Let’s Cut Out The Realtor And Save 3%!

May 15th, 2012

I sometimes hear how a buyer thinks they can save 3% by cutting out the buyer agent when buying a home, then representing themselves, and end up saving 3% by dealing directly with the listing agent. And I think I will do my own surgery, represent myself in court and put a new roof on my house on my own. Sure you will represent yourself in a real estate transaction, why not? It is easy and it takes almost no time at all. I hope you see the sarcasm in those last statements. There are many things wrong with thinking you can represent yourself when buying a home.

First, you don’t have time to do it. I can barely get people to return my calls, do a complete loan application, and send in the requested loan documentation first time around. And I get why. They are busy, they have jobs and families and demands on their time. So realize it takes an enormous amount of hours to represent yourself on your own when buying a house, and most people do not have the time to do it.

Second, there is a lack of knowledge and resources. How will you find a sales contract, write up this complicated instrument, make offers and counter offers , know real estate contract law, negotiate the entire offer, find a local home inspector, choose and interact with the lenders and title companies, etc? It takes many resources to do all this on your own that most people lack.

Third, the listing agent will think, “oh boy, another buyer who thinks they will do all the work of a buyer’s agent and that it will save them 3%, which means I’ll end up doing all the work of the buyer’s agent for free, no thanks.” And this means that many times a listing agent won’t even consider your offer with out you having representation. Or a few times I have seen a listing agent say, “I will reduce the commission from 6% to 4.5%, and I’ll take 3% as the listing agent, and for 1.5% I’ll do for you all that your buyer agent would have done. Well there, its all fixed isn’t it? You just saved 1.5% and Brian Martucci is wrong, there are savings in going directly to the listing agent! Yes, there are some savings, and then, you have just set yourself up for failure, because you have the agent who is representing the seller now helping you, and there first duty is to represent the seller who is paying them! So how are you supposed to get fair representation in this “dual agency” situation? You won’t. Human nature says you more fairly represent whomever is paying you! So for 1.5% savings you want to give up your rights to proper representation, making sure you have someone fighting for your interests, the best price, and a smooth transaction. How is this smart? You may even pay 1-5% too much for the property by not having all the local knowledge that your own buyer agent would offer, offsetting the gain on the slight savings on the realtor commission!

But, for the listing agent who is foolish enough to allow someone to represent themselves on their own, who will get a copy of the sale contract? Where will you source it from? No, you cannot get a current, accurate sales contract from Office Depot or “just find it online.”

And if you do find one that you think is valid, who will fill it out? A lawyer? And will they do it for free? And does a standard lawyer even know current real estate law?

Will you fill it out on your own? Are you sure the sales contract you find will include all the necessary contingencies, to protect you as a buyer? If it does have all the necessary contingencies do you know how to negotiate and fill each one out?

Will you miss something?

Who will recommend the best local lenders, title companies, home inspections, contractors, etc?

Who will monitor the deal?

A few times I was asked to, as a lender, take over as the buyer’s realtor, for free, and do all the things that the buyer wanted to “save 3% on.” I heard, “Brian, we know you know all this stuff, can you help?” Is this fair to me? Why don’t I get to charge a commission? Do I have time to be both realtor and lender? But I do not offer to help in this sort of situation. Although I know real estate contracts, have seen contracts negotiated for 26 years, and know a real estate transaction backwards and forwards; I am not licensed, don’t know the work as well as a realtor would, and can’t imagine I would do the same job as a qualified realtor. And I am not sure its even legal!

So the bottom line is buyers cannot represent themselves in a real estate transaction, they don’t have the time, likely won’t save any money, and may end up causing a legal problem or costing themselves money in the end. Don’t begrudge professionals their paycheck for doing their work, as they would not begrudge you yours.

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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