Do Investors Really Need Realtors?
Let’s face the facts — a couple of decades ago, your only insight into the real estate market would be an agent. Today though, a smartphone and an app (any one of dozens) provide access to not only properties, but maps, crime data, comps and more. So it’s not unreasonable for would-be flippers to assume that a realtor is just a waste of time and commission. But unfortunately, the solution to this puzzle, carries with it an abundance of caveats.
I’ll start by giving you the simplest answer — no, you don’t need any real estate agent…but you do need the right one.
Real estate investors are a tight-knit group. Professional investors spend their time researching, combing through articles (like this one), going to seminars, attending training events and strategy mastermind groups — so that they may ultimately emerge a lean, stealthy, property-flipping beast of an investor. That’s why you’re here, right?
How Investors See Real Estate Agents
Investors have no use for extra baggage — especially when that extra baggage carries with it an added expense. For some investors, a real estate agent is looked on as a necessary evil. Others feel that real estate agents don’t contribute enough to justify that expense — and they find all their properties without realtors. But for experienced investors, real estate agents form an integral part of their business process. Why are there so many different opinions about agents? The answer lies in the investor’s ability to correctly identify what particular breed of agent they’re dealing with.
So if properties are accessible with a few taps on our phones, why do some investors place so much stock in their agent relationships? It’s simple — not all agents are created equally. Let’s take a look at what you DON’T need from an agent.
What You Don’t Need From A Real Estate Agent
Let’s assume that you are a new investor and you’re starting out in a new territory. You call a realtor and you describe what you’re looking for. You tell them you’re an investor who rehabs distressed properties. And you let them know you’d like properties that match a specific criteria.
Real estate agents are mentored by senior agents — some of which, are very good at what they do. And what is it that real estate agents do? Do they buy houses? Do they