Buying a Home Without Representation

Buying a Home Without RepresentationThere was a time when buying a home was as convoluted as walking into an real estate office and looking through their "inventory" - that is, the properties that the agents specifically in that office had listed for sale.  If you wanted to see a house that wasn't listed by that office, you had to go to the corresponding listing office, and they could tell you the details and sell you the home.

As a buyer, you generally didn't travel this circuit with your "own" agent, you relied on the listing agent to help you.  Here's the issue, or at least, the biggest issue: The brokerage is obligated to the sellers to get the most money possible on the sale of their home, to represent their best interest - not yours.  The running around has been reduced, but the obligation to the represented parties remains the same!

When a home seller hires an agent to sell the home, the agent has a fiduciary (read: legal) responsibility to his or her clients' best interests. The agent must protect their private information and motivations, market and show the home, etc, but he is also responsible for bringing the highest price the market will bear. All of the agent's research, marketing, and negotiation are with his/her clients needs in mind.

A Real-Estate Agent is A Trained Negotiator

Whether or not you feel well versed in the ins and outs of real estate, having a real-estate agent there to fight your battles for you can pay HUGE dividends in the end.

A Realtor's job is to act as a sort of buffer between the two negotiating parties, diffusing what is almost always an exceptionally emotional process for sellers and buyers alike. In fact, as large-scale transactions go between consumers, this one is downright unique. In these sort of situations, it is your Realtor's job to specifically negotiate the facts, and present your interests in the best possible way, and to eliminate the emotion from the discussion.  This is something a principal to the transaction typically can't do on their own.

A Real-Estate Agent Knows the Market and Will Save You Money

An essential part of a real estate agent's job is to know the real estate market. They should know approximate home values in a neighborhood, and more so, they should know how to analyze the data to recognize trends. You don't want to be the one holding the bag on a $400,000 purchase to find that the market dropped 10% within a year of buying. That's $40,000 in the toilet.

Additionally, a good Realtor can negotiate, on average, about 97% of the list price (we get even more), for a 3+% improvement on return just on face. (Of course it's more complicated than that, 97% of the correct list price might be far more than 94.5% of a poorly priced home.)

A Real Estate Agent Allows You to Focus on the "Fun" Part - Finding Your Dream Home

The detail that goes into the legal and financial aspects of acquiring your dream home is quite substantial.  So why not let an agent take care of it for you so you can focus on the enjoyable parts?  A good real estate agent will take so much of the pain and suffering out of the process and allow you to focus on finding your new, dream home. A good real estate agent will:

  • Listen closely to your needs and wants, and only show you homes that meet your criteria.
  • Explain the full home buying process to you up front, mitigating the risk of any surprises, like mortgage insurance, high assessments, earnest money, or high closing costs.
  • Schedule appointments for showings, second showings, third showings... etc.
  • Help you to understand and complete forms and write offer contracts.
  • Perform a market analysis to assist you in preparing a reasonable offer on a home.
  • Negotiate on your behalf and in your best interests.
  • Guide you through the inspection process, the attorney review, and coach you to the closing table.

The best part?  It doesn't cost you anything. (Yes, really!)

How can that be?

The vast majority of the time, buyer's agent's compensation comes from the listing agent's commission split. The home seller has agreed to pay the listing agent a percentage of the sale price of the home (commission). The listing agent then makes a promise to the market to pay a "cooperating commission" to an agent that brings the sellers a buyer.

The home buying process has changed a great deal in recent years:

  • The advent of the Multiple Listing Service (MLS) made all listings available to all MLS subscribers. The buyer was freed from having to find the office of each home they had interest in.
  • The introduction and proliferation of the World Wide Web and widespread internet connectivity made it possible to preview homes from the comfort of your own home, sharing one's likes and dislikes with his or her Realtor prior to making any appointments. No longer does the buyer need to see lofts when looking for townhouses, or vintage style kitchens when looking for granite and stainless steel. Information is widespread and best, free!
  • Focus has increased on improving the experience and protection of home buyers. Most real estate transactions feature two represented sides - a listing agent and a buyer's agent. There are laws in most states defining the roles that an agent can and cannot play in a real estate transaction. In some states, a single real estate licensee may not represent both the buyer and seller in the same transaction. In some, such as Illinois, the agent may represent both sides, accompanied by full disclosure, but we at Real Group recommend very, very strongly against it.

One thing that has not changed, is the listing agent's responsibility to his or her clients. 

The bottom line?

A real estate agent is your hired negotiator who is an expert in the field, has extensive knowledge of the market conditions and inventory, and will essentially ensure that you don't make any costly mistakes during the detailed home buying process.

Going unrepresented is risky, time-consuming, and typically very costly.  So go ahead.  Hire a real estate agent.  There is nothing to lose and everything to gain.

Real Group Real Estate

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2526 N Lincoln Ave
Chicago, IL 60614

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