Buying without a Realtor---Saving Money?

41 Replies

Hello,

I am in the process of making my second purchase in Sioux Falls SD.  Im not using a realtor as I feel I know what I want and I know the neighborhoods.  

I have thought of using an attorney to draw up the purchase agreement but I want to entice the seller with the opportunity to save money as he will not have to pay for the commission on my side (if I had a realtor).  That way it looks like he is saving 3%, (6% total/split between the buyer/seller realtors).    Am I correct on this one?

How do I write this or word it on the purchase agreement?  

Also I thought I read on BP that the seller agrees to pay a 6% commission and then they split it up between the buyer and sellers realtors?  Would I just be giving the sellers agent the full 6%?

yes you would be giving the sellers agent the 6%.  They have an agreement to work out financials and you're not really part of it.  Also as a buyer your agent is basically free so it's really a waste of your own money to hire an attorney to draw up papers your agent would do for you being paid by someone else.  It's not a big deal if you use an agent or not.  Our forms in Sioux Falls are already attorney written and are standard. (I'm a local realtor).

The agreement for commission between seller and listing agent has already been made, likely 5 or 6%. That won't change, even if you don't have an agent. 

What will change is that the listing agent will be dual agent, representing you and the seller. Usually they pull in a 2nd agent from the same office, so, that there's not a conflict of interest. 

My experience has been that I like to make offers directly to listing agents. It somehow flows easier and a lot of negotiation is being done by email first. But I've been buying mostly REOs, so that's different than a private seller. If the agent gets double the commission, they would prefer that the sale goes to you, instead of another offer with another agent and they might push your offer more or tell you where you need to be to look better than the other. 

Gosh, I guess I was hoping that this would save both sides some money but it doesn't look that way.  You would think by cutting out one realtor and doing the work yourself you could save some money.  

I appreciate the help and prompt responses.  That helps, probably easier to just get a realtor that way.

simply tell the listing agent.

"Hey, I dont have a realtor.  I imagine you are making 6% which was going to be split 3% per side.  Take that 3% you where going to pay a Realtor and issue it has a credit off the purchase price"

Its a win win for all.

In the future, if you plan to purchase more properties get your own license.

Your strategy to save both sides money would work on a FISBO (For Sale By Owner) or a RE broker trying to sell their own home, but not in most other cases. However, I used a similar strategy for a different reason  to help get good deals.

I got search access to MLS (or Redfin or Zilllow, etc. if you can't get MLS) and identified properties on my own. Then I contacted the listing agent and asked to see the home, telling them I that if I put in an offer it would be through them. This allows you to put in lots of offers on lots of homes and get represented by lots of eager agents trying to double end their listings, giving them incentive to close the deal with you ... this shouldn't matter in theory, but I can tell you from experience that it does matter in practice. You have to watch your own back in escrow, but I'd argue you need to do this no matter what anyway, whether or not your agent also represents the seller.

I was thinking of having my attorney draw up the offer stating I would like to have 3% off the agreed upon price. Stating "Asking the 3% realtor commission be applied to offer price as buyer is acting independently". I'm going to hope this works. 

I did find a company called Solopro. They are fee based and handle all the paperwork involved. They will give you a rebate for 3% after paying fees. It seems to be a nice way to save money on a realtor commission but they don't have any representative in the Sioux Falls area. 

SD law states that you need to be licensed to collect any sort of payment or otherwise.  This walks pretty close to that line.  Depending who the selling realtor is it may fly because what you're asking is the selling realtor pay for this deal to happen. It's bold and I'm kind of hoping it does work for you. If I was on the selling side I'd personally be cool with it as it's the same amount of money for me either way, but I know a lot of realtors In Town don't do business as I do.  Most are looking for a check not to help and it drives me crazy. Best of luck, let me know how it goes!

@Nate Rohlf

Hi Nate

A broker is an indispensable team member. They will be out there scouring the market looking for deals.  They will also present deals to you first if you have a track record with them.

If you see a property listed, then by all means contact the listing agent and work directly with them. Just keep in mind the agent is working for the seller, not you. Anything you disclose to the agent they are bound to share with the seller

It is sometimes easier to work with one broker on a deal, less going back and forth. I have heard of buyers trying to discount the commission of the agent if they only used one broker. Not a great way to build your team or reputation, but people do it.

Brokers are out there looking for deals.  Make sure you connect with brokers that buy and sell your type of real estate. For example, don't use a residential broker to buy commercial and multifamilies.

Good luck

Gino

Your best bet is to find an agent that is willing to discount his commission.  Explain to them that you are a savvy buyer who won't need help with the financing or explaining of contracts.  The less work they have to do the more likely they would be willing to rebate some of their commission.  If you have only bought one other home, chances are the realtor is going to end up doing a lot of work still and this strategy might not work until you have more experience.

