Purchasing a Home Without a Realtor: What You Need to Know
You may be able to save money by buying a home without a realtor. Here are some actions that you can take in order to make homeownership a reality without a real estate agent.
Determine How Much You Can Afford
When deciding how much money you can put toward a mortgage, consider your monthly expenses and debt. Write down your costs for car loans, credit card debt, school loans, food, utilities, savings and other financial obligations. From the amount of money left, figure in your mortgage payment, property taxes, insurance, maintenance and other housing expenses.
In addition, you will want to contribute at least 20% of the home’s purchase price as a down payment. This will help you avoid paying private mortgage insurance, which protects the lender, reduces the overall long-term cost of your home and lowers your mortgage payments.
Find a Lender
Before seeking preapproval for a mortgage, get a copy of your credit report from each of the reporting agencies. Ensure that all of the information on the report is accurate, especially the debts listed in your name. Report any discrepancies to the credit reporting agencies.
You will need at least three years’ of tax returns and six months’ of bank statements to verify your income and debt obligations. Also, have your down payment, money for closing costs, and more than one year of real estate taxes and insurance readily accessible. Lenders want to know that you can afford to pay for unexpected expenses, in case you lose your job or face other financial hardships.
Meet with multiple lenders that offer various loans to determine which mortgage is right for you. Ensure each lender clearly explains what fees you will be paying and answers any questions that you have.
You can easily find real estate listings online through a search engine or on social media. You may decide to search by the city or neighborhood you want to live in, or by how much you want to spend. You may also find properties by looking through local newspapers, talking with family and friends, or driving around the area where you wish to live.
Create a Market Analysis
You will want to form a market analysis comparing sales prices of homes in the area to determine how much the home you want to buy may be worth. The Federal Housing Finance Agency (FHFA) website has a house price calculator to assist you. Simply enter the list price of the house you want to purchase to determine the home’s likely value. You may also access local property tax records online or in person to determine the most recent selling prices of homes in the area. Use this information to create a spreadsheet detailing the selling prices for homes in the area over the past three months. You will get a clearer idea of how much the home you want to buy is worth.
Negotiate an Offer
You may want to hire a local real estate attorney to prepare or review documents for submitting an offer on the home. Depending on real estate laws in your state, the documents will either begin negotiations for purchasing the home or will be a full contract to buy the home. Be sure you include contingency clauses that involve financing, inspection, appraisal or other issues so that you may get out of the transaction if problems arise and you cannot purchase the home.
Ask the homeowner or your attorney questions about things that you do not understand. Determine a fair offer that fits your budget, is based on current real estate conditions in your area, and includes the seller’s requirements and the condition of the property. The seller may decide to accept or not accept your offer, propose a counteroffer, accept a third party’s offer or keep the house on the market.
Arrange a Home Inspection Before Closing
You will want to hire a contractor to complete a home inspection before closing on the home. You can find a contractor through the American Society of Home Inspectors website. The inspector will examine the plumbing, electrical and heating/cooling systems, paint, floors, windows, doors and other elements to ensure that your home is safe and meets building codes. The inspector should also examine the land surrounding the home for issues with drainage, grading and plants that may affect the property.
The Bottom Line
You can save money immediately by not involving a realtor in your home purchase. Investing a little more time in performing the work yourself is likely to pay off.