This article briefly covers some of the pros and cons of purchasing a house from a seller who does not have a real estate agent.

Purchasing a home from someone selling without an agent (commonly called “for sale by owner”) can often be an attractive option when considering the purchase of a new home. Homes which are listed by the homeowner are often priced less than other comparable homes listed by real estate agents. The reason for the price difference may be because the seller does not know the value of his home, or may be due to the reduced costs incurred by the seller in deciding not to contract with a real estate agent. Real estate agents typically charge sellers a fee of six to seven percent of the purchase price of the home. This commission is taken from the seller’s proceeds at closing, and the seller may be inclined to increase the listing price of the house to cover the agent’s commission. For example, a house that is listed for sale with a real estate agent for $100,000 will typically result in an agent’s commission of $6,000 to $7,000. If the seller does not hire an agent to find a buyer for the house, he might subtract these costs from his asking price, resulting in a listing price of $93,000 to $94,000.

Another advantage of buying a house from a seller who has not hired an agent is that the parties to the sale have more flexibility to negotiate the terms of the contract for sale. Real estate agents have an obligation to protect the interests of the party they work for. Therefore, the seller’s agent will advise the seller of certain liabilities and potential pitfalls of the real estate contract. A seller who does not hire a real estate agent may not be informed of the liabilities and unfavorable conditions present in the contract. This can often benefit an experienced or knowledgeable purchaser by allowing him to construe the terms of the contract in his favor.

Flexibility to negotiate the sales contract terms without the help of real estate agents may also sometimes disadvantage the purchaser. If the seller is informed and experienced in the area of real estate, he may attempt to construe the contract to include terms unfavorable to the buyer. Negotiating a real estate purchase without real estate agents allows the parties to rely on their own understanding of real estate practice and principles. This can be advantageous to the knowledgeable purchaser, while serving to disadvantage the uninformed buyer.

Another potential problem with buying a home from an unrepresented seller is that some sellers who do not contract with an agent to sell their home often will not deal with purchasers who do have agents. This is sometimes because the seller does not want to have to pay part of the commission to the buyer’s agent. The seller may also want to convince the purchaser to enter into an unfavorable contract for the purchase of the property. Use caution in dealing with an unrepresented seller who refuses to work with your real estate agent. If you do not feel comfortable with your personal knowledge of real estate contracts, it might be to your advantage to search for other properties.

Houses listed for sale by owner are also usually more difficult to locate than houses listed by real estate agents. Good listing real estate agents utilize numerous forms of advertising to sell the properties they list. Most real estate agents make the properties accessible on the internet, through the newspaper, and in periodical real estate magazines. They also place signs on major roadways near the properties directing potential buyers to the listed homes. Homeowners who are selling for themselves rarely advertise their homes as well as real estate agents. Many simply place a sign in the front yard with a phone number to call if you are interested. The only way to locate such homes is to actually view the property. Searching for homes that are for sale by owner can multiply the time required to find a potential new home.

Another disadvantage to purchasing a home from an unrepresented seller is the amount of work required to negotiate the purchase of the home. This workload is especially compounded if the purchaser chooses to proceed without an agent. There are numerous inspections, appraisals, and financing arrangements that must be completed before the sale of a property. Agents are often very helpful in arranging and completing the pre-purchase work.

The primary advantage of purchasing a home from an unrepresented seller is that the listing price may often be substantially lower than if the seller were represented by an agent. The parties to the sale also have more flexibility to negotiate the contract and are allowed to rely on their own understanding of real estate contracts. These advantages must be balanced against the disadvantages of possibly being drawn into an unfavorable bargain, having difficulty locating properties, and assuming responsibility for pre-purchase arrangements.