Originally posted by @Nate Rohlf :

Gosh, I guess I was hoping that this would save both sides some money but it doesn't look that way.  You would think by cutting out one realtor and doing the work yourself you could save some money.  

I appreciate the help and prompt responses.  That helps, probably easier to just get a realtor that way.

Cutting costs is all well and good. Just understand what you're doing, why you're doing it and what the tradeoffs are.

Here's my philosophy on hiring professionals: I exploit my strengths and hire out my weaknesses. If I'm not a qualified professional in (whatever area), I'll hire it done.

I save half the commission on my purchases of listed property most of the time. I use the standard MLS RE purchase contract for my state. In the Selling Agent / Buyer's Broker space I put "N/A - see addendum." In the addendum I state that I am unrepresented, but if the offer is countered in any way I reserve the right to obtain a selling agent.

I simply offer 3% less than what I hope to pay.  The LA gets both sides if the offer is not countered.  They know this and tend to be helpful getting it accepted as written.  If countered, I often choose to just pass on the property rather than go interview agents and stuff, but I did have a better chance getting my original offer accepted. 

I am also completely comfortable with the buying process.  If someone is newer, I would just obtain quality representation from the beginning.  Missing a key step or deadline will cost a lot more than the potential savings!

Good question @Nate Rohlf .  With access to the standard realtor PSA in your state, there is probably no reason to have an attorney draft one from scratch.

Hey Nate, have you considered becoming an agent?  I'm looking into online courses.  I agree with the posts stating that the agent input is valuable but it seems like you could recoup some of the costs at least on the buyer's side.  Every home I've ever bought I've found myself.  While I used an agent who surely did a lot of work with the offers/counter offers, I wonder how much could be saved by learning those things and DIYing it. I'd love to hear from the agents and investors out there in this area although BP has more posts than one could read about this topic.

@Nate Rohlf You don't seem to understand, nothing you put in a purchase agreement, even when signed by you and the seller, changes the listing agreement executed between the seller and agent.  Also, who's going to have to take you to show it to you, be there for your inspections, answer questions along the way, etc.?  So no, don't expect a 3% rebate because it's Not the same as having your own agent.

Hi @Nate Rohlf

"I was thinking of having my attorney draw up the offer stating I would like to have 3% off the agreed upon price. Stating "Asking the 3% realtor commission be applied to offer price as buyer is acting independently". I'm going to hope this works."

Really that is a contract between him and his agent. When you figure your offer and present it to him, he can decide where the money comes from. He could offer his agent 25% commission if he wanted and where he spends the money from the sale is really his call.

Think if you were selling a house and someone came to you and said "I offer you 100K for your house but you can only give 3% of it to your agent not the full 6% you are under contract for". You would think "Who is this guy telling me what I can and can't do with the money after the sale?". I'd recommend just offering 97K and letting him figure out what he is going to do with his agent.

Good Luck!

Nate,

It seems as if you've been given plenty of advice... so I figured that a little more wouldn't hurt.  The simple fact is, that there are no rules, laws, or even dirty looks that can force someone to hire a Realtor. So long as your not helping anyone else facilitate the transaction, you don't need a license of any kind.  Basically, if the property is yours or soon to be yours - you can do whatever you want.        However, if your talking about buying a property from someone else. They have already done what they thought was best, and that was to sign a listing agreement with a Realtor. In that agreement they would have agreed to the commission rates for both Buyers agent and Sellers agent. They gave permission for those fees to be paid out from the proceeds of their own sale. Their Sellers agent commission is set and done. But the Buyers agent commission was an "authorization" NOT a guarantee.  If a Buyers agent shows up with a qualified Buyer then the Seller has already agreed to a 3% (normally) commission for them. But it's not guaranteed. The Buyer would already have an agency agreement with that Realtor in which they already agreed to fee amounts. Maybe that Buyer only agreed to 2.5%.     Sorry for taking so long, but my point is, nothing is written in stone. In my book, everything is negotiable and you won't know unless you ask.  Because unless you actually agree to that Sellers agent receiving the Buyers side 3% - they can't have it.  If the Seller offered to pay them 6% that's different.  But more than likely they wrote it up as a 3 and 3 split.  There are obviously other documents that could give both sides to that Sellers agent - but it doesn't sound like you're there yet.       The Sellers agent can't refuse to present your offer. So absolutely try to get the sales price reduced by that 3%.  

Hi Nate,

I know this thread is rather old, but there's been a LOT of incorrect information here, and since this was one of the first things that popped up when I google searched it, I want to jump in to help educate other people who may still be viewing this thread.

