Flag Link Wed May 22, 2013
It doesn't cost the buyer anything to work with a realtor. The buyer's agent's commission comes out of the proceeds of the sale that go to the seller. Also, the buyer must present the appropriate standard contract, riders, and addenda. (He/she should also should retain a real-estate attorney to draft any necessary requests for extensions of time, and changes to the language of the contract. Also, the attorney will have to pull the deed, and do all of their title work.) Additionally, the buyer's agent can provide a Comparative Market Analysis to help the buyer know how much to offer etc. Finally, if the buyer doesn't use an agent, the person showing the home is not going to be a dis-interested party, who is willing to point out possible problems with the property/transaction that may come out later (after it's too late); and it's likely that the seller will have an agent, who represents him/her, and who is looking out for his/her best interest... the buyer should make sure that they have the same.
0 votes Thank Flag Link Wed May 22, 2013
Its free to use an agent, so no sure about the argument.
0 votes Thank Flag Link Wed May 22, 2013
I have a few friends who do not believe in using Realtors either. They believe that they save on the purchase side, but more times than not they end up overpaying for the property. They also overpay for additional services (eg. lawyer, title, etc). On the sell side they don't maximize the sale price since they can't generate the overall traffic. There really is nothing to warn them against since they believe that the agent does not add any value to the transaction.

Geoff Ommen
Broker Baird & Warner
847-271-2622
geoff.ommen@bairdwarner.com
http://www.geoffgetsit.com
0 votes Thank Flag Link Wed May 22, 2013
As a lender I recommend that buyers always use an Agent and an Attorney. I even have attorney clients that purchase and hire another attorney that is familiar with real estate to handle the transaction. It is a huge purchase and not to be taken lightly, use a professional to guide you through.
0 votes Thank Flag Link Wed May 22, 2013
I would say that I would not represent myself in court and I would not represent myself in a transaction this large either. Especially when the representation is FREE!
0 votes Thank Flag Link Wed May 22, 2013
Buyer wants to work without a Realtor?
0 votes Thank Flag Link Wed May 22, 2013
Umm, they do not pay for buyer broker services. They will almost certainly pay more by being unrepresented in a purchase. This is a complicated and intricate process, with small errors leading to big expenses.
it is foolish at the least and definitely almost always a costly mistake.
0 votes Thank Flag Link Wed May 22, 2013
My basic advice is: don't advise people who don't want advice. Especially if you're not an expert!
0 votes Thank Flag Link Wed May 22, 2013
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