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Buying a house without a Realtor / real estate agent

First off, why bother?

This is the first thing listing agents tell you when you're looking at houses. It's an intimidating statement they like to use every time they meet you: If you're not the one paying the commission, why bother buying a house without an agent? It's almost an insulting question, and the answers below allow you to see right through them:

There are MANY reasons! All of them are a good thing:
  1. Using an agent shields you from learning about the market:
    Buying a house is the biggest investment you'll likely make in your life. It's not to be taken lightly. And if you're gonna pour your savings into something that's this big of a deal, you damn well better make sure you know what the market looks like --- especially in a market with multiple-offer situations. An agent can both hurt you and help you in a very active market. If you're not rich, but you have the patience, an agent can inadvertently navigate you into seeing homes you would not ordinarily see if you had simply taken the time to go see homes by yourself. I saw (and drove to) literally 60+ homes that I was actually serious about over the course of 4 months. If you're not that serious about choosing a house, then this tutorial is not for you. Just go get an agent and wash your hands of this tutorial.

  2. Reading every document you sign is extremely important:
    If you're not reading the ENTIRE contract, word-for-word, and comprehending it, then stop shopping for a house right now. Just stop. Go home and stick your head in the sand. You're making a totally irresponsible decision. If you have the time to read it (and every addendum to the contract), then there's no reason why you can't fill it out yourself either. The only alternative to not doing this is either that you're an investor or a cash buyer, in which case, this tutorial is meaningless to you.

  3. You might want to sell your house by yourself in the future:
    By buying a house without an agent, you learn all the steps needed to complete the process: from title company, to inspection, to survey, to mortgage, to closing. Selling a house is exactly the same, just the other way around. Same documents, same shit.

  4. Losing your offer more than once is important! I'm not even kidding:
    If your offer is rejected, don't be sad! It's fine. The world's not going to end. Just go find another house and do it again. Losing is actually very important, because on the first offer you make, you need to understand by how much money you're losing, and the only "legal" way to figure that out is to lose. The listing agent can't legally tell you how much the winner offered until the sale closes --- but that could be a month later, and by then you will have already made another offer. By losing, you gauge your own tolerance for how much you're willing to spend. For example, let's say you bid $2000 over the list price and lose in the same area. OK, so, well, maybe next time you should try $5000 over. And then maybe you lose again. So, you keep adjusting your comfort level until you hit a limit that you're not comfortable with anymore -- all the while keeping in mind that the houses you're bidding on are not jokes --- if you happen to win an offer early, then you better not bid on something in which you honestly wouldn't want to live. If you hit that comfort limit (and you better have one), then that tells you whether or not to stay in that area or try another area. Losing is actually very important and should not be avoided. A buyer's agent will tell you that you can save the emotional turmoil buy just using an agent, but if you did that you wouldn't have gotten the education about the market, and without that education, you might end up buying a house that you might not totally be sure about.

Second, how do you see homes by yourself without an agent and without MLS access?

  1. You don't! You do NOT need MLS access! You just call the listing agent =) That's not a joke.

    Wait, you can call the listing agent? Yes! That's what all those pretty signs are for sitting outside the front yard of every house that's for sale.

    Here's how you do it:

    a) Spend some time on redfin.com. Take your favourite listings and cross-reference them with zillow.com. 50% of the time the listing agent will appear, and 50% of the time the listing agent will not appear.

    b) If the listing agent is not there, drive to the house and write down the listing agent's phone number. If their email or website is printed on the sign, then write that down too. I'm not even kidding. If you seriously like the house, take your lazy butt out of your apartment, jump in the car, and visit the house. Write down everything you see on the sign. 20 to 30 percent of the time, you'll see something on the outside of the property that you didn't see in the listing which will give you pause and end up causing you to throw out the house anyway ----- so get over there and drive!

    c) Once you have the listing agent's phone number, call them and ask them to show you the house. NOTE: There are good listing agents and there are bad ones. In a very "hot" market, there are just as many bad ones as there are good ones, and some of them will just blow you off. If they blow you off, then either the Seller's don't really care about who's representing their interests or something's wrong with the house, or both. If the house is worth buying, the listing agent will happily show you the house. Otherwise, it doesn't matter how pretty you thought the house looked online, just forget about it and move on to the next one.

    d) Do NOT call listing agents if you're not actually serious about considering making an offer on the house, provided that everything checks out after you've seen the house. They're taking their precious time to show you the house, so if you're not actually ready to buy something, then just stick to open houses and don't bother anybody. Otherwise, you'll further the reputation that agentless-buyers don't know what they're doing and we want that to stop.
Third, if you're serious about the house you just saw, make an offer!
  1. Lookup the sales nearby (again, I prefer redfin.com for this because the have more detailed search capabilities):

    On your favorite non-MLS website, list the recent sales surrounding the house of comparable size and amenities. Compute an average and use your own judgement to insert some wiggle-room. (This is not a science. You'll get better at it). After you have an average, ask yourself: Does this price more or less jive with the list price? You don't need a buyer's agent to teach you how to do this. I've passed over a few houses because the listing agent totally got the price wrong ---- yes, they can get it wrong. It's obvious when it's wrong too --- the house stays on the market too long.

  2. Next, contact the listing agent by email and ask for the disclosure and survey for the home.
    In Texas, unless the house is an estate sale, the seller's are legally bound to give you a disclosure of the home that tells you what they know is wrong with the house. You're also legally required to sign it and return it with the offer itself.

  3. Grill the listing agent:

    So, you've pulled up in the driveway and you're walking around the house that the listing agent let you in to see. Ask questions!
    1. Does this house have an offer deadline?
    2. Why are the seller's selling?
    3. Do you have the disclosure and survey ready?
    4. Is the house rented?
    5. Have they already received offers? (You're not asking for the details. Just if any were received yet).

