Finding and Working with a good Real Estate Agent
One of the most critical steps for a new investor is finding a competent real estate agent who understands your needs as an investor and will work hard for you. This article attempts to address that need.
Understanding the Agent
In most cases, you will have to train a Realtor to work for you. Real estate agents are generally good at what they do, but most of them do not deal with investors and our methods are foreign to them. This does not make them bad people, nor does it make them stupid. Typically, an agent makes more money dealing with pretty houses and people with good credit, so this is the area where they become experts. If you can find an open-minded agent and teach them about what you do, then you can put together a mutually beneficial relationship. But first you have to respect the agent’s perspective.
An agent gets their license and starts selling real estate to make a living. They aren’t doing it for charity. They only get paid if someone buys a home and settles on it. A lot of work goes into a putting a deal together. Agents have been burned time and time again by investors who do not produce. Many so-called investors have real estate agents scour through listings, make appointments to see houses, show them around town, get them back into houses a second time, and never make an offer. Many investors who do make offers produce offers which are so ridiculous that if the agent knew this up front, then they probably would have never agreed to work with the investor. Then there are investors who get offers accepted but never settle on the deal. So the agent, who has about 30-40 hours worth of work into a transaction, will never get paid for their time. How many of you would want to go to work for a week and then not get paid?
What to Expect from Your Agent
You need to recognize the fact that you are going to be looking at many houses and buying few. You don’t need the agent to drive you all around town, pull up comps on every house you are going to see, or present offers on which you can’t follow through. This is a waste of their time and yours. The only thing that I expect from my agents is to provide me with listings and submit my offers. Occasionally I will ask them to show me a home or pull comps for me if I can’t find anything on my own. With few exceptions, you need nothing from your agent but for them to give you listings and submit your offers.
How to Find an Agent
When interviewing Realtors, you need to have a good idea of what you expect from them so that you can explain to them exactly what you need. They need to know exactly what their role is going to be if they are working for you. I simply tell new agents the following:
“I’m looking for a new real estate agent to help me, someone who can provide me with lists of fixer uppers and foreclosures on a daily basis. It won’t be necessary for you to run me around town to see all of the houses. Occasionally, I may need to get inside of a home, but not very often. I may also need comps once in a while, but mostly I’ll just expect you to submit my offers for which I will provide all of the terms up front. I will probably make about 20 offers per ______. My offers will be low and most will be turned down, but I usually get one or two. Since you won’t have to work to hard for these sales, would you be interested in working with me?” Most Realtors will say yes. The ones who usually decline are those who are mega producers and already busy enough.
It is not difficult to find a real estate agent, however it can be difficult to find one that you like who will also work with you. The first thing I suggest is for you to look for someone whose location is convenient for you. You will have to see them regularly and you don’t want to be traveling out of your way all of the time.
Be Honest with Your Agent
When dealing with a new real estate agent, be sure to be totally honest with them. If you have never done a deal before, you shouldn’t walk into their office and tell them that you are a successful investor who does 5-10 deals per month. First, this is lying, and second, your inexperience is bound to show through and you are sure to lose all credibility with the agent and anyone that they know. A real estate agent will be more inclined to work with you and be happy about it if they know everything about your situation up front. If you enlist their services through deception and they discover shortly thereafter that you have never done a deal, you will probably never hear from them again. Overall, real estate agents possess a good heart like anyone else, and they like to see people succeed. Moreover, they would like to be a part of your success story, so be honest with them and you will see how much further it will take you.
How to Work Well with Your Agent
The key to working well with an agent is for you to respect their time. Real estate agents are just like you and me. They do what they do to make money. Their time is money. If you have an agent run you all around town to look at houses, spend hours preparing contracts, hours on the phone with other agents, hours pulling comps (we will discuss comparable sales later in the course) and hours pulling listings but you don’t buy a home, then the agent loses. They get nothing for all the time that they spent in good faith, hoping that you will buy a property. You need to be aware of this and respectful of it. Most investors who go to a real estate agent are beginners/wannabes. They never buy a home, yet the real estate agent invested a lot of time and effort into them. As a result, on the whole real estate agents have little success with investors and therefore tend to stay away from them. You have to be different. Be considerate of your agent’s time and produce.
Real Life Experience
I have never had a problem with finding real estate agents to work with. I can walk into any real estate agency, and find an agent to work with me. I sit down with the person on floor duty and ask them a couple of questions about their experience. I ask them if they are opposed to working with investors and I listen to their response. I then go into my pitch. I tell them that I am an investor and that I buy 3-5 houses per month. I ask if they would be interested in handling that for me. I always get a yes to that question. I then give them something else to get excited about. I tell them that I do not expect them to take me out to show me houses- their faces usually light up. Next I tell them what I do expect of them. I want listings on a regular basis and I want them to make all of my offers. I let them know that I will usually make about 30-50 offers per month in order to get 3-5 accepted. I ask them if that will be a problem. That usually is not something they like to hear, but they realize that they don’t have to do anything else so they agree to it. I tell them that the reason I only get about 10% of my offers accepted is because I offer very low. I let them know that most will be turned down, but some will be accepted and those are the ones that we want. I also explain some of the things that I have learned when it comes to dealing with banks. Most banks pay real estate agents a minimum commission (as opposed to a percentage), so if you are making low offers your agent can still expect to make decent money. This is another plus, they like to hear that you want them to make money. Bring it up often- tell them that you value their time and you won’t waste it. Be considerate and they will be loyal.
