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Note, the question isn't searching for a home, but buying a home. If you do the leg work on your own, identify what you're looking for and find it, then what are the downsides of not making the purchase with the assistance of a real estate agent for you as a buyer?

For example, I know there's a lot of paperwork involved and figure a lawyer can tackle that, but how much money does that generally save (or does it not save $ at all to cut the real estate agent out of that)? I'm also aware the real estate agent can help with negotiations and working with a house inspector. Let's say I am a confident negotiator, and have a reliable home inspector in mind to work with - is there something I'm missing out on by buying without a real estate agent? Though real estate agents may be great negotiators I expect even a good buyer's agent has some incentive for the sale price to be higher rather than lower, as their commission is greater with higher sales price.

Does the answer change depending on whether the seller is using an agent or not? I'd think the answer wouldn't change and the positives and negatives would be the same when it comes to using a buyer's agent.

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    I think the country here is relevant enough to warrant a tag
    – Yosef Weiner
    May 11, 2017 at 18:36
  • Do you have a family member who's done this before?
    – RonJohn
    May 11, 2017 at 20:31
  • @RonJohn close friends yes
    – cr0
    May 11, 2017 at 23:00
  • I'd pick their brain over multiple dinners and cases of beer.
    – RonJohn
    May 11, 2017 at 23:02
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    This really depends on location. I some places going though an agent is compulsory. In others the buying-process is formalized to such an extent it virtually makes no difference, except cost.
    – Daniel
    Mar 29, 2018 at 14:48

3 Answers 3

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Disclosure: I am not an agent.

Yes you can negotiate a lower price if the seller doesn't have to pay a buyers' agent's commission, but you probably won't save the full commission, since the buyer will want to take some of those savings in exchange for the extra risks involved. Thinks about some of the things that buyers' agents do on your behalf:

  • Run comps to make sure your offer price is fair. You can do this yourself, but realtors generally have better resources to do it more effectively
  • Make sure the offer has sufficient contingencies to protect you. What if you don't like the result of the inspection? Can you back out of the deal? What are your options?
  • Schedule the necessary inspections, surveys, etc.
  • Make sure the seller gets you all the required disclosures (and know how to deal with them)
  • Know the neighborhood. Is the price fair for the neighborhood? IS it suitable for your family situation? Is it improving or declining?

I expect even a good buyer's agent has some incentive for the sale price to be higher rather than lower, as their commission is greater with higher sales price.

True, but their main incentive is to make a sale or they get nothing. Since their commission is relatively low, even a 10% increase in the offer only increases their commissions by 0.3% of the offer. For example, increasing your offer from $200,000 to $220,000 only increases a 3% commission by $600 (from $6,000 to $6,600), but could be the difference between an offer getting accepted and rejected. It usually isn't enough for them to encourage you to make a bad deal, which could hurt their reputation.

Does the answer change depending on whether the seller is using an agent or not?

Some FSBO sellers are more willing to work with non-agent buyers, but the same risks above apply.

The bottom line is: you can buy a house without an agent, but you need to make sure that you can replace their expertise and time spent working for you, and that the savings are worth the additional work and risks.

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  • I moved less than 90 miles about a year and a half ago (transfer from one unit of my company to another). It was amazing just how different the local real estate customs were between places. Things like what each buyer and seller is expected to pay for, what appliances are left, the work needed at the county office to get a title history on the land. A good realtor should know how to navigate all that stuff in their market.
    – R. Hamilton
    May 11, 2017 at 21:26
  • "even a 10% increase in the offer only gives them a 0.3% increase in their commission." I know what you're trying to say, but the way you've written it is confusing. The context is differences in what the realtor takes home, but you've framed it in relative terms of the sale price. It would make more sense to use absolute numbers with an example. "A change of $10,000 in sale price is a change of only $300 in commission." And if this is a $300k sale, $300 is nearly insignificant.
    – user26460
    Jan 7, 2018 at 6:11
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    Read literally, it is incorrect. If sale price moves by 10%, commission also moves by 10%.
    – user26460
    Jan 7, 2018 at 6:12
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From a financial perspective, there are only downsides to using a buyer's agent, because there is one more person to be paid involved in the transaction.

Far from helping you save money, it is in the interest of both agents for you to pay more. The more you pay, the more commission both of them get. And since they are splitting the commission, that is all the more reason for them to try to get the maximum out of you, as long as the sale is assured.

If there is only a seller's agent, then you are more likely to get a good deal, because the agent will be getting a larger commission so their focus will be to convince the seller to agree to a lower price so the deal gets done.

Let's look at some actual math to see how it works:

Imagine we have a house you want to buy that is listed for $500,000.

Case 1: You have no agent. In this case the seller's agent will ordinarily get the full 6% commission of $30,000. If you offer $450,000, the agent gets $25,000. The agent has an incentive to convince the seller to take the deal, especially if they think it could take months before another potential buyer appeared. In other words, even if the OWNER doesn't mind waiting for months, the agent definitely will mind waiting.

Case 2: You have an agent. In this case the seller's agent will get $15,000 and your agent will get $15,000. If you offer $450,000, then it will be $12,500 each. Now, the seller's agent has a significant incentive to wait, because if an independent buyer comes around later the agent could eventually make $30,000 which is a LOT more than $12,500. Therefore, the agent has an incentive to advise the seller to hold out for the full amount. The buyer's agent knows all this, so they will advise you to pay full price or near full price.

Also, if there are multiple offers, guess whose offer seller's agent is going to prefer? The independent buyer. So, for example, let's say an independent buyer offers $500,000 in cash and you (with agent) offer $525,000 contingent on a loan. Guess which offer the seller's agent will recommend taking?

From these examples, you can see that the math favors the independent buyer.

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  • Assuming 6% full commission, shouldn't it read "if you offer $450,000, the agent gets $27,000". Same in other places - $12,500 should be replaced with $13,500. While what you claim here sounds obvious from incentive standpoints, have you tested if it works like that in real life?
    – user4910112
    Aug 7, 2020 at 5:22
  • Yes, there's bad math in this answer.
    – Bob Baerker
    Sep 29, 2021 at 12:23
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    @user389238 I have bought 3 different houses and made offers on several others and I have never used a real estate agent. There is no reason to ever use a buyers agent unless you do not want to spend time looking for a house and want to pay the agent to do it--in which case you will get a house the agent likes.
    – Five Bagger
    Sep 29, 2021 at 12:41
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Ultimately, the price you pay is what is agreed upon by you and the seller. The Broker/Agent commissions are paid out of the sale price; so you don't really save any money. However, there are always properties "For Sale By Owner" and you still have to determine how the fees for transferring the deed get paid, as well as taxes. The default is that closing costs are paid by the buyer; but, that too can be negotiated.

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