Buying a Home

(And Pros/Cons of Using an Agent)

Ready to buy a home? Here’s what to expect:

1. Know what you can afford

Get preapproved through a lender such as SoFi, Rocket Mortgage, or a local lender (I highly recommend Jon Hasebi at Cross Country Mortgage). It will be a bit of a process to upload all the documents they need (such as your W-2s, 1099s, and tax returns), so expect this to take a few days.

The lender will do a hard credit pull which will slightly negatively affect your credit, but for a year thereafter you can get preapproved with multiple lenders to shop the best rates without taking more hits to your credit despite them also doing hard pulls.

The lender will then let you know what purchase price you would be preapproved for depending on how much your down payment is. They will provide you with a loan estimate that shows the interest rate, monthly payment (principal, interest, and escrow, where escrow is an additional monthly amount you will pay for property taxes and homeowner’s insurance), and cash to close (your down payment plus the cost of the loan and estimated expenses like title fees).

2. Find a house

This is the point where many people opt to find a real estate agent. While purchasing a home will be significantly easier with an agent, you can save a lot of money by not using one. Agents will tell you that the seller pays their commission, which technically is true, but then buyers need to offer more to make their offer attractive to the seller. Before the NAR settlement in August 2024, sellers who signed with a listing brokerage typically agreed to pay their listing brokerage a commission (usually 5% or 6%) which the listing brokerage would then split with the buyer’s brokerage. So, buyers and sellers had no control over how much the buyer’s brokerage would get.

Now, listing brokerages only negotiate for their own commissions, and the buyer’s brokerage commission is included in the real estate purchase contract (REPC). If the seller accepts the REPC, they are therefore agreeing to pay the buyer’s brokerage whatever it states there (typically 2% or 3%). By not using an agent for a $500,000 house, you would be saving the seller $10,000-$15,000, which means that you could offer $10,000-$15,000 less (so, $485,000 or $490,000 depending on how much you want it) and your offer would be just as attractive as a $500,000 offer with a 2%-3% buyer’s brokerage fee. For your pocketbook, the difference between a $485,000 offer and a $500,000 offer is $3000 in savings on a 20% down payment, plus savings of $76/month from your monthly payment if the interest rate is 6.5%.

However, not using an agent (who works for a real estate brokerage) has its downsides. Throughout the remainder of this article, I’ll share how you can do each step with or without an agent, and the pros and cons of each.

With an agent: Your agent will set up a search, which often allows for very specific criteria that aren’t covered by Zillow and other consumer-facing marketplaces. They will set up automatic emails of any listings that meet your search requirements. If you see a house you’re interested in, agents often have access to info about the house that isn’t publicly available. When you want to see a house, they will coordinate with the listing agent to set up a time at your convenience. They have a thing called a Supra key, which is an app that unlocks a Supra lockbox that almost all listing agents use, so that they can access the keys to the house anytime.

However, part of the NAR settlement is the requirement that buyers sign an agency agreement with an agent before that agent does any showings with them. This agency agreement specifies the amount of commission that you as the buyer agree to pay. As mentioned earlier, the REPC will ask the seller to pay this, but if you sign an agreement with your agent that you will pay them 3% and the seller only agrees to pay your agent 2%, you are legally responsible to pay the additional 1% out-of-pocket. Some agents won’t require this and will be fine with whatever the seller agrees to pay them, but that’s not always going to be the case. See Negotiating with a Real Estate Agent.

Without an agent: You can see what properties are on the market on Zillow and other sites, and see if any of them have open houses. You can also call the listing agent directly to try to arrange a showing. However, if you tell them you’re unrepresented, many listing agents will try to hook you up with an agent they know. If you lie and tell them you have an agent, they will tell you to coordinate showings through your agent. Your best bet is to tell them you’re unrepresented and plan to keep it that way, and hope that they cooperate. Unfortunately, many listing agents will tell you that you can only do a showing through an agent.

	Pros	Cons
With agent	• Agents know the market and where you might narrow your focus to find a property that will meet most of your needs • Easier to narrow your search to features you care about • Easier to schedule a showing	• Have to sign agency agreement that specifies a commission that you have to pay them
Without agent	• Save a few thousand dollars	• Much more difficult to see properties in-person

3. Make an offer

An offer consists of many terms: the offer price, earnest money, appliances or personal property that would be part of the sale, contingencies, deadlines, and anything else that the buyer may request. Determining the right offer price is likely the most difficult, but it’s important to know what contingencies you could include that would allow you to back out without penalty.

With an agent: Your agent will conduct a CMA (comparative market analysis) which looks at the price that similar homes have recently sold for. This helps approximate the current market rate and therefore helps you determine the right offer price. Then they will fill out the appropriate forms and walk through them with you in detail to help you decide on the terms of your offer.

Without an agent: The onus is on you to determine what price to offer and the terms of your offer such as any contingencies. One resource that can help you is my free CMA tool (just enter the property address of the home you’re interested in).

Once you know what price you’re willing to offer (and remember to subtract 2%-3% from your offer price since you’re not using an agent), you can visit https://eforms.com/purchase-agreements/ and select the purchase agreement for your state. The cost is $55 per form.* Fill it out and send it to the listing agent.

After you submit your offer, the seller may accept, reject, or counter. If they counter, you may counter the seller’s counteroffer. You can go back and forth as long as you want, just keep in mind that the deal is not done until both parties have agreed. If one party indicates on the REPC that they accept the other’s counteroffer and then signs it, the agreement is legally binding.