You can ABSOLUTELY save money by not using a realtor! I'll go into more detail below and address a lot of the points brought up in this thread

The 5-6% is indeed negotiated between the seller and their agent before a sale. I would not simply go in there and offer less based off the fact that you don't have an agent. As far as the seller is concerned, they still have to pay the same amount. As @David Faulkner mentioned above, this can be beneficial to motivating the sellers agent to close the deal on your behalf. I move around quite often and I'm very picky about where I live, so I use this strategy quite often in order to ensure I get what I want.

Here's what you CAN DO to save money -- come in with an offer, and ask them to credit 3% of your would-be realtor fee towards the purchase price (if you want to incentivize the sellers agent still, you can tell them to credit you 2% and the sellers agent keeps an extra 1%). Everything is up for negotiation, and frankly if your offer comes out to the same amount as somebody else once the fee is accounted for, they have no reason not to accept. I've used this strategy before successfully and everybody walks away a winner.

Every time I go to a showing without a realtor, the sellers agent attempts to convince me to use them if I go to another property, and says "You're not saving any money by not using a realtor, might as well use one". That's the narrative they keep trying to tell us, and many have tried to tell you in this thread. This is simply not true. I wish this information was more mainstream, but seeing as it would seriously harm the existence of realtors, I can see why there's very little known about it.

Redfin even wrote an article agreeing with me
https://www.redfin.com/blog/everything-to-know-about-buying-a-home-without-a-real-estate-agent/


To add some disclaimers, you need to know what you're doing in order to use this strategy, and I'd only advise people with the time + knowledge to do any real estate deals without a realtor. For those of us who don't need one though, do not use them -- it is money wasted on an unnecessary middleman. Pocket the extra cash yourself. Nothing against realtors, I'm just tired of "middleman industries" taxing consumers (care sales are a great example).

Originally posted by @Tchaka Owen :

@Zee Anon - Keep in mind that the agent can say "no" to giving you 2%. An agent is not required to submit such an offer either. 

 Of course they can say no, but why would they? 
If they say no, then you say "okay, I'll use a realtor then". And now they've lost the extra 1% (or potentially lose the deal altogether). 

As per your second point, I actually didn't know that. Can you provide a source? Why specifically are they not required to submit that offer? 
Either way, I would consider that highly unethical for them to not submit an offer that's in their clients best interest because they aren't making double the commission. Once again, this narrative is sounding more like realtors trying to protect their industry rather than what's best for both the seller and buyer. 


@Zee Anon - I am a licensed (and practicing) agent in addition to being an investor. 

1. So use another realtor, I don't care. When covering both sides of a deal, an agent has more work to do. The time I'm not spending there I can use to prospect...or whatever else I want. There are a number of agents who don't value their time and will do anything for a deal, but the best agents often won't. A smarter approach is to ask the listing agent if there's a benefit to working directly with him/her. Let the agent hook you up. Threatening does little for you. Put it this way, if you pulled that move on me, I'd ensure the seller makes more off you. And you'd never know it. :-)

2. Listing agents are required to submit offers on properties they list. If you make an offer that cuts into an agent's commission, it's no longer just an offer on said property - it's now an attempt to modify a contract to which you're not a party. If I'm that listing agent, I'll kick it back to you. Not every agent will (likely because they don't know). I do.  

And no, the narrative is about you thinking that you're correct about dipping into a realtor's pocket. Why don't you dip into the seller's pocket? Next time you visit your doctor, pay half of your bill and walk out. Do that to your landscaper too. Maybe your next client can give you partial payment. The list is endless.

Originally posted by @Zee Anon :
Originally posted by @Tchaka Owen:

@Zee Anon - Keep in mind that the agent can say "no" to giving you 2%. An agent is not required to submit such an offer either. 

 Of course they can say no, but why would they? 
If they say no, then you say "okay, I'll use a realtor then". And now they've lost the extra 1% (or potentially lose the deal altogether). 

As per your second point, I actually didn't know that. Can you provide a source? Why specifically are they not required to submit that offer? 
Either way, I would consider that highly unethical for them to not submit an offer that's in their clients best interest because they aren't making double the commission. Once again, this narrative is sounding more like realtors trying to protect their industry rather than what's best for both the seller and buyer. 


 If my offer wasn't submitted, I'd be talking to the agent's broker and I could always go online or to the clerk's office to find out who gets the tax bill on the property and simply send a letter to the owner with my offer and letting them know what their agent is up to.

What you've proposed makes perfect sense and isn't stealing from the agent in any way.  They'd lose a percentage to your agent if you had one.  So, what's the difference?  The deal got made.

