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Diana Costagliola

Diana Costagliola: What homebuyers should know about closing on a house without a Realtor

With all of the resources available to homebuyers, it may be tempting to purchase a home without a real estate agent. If you do it right, you could save thousands in agent commission. However, most buyers benefit from the expertise of an agent, so it's important to evaluate your options.

Why some buyers pass on using real estate agents

Just 11% of homebuyers opted to purchase a home without an agent in 2019, according to the National Association of Realtors. Some 52% of homebuyers found the home they purchased online, while only 29% found their home through an agent.

Still, buying without an agent may be a viable option if you're familiar with the house; perhaps the property belonged to a neighbor or a family member. Closing without an agent on "an intra-family transaction is fairly common," says Pamela Linskey, attorney and founder of Linskey Law LLC, which specializes in real estate, estate planning and probate in Massachusetts.

Most people, however, are looking to save some money, a goal that may be misguided given how commissions are typically structured.

"Generally, the only advantage to buying a home without an agent is saving the money it would cost to pay the agent, typically about 3% of the purchase price," says William P. Walzer, attorney at Davidoff Hutcher & Citron LLP in New York. "For expensive homes, that amount isn't trivial and could come to tens of thousands of dollars."

If the buyer agent's commission is 3% on a $450,000 home, that equals $13,500. But because the seller pays the commission, Linskey doesn't know if there is any real money-saving advantage for the buyer: "The seller pays the brokerage fee for the listing agent and any buyer agent, so there's really no benefit to the buyer for going it alone."

Linskey adds that having an agent means that there will be "an extra set of eyes and ears at the time of the offer, throughout the process and at the closing."

"From the mortgage application and the formal offer letter to the deed transfer and the bill of sale, handling that paperwork is never fun, but a good real estate agent can assist a homebuyer to make the process easier," Walzer says.

How to buy a house without an agent

If you decide to make an offer on your own, here's how to buy a house without an agent and what to expect at the closing.

1. Negotiate with the listing agent

As the buyer, you may be able to negotiate the price of the home with the listing agent since you're saving the seller from having to pay your agent's commission. Negotiating on a home takes skill, but if the seller lowers the purchase price to reflect the lack of agent fees, this would result in a smaller mortgage and lower monthly payments.

If you can negotiate with the seller's agent, you stand to save between 2.5 to 3% in commissions, which is generally half of the total commission. Even though the seller pays the commission, the buyer's real estate agent's commission is baked in _ but, if there's no buyer's agent, then the buyer might be able to knock that fee off the purchase price.

2. Review the closing disclosure and ask questions

The closing disclosure is an important document that includes information about the terms of your mortgage, closing costs and your average monthly payments. This document is usually about five pages long, and can be reviewed up to three days before your closing date.

Read the document carefully and compare everything to your original loan estimate from your lender. If you notice any discrepancies, now is the time to make any adjustments. Take note of the interest rate, estimated number of payments, any prepayment penalties and the closing costs.

You can also submit a request for final bills to be delivered on closing day. This will show that all of the seller's outstanding bills, such as utilities, have been paid.

3. Have a professional review the paperwork

Hiring an attorney to review the documents is a smart move because a house is a large transaction _ and the documents can be complicated to read through and understand.

Issues can come up at any time as well, and a real estate lawyer may be your best resource.

"Forget waiting until the closing to get an attorney," Linskey says. Because this is their business, an experienced lawyer will be able to advise you on the types of issues that may come up during the process, and have language incorporated into the purchase and sale agreement to protect the buyer. Linskey adds that by doing this beforehand, the buyer won't be in "a defensive posture of reacting and hoping the seller will work with them."

4. Gather a cashier's check, proof of insurance and your IDs

There are a few important things you'll need to bring to your closing. Have these items ready a day or two before so you don't run into any issues on the big day.

Certified or cashier's check: You should be notified at least one day in advance of the checks you'll need to bring to the closing, including who they should be made payable to and the exact amount. Personal checks are usually not accepted, so you'll need to go to your bank for an official check.

Proof of homeowners insurance: You'll need to show proof that you have secured a policy to insure your home on the day of the closing that is good for at least one year.

Government-issued photo ID: Make sure you have a current driver's license or passport on you, as you'll need it at the closing.

5. Sign all the documents and get the keys

At the closing, plan to spend one to two hours reviewing and signing two sets of multiple documents. One set contains the agreements between you and your mortgage lender, and the other set contains the agreements between you and the seller.

Take your time and read everything. You don't want to add your signature to a legal document you don't understand.

Once everything is signed, you'll be handed the keys to your new home.

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