	Pros	Cons
With agent	• Will ensure you understand all terms of the REPC • Will make sure you don’t make a grave error that can end up costing you lots of $ • Will help you navigate counteroffers	• You will need to pay (directly or indirectly) thousands of dollars
Without agent	• Save a few thousand dollars	• You must make sure you understand all terms of your offer and any counteroffers; else you risk making a huge mistake that can end up costing you thousands of dollars or require you to purchase a house you don’t want

*As of July 30, 2024

4. Submit earnest money

Earnest money is money that the buyer provides to the trust or escrow account, usually 1%, that indicates that they are serious about the purchase. If the buyer breaks the contract or cancels beyond a certain deadline (usually the financing & appraisal deadline), the seller can keep the earnest money. And if the seller breaks the contract, the seller is usually required to pay the buyer that amount of earnest money in addition to the buyer getting their earnest money back.

With an agent: Your agent’s brokerage will likely have a trust account and will give you instructions on how to wire it or send a check.

Without an agent: Find a title company to work with, many of whom also serve as escrow companies or can refer you to one. Your title and escrow officer can help guide you through the transactional processes but won’t be able to provide guidance on the terms of your purchase.

5. Due diligence

The due diligence period is the period of time that the buyer has to inspect the property and make sure they want to proceed with the transaction. Usually they will hire a home inspector who will inspect the plumbing, electrical wires, foundation, roof, flooring, cosmetics, appliances, and everything else that can be reasonably inspected. A sewer scope, meth test, radon test, and termite inspection are usually additional charges.

With an agent: Your agent will set up the inspection for you and meet the inspector there to walk through the issues they find with the house.

Without an agent: You will need to find your own inspector and set up the inspection in collaboration with the listing agent.

Here are examples of things to look out for:

Toxic Chinese drywall
Cracking in the walls, indicating a structural issue
Warped or wet walls, indicating water damage and potential ongoing leak

	Pros	Cons
With agent	• Has known and trusted inspectors and other contacts who may be needed to perform a thorough due diligence • Can help negotiate repairs and/or monetary credits from the sellers	• The cost of hiring an agent
Without agent	• Save $ on agent fees	• You’ll need to do all the coordination with inspectors yourself • You may not know about a critical inspection that you should have performed and end up owning a house that costs you thousands to repair • You will have to do all the negotiating with sellers yourself and may not know how to proceed with paperwork correctly to make any seller concessions legally required

6. Financing & Appraisal

A buyer’s ability to obtain financing and the appraisal of the house are two more contingencies that a buyer may indicate on the REPC. In other words, if the buyer needs a loan to be able to purchase the house but is unable to obtain financing, or if the home appraisal comes back under the offer price, most REPCs allow the buyer to back out without penalty. (Though, keep in mind that when first negotiating the offer, the seller may counter with the requirement that they are able to keep the earnest money regardless of the appraisal. Anything can be spelled out in an REPC, so it is very important to understand all terms of the contract.)

Throughout this entire process, you and/or your agent should have been in communication with the lender: you to provide any additional documentation they need for underwriting to approve your loan, and either you or your lender to keep them updated with any new terms and associated addenda to the REPC. If the lender is not able to get underwriting’s approval or if the lender is not able to get the appraisal report back prior to the Financing & Appraisal deadline, and you usually cannot legally back out of the contract without a penalty. Sometimes the seller can sue you for specific performance, i.e., force you to buy the home.

With an agent: The agent will keep everyone, including your lender, on track to make sure you have everything you need to meet this deadline.

Without an agent: You will need to follow up with your lender to ensure they meet your financing & appraisal deadline. You will also need to negotiate with the sellers if the appraisal comes back below the purchase price since the lender will only be willing to give a loan based on the appraisal valuation. For example, if your lender agreed to loan you 80% and the appraisal report comes back at $480,000 instead of $500,000, your lender will only loan you 80% of $480,000. So if the current purchase price is $500,000 and you don’t negotiate with the seller for it to be lower, you will be on the hook for coming up with the balance of $116,000, which is a down payment of 23.2%.

	Pros	Cons
With agent	• Agent will stay on top of your financing to ensure you meet your financing & appraisal deadline • Agent will help you negotiate with the seller based on your appraisal report	• The cost of hiring an agent
Without agent	• Save $ on agent fees	• You will need to stay on top of your financing to meet your financing & appraisal deadline • You will need to negotiate with the seller yourself

7. Settlement

Once both you and the seller have met all terms of the agreement and you both are moving forward with the transaction (hooray!), you will sign the loan documents, settlement statements, etc. to finalize the transaction and transfer title to the property in your name. A notary will meet you to complete these, or you can sign directly at the title company.

The title company will give you specific instructions for wiring the cash to close. Make sure you get those instructions DIRECTLY from the title company to avoid wire fraud! Your lender will also release the funds they’ve loaned to you so the seller gets paid in full. Once the loan has been funded and the property has been recorded in your name with the county assessor, the property is yours!

With agent: Your agent will verify that any fixes/repairs agreed to by the seller during due diligence have been taken care of. If they’re not, your agent will help figure out a path forward (e.g., moving back the deadlines to give the sellers more time, if you agree to it and still want the house). Usually right before the settlement, your agent will also do a final walkthrough to make sure the house is in the same condition it was when you first made your offer. Your agent will also review the final closing documents from the lender to make sure all is in order.

Without agent: You’ll have to do all the aforementioned yourself.

So, it is possible to purchase without an agent, but a lot more difficult. A smart and savvy buyer can certainly do it, but it may be worth it to pay an agent to make sure you have all your bases covered. This article is an “at a glance” look at a typical transaction, but anything can happen. It’s critical to make an offer in your best interest, negotiate with the sellers, and be able to legally cancel without penalty.

Questions? Email me at katie@kormanikrealestate.com anytime!

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