Fourth: How do you make an offer --- like how do you ACTUALLY do it?

Do you just call up the listing agent and be like, "Yo, homie ---- how about this much?"

Well, no. But it's not that complicated:

  1. In Texas, you download an empty contract "1-4 Residential Contract Resale" from https://www.trec.state.tx.us and fill it out. Line by line. Box by box.
     You will need to request the name of the title company and the escrow agent from the listing agent in order to complete the contract. Do this by email.
    Texas is "nice" like this. The contract wording is already set in stone. You don't even need to hire an attorney if you're an expert already (but if you're reading
    this, you're likely NOT an expert). You just fill in the blanks, dot your I's and cross your T's and you're good to go.

  2. If you're applying for a mortgage, you also download the form "Third Party Financing Addendum" and fill it out.

  3. You also sign the disclosure that was given to you.

  4. If a copy of the house's survey (the diagram of the boundaries and configuration of the home) was not furnished to you before making the offer ---- do NOT buy the house. Just don't. It's not worth it. It's a red flag. I mean, you can --- the Seller has to generate one, which is allowed in the contract, but it delays the closing and unless the market is totally dead, just go find another house.

  5. Finally, if this is your first offer, take those 4 documents (contract, financing addendum, disclosure and survey), find an attorney on yelp, pay a flat-fee, and ask the attorney to review your contract. A few hundred dollar retainer goes a long way. Just pay it. Rip off the band-aid and pay it. But don't do it twice. *Definitely* do it once. You'll regret it if you don't.
    If you lose this offer, you can use this contract as a reference for your next offer. Just make sure to go through it with a fine-toothed comb, because attorneys can be expensive if you have to pay that flat-fee again. In states like New york (where I've also bought a house before), Attorneys direct the entire process. If that's the case, you don't really have a choice ---- they are legally required to be involved from the beginning as part of the closing costs.

  6. Send the offer by email to the listing agent ---- don't mail it. Don't fax it. If you don't email it these days, you're wasting your time.

  7. Ask the agent if there's a deadline for reviewing the offers they have received ---- in a multiple-offer situation, there usually is a deadline. If they don't have one, put pressure on the agent to create one. The deadline usually should be within a few days, and if not, something may be wrong with the house that you don't know about or is not listed in the disclosure. In my case, I lost a lot of offers, but I was making on average about 1 offer every week until one was successful. That's totally normal. If you're waiting more than a few days for a response to your offer, then something is wrong.

  8. If your offer is accepted, make sure your contract included an option's period, if your state allows for this. (New York doesn't, for example)Don't skip this. An option's period is a legal way to cancel the contract for whatever reason you want to cancel it. It should generally last no more than a week or two, cost's $100-$200 and is credited to the sales price during closing just like your earnest money check. It's priceless insurance that doesn't cost you anything unless you actually decide to cancel the contract. It is not necessary to ask the listing agent how much you should pay for the options period ---- you can just pick a number yourself. But, realistically, don't ask for a length of time that's longer than it takes to complete the inspection on your home, and don't offer more than a few hundred dollars.

Fifth: you got a return email / phone call that your offer was accepted. Now what?

Take a deep breath! That was the hardest part. And you made it. Now, if you made it this far, then you know your contract back and forth without me having to tell you:

  1. Drop off the initial checks to the title company in person: Your contract specifies an "earnest money" check, which is generally 1% of the sales price that is credited back to you at closing, and if you chose an option's period, that's a separate check, both of which are listed in the contract. The earnest money check has no relationship to your down payment ---- it's simply a refundable check that shows that you're "serious" about the offer you're making. Since it's creditable at closing, making a check larger than 1% doesn't really help you. Fill out these two checks, drive to the title company, and drop them off. After you drop them off, the title company should give you a final "executed" version of the contract back to you by email.

  2. Send that executed contract back to your attorney and have them look over it just to make sure nothing's wrong. Sometimes the title company does make mistakes ---- they are NOT attorneys.

  3. Schedule your home inspection ASAP. Find one on yelp, and if you call one that can't make it out before your options period ends, then SKIP them and find another one. Keep calling until you find one.

  4. Do not send a copy of the inspection to the listing agent unless they specifically want to see it. It's just etiquette.

  5. If the inspection turns up something bad, discuss it openly and honestly with the listing agent. You may have to work out a deal, change the sales price, or request repairs to be completed before closing. There's nothing wrong with negotiation. There's nothing that can particularly prepare you for this process ----- you just have to deal with bad things when they happen, and they do happen.

  6. If you have finished negotiating anything that was wrong with the inspection, great! Schedule your mortgage application to begin ASAP. It doesn't hurt to schedule the mortgage application before this --- as long an appraisal hasn't been scheduled yet, you're under no obligation to proceed with the mortgage. The more you get started in advance, the better.

  7. If you were unwilling to negotiate problems with the inspection ---- WALK AWAY FROM THE HOUSE. How do you do that? It's pretty easy actually: In Texas, you don't need an attorney. In a state like New York, you probably do. You just fill out the form "NOTICE OF BUYER'S TERMINATION OF CONTRACT". In Texas, you do not need anyone's permission to fill this out and you do not need your attorney either. You literally just print and sign this thing and walk it into the title company's office. The title company is legally required to give you your earnest money back as long as you are either within your option's period or have some other grounds to cancel the contract. It's that simple. The title company cuts a check back to you and you walk away scott free.

So, you finished your inspection, negotiation, and mortgage ----- go to closing!

And enjoy the house =)