All you need is a title company - or a RE attorney in an attorney state, as far as completing the deal as a buyer.

Originally posted by @Tchaka Owen :

@Zee Anon - I am a licensed (and practicing) agent in addition to being an investor. 

1. So use another realtor, I don't care. When covering both sides of a deal, an agent has more work to do. The time I'm not spending there I can use to prospect...or whatever else I want. There are a number of agents who don't value their time and will do anything for a deal, but the best agents often won't. A smarter approach is to ask the listing agent if there's a benefit to working directly with him/her. Let the agent hook you up. Threatening does little for you. Put it this way, if you pulled that move on me, I'd ensure the seller makes more off you. And you'd never know it. :-)

2. Listing agents are required to submit offers on properties they list. If you make an offer that cuts into an agent's commission, it's no longer just an offer on said property - it's now an attempt to modify a contract to which you're not a party. If I'm that listing agent, I'll kick it back to you. Not every agent will (likely because they don't know). I do.  

And no, the narrative is about you thinking that you're correct about dipping into a realtor's pocket. Why don't you dip into the seller's pocket? Next time you visit your doctor, pay half of your bill and walk out. Do that to your landscaper too. Maybe your next client can give you partial payment. The list is endless.

 1) I don't understand why you think me saying I'm going to get a realtor if they decline is me threatening them. So, you brought up a fair point "I'll have to do more work by representing both parties", but that's why I'm still offering the extra 1%. They get to close the deal quickly and make a larger commission, why exactly is that so bad? If they don't want to do the extra work, so be it, that's their right to decline -- so I'll get my own realtor and everything's fine. However, I'd like to point out that every lease agreement I've signed, they've done very little (if any) extra work, and I'd argue they often did less work by communicating directly with me. 

Everybody wins in this situation. The only person who "loses" is the lost middleman who I never needed to begin with. 

2) I'm not a licensed realtor, so I'm not going to tell that you're wrong, because frankly I don't know. However, I'm very skeptical that this is accurate, and I'd like to again ask you for a source on this claim.

I'm going to try and word this as clear as I possibly can to avoid any confusion, because you're deflecting from the point and bringing up irrelevant arguments.
I am NOT dipping into the realtors pocket. You were never getting the double commission. I'm the one actually doing the extra work, scoping out properties, scheduling showings, negotiating contracts, etc -- the sellers agent is not doing that for me. I am. 
If an agent refused to credit me back the 2%, I would simply hire a realtor to do the work I'm doing and actually look out for my best interest. 

What I'm suggesting makes both parties better off. Once again, the only person who's "pockets" I'm dipping into is somebody who was never needed to be involved in the process. 

It appears as if you're trying to discourage people from implementing my strategy by claiming the landlords would never hear my offer. For one, that's false, as I've had multiple deals like this. For two, I want to again express that by not bringing my offer to the landlord, you are acting extremely unethically, since my offer is better for EVERY party involved. 

Your examples regarding doctor bills or landscapers make no sense. There's no potential middleman there that I can cut out. I'm not suggesting we apply this to every industry, simply this one where the job is not necessary




Originally posted by @Sue K. :
Originally posted by @Zee Anon:
Originally posted by @Tchaka Owen:

@Zee Anon - Keep in mind that the agent can say "no" to giving you 2%. An agent is not required to submit such an offer either. 

 Of course they can say no, but why would they? 
If they say no, then you say "okay, I'll use a realtor then". And now they've lost the extra 1% (or potentially lose the deal altogether). 

As per your second point, I actually didn't know that. Can you provide a source? Why specifically are they not required to submit that offer? 
Either way, I would consider that highly unethical for them to not submit an offer that's in their clients best interest because they aren't making double the commission. Once again, this narrative is sounding more like realtors trying to protect their industry rather than what's best for both the seller and buyer. 


 If my offer wasn't submitted, I'd be talking to the agent's broker and I could always go online or to the clerk's office to find out who gets the tax bill on the property and simply send a letter to the owner with my offer and letting them know what their agent is up to.

What you've proposed makes perfect sense and isn't stealing from the agent in any way.  They'd lose a percentage to your agent if you had one.  So, what's the difference?  The deal got made.

All you need is a title company - or a RE attorney in an attorney state, as far as completing the deal as a buyer.

 Thanks for the reply Sue. That's my thoughts exactly -- I'd simply pay for the attorney myself and handle the paperwork. It's not for everybody, but for many intelligent people I think it's very much worth the extra effort. 

I think responses like Tchaka is why it's not a known strategy. As a realtor, he's clearly very biased against what I'm suggesting, and has even gone as far as to say he would implement unethical practices to stop me.