Great information, thanks! One thing I don't understand though: why would you not want to see the inside of a house? You need to know what all is wrong with it, espeically if there are any cracks in the basement walls etc., before you make an offer on it.
Thank you for all the information!
I am not clear about :
"Most banks pay real estate agents a minimum commission (as opposed to a percentage"
Which banks do you referred to?
I though the seller pays a 6% (normally) or about, of the selling agree price.
Often Bank REO's sell for below market value. This brings the realtors commission down if they are getting a percentage. Sometimes it brings the commission down so far it is not worth their while. The the banks have a stated minimum commission that they will pay. Usually around $2000-$2500.
Blessings,
Steve Cook
AH!
Thank you!
(I live in San Diego and we have no REO!)
I know it is not easy to belive, but everuthing gets sold before it gets to the bank!
Rocio
Rocio, you sly dog. Trying to keep me out of the area. I know you.
Seriously I consider your comments a compliment. It shows that me and my ilk are doing a really good job. The minute someone slips a few payments the specialist is there. Working the PreREO list of the Banks, Savings and Loans etc. Yes there are such lists but they are only for those persons who massage them on behalf of the Lenders to keep everything on an even keel. You solve the problem. Most foreclosures are needless to say dah an indication of some social problem. So the person who handles it must really do a job. And the result of all this highly professional work. Very few foreclosures in San Diego County. Lots of sales of properties where the owner would be foreclosed if left unattended. Cheers Lucius
I am working with a realtor at the moment who sepcializes in foreclosures. They want me to sign an exclusive buyer's agent agreement. Is this a good idea?
When you are doing this long enough, you don't always need to see the inside of the house. Especially when you are buying dirt cheap. When someone wants to sell at the high end of the wholesale pricing scale you need to see the inside, but I've bought many homes that I couldn't care less about the condition because I bought them so cheap.
Blessings,
Steve
I see. To buy them cheap, do you just put in a high volume of dirt cheap offers on bank REOs and see what happens? Kind of like a "spray and pray" approach? Or do you have certain criteria for the properties and/or the sellers?
I have never signed an exclusive Buyers agreement with a realtor. If they don't work out, you need to move on, and they can not keep an eye on the ENTIRE market. You want a number of eyes out there working for you in different areas. Particularly if you are interested in Wholesaling.
Blessings,
Steve
Signing a Exclusive agreement with a realtor will limit your flexiblity and if you get one that will say they will work with you and then 4 weeks down the road stop doing what you need them to do your stuck.
I have signed contracts with them but add to the contract that this agreement is for property located at 123 jackson rd texas city tx only and expires upon purchase or rejection of offer. We all sign and intial each change. I then would sign one for each property on the MLS that they help me with .
They do not like this at least most don't. Find another agent.
I do explain it is like a job that has a probation period, we need time to see if we can work together. I explain to them that I can't sign an exclusive with them becuase I do not know if we will "fit", I have critiria (see above) that I work within and that I do not want them to waste thier time or me mine if everyone is not truly dedicated to my guidelines and success in purchasing property. I also tell them if they are serious and we work well together there will be no need for an exclusive. I will use them for everything in their area and to list mine for many years to come. A handshake is rare but I still believe in the concept of being loyal, honest and fair when dealing with them.
Seems to work for me.
There is a certain rhyme to the reasoning behind my offers. I do know what the homes are worth after fix up, and I have an idea of what my worst case scenario can be for repairs.
With experience it gets much easier to take such an approach. I rarely see what I buy anymore. But it is a numbers game.
This is a great article. One question though, how much do you pay the agent? Do you give them a flat fee or a percentage of the purchase price?
The seller pays the agent. When a seller lists their property, they are the ones who agree to pay a percentage of the sales price.
Blessings,
Steve
Wouldn't you agree you are paying this anyways, in your purchase price? And your agent and the selling agent split that commission, correct?
Very informative article. I am just starting as a birddog. Rehabs will be my next step in this business. What I would like to know is - can I use a realtor if I am a birddog also? How much should I pay them from what I make from the deal?
I've used realtors since day one, and I started out bird dogging. I didn't pay my realtors anything. When I found a deal through a realtor, I made the investor that I was bird dogging for present the offer through my realtor. The realtor was compensated fromt eh commissions paid by the seller.
Blessings,
Steve
Sure, ultimately it is included in the price of the home, but you do not need to cut additional checks to compensate the real estate agent. The seller has agreed to do so as part of the listing agreement.
Blessings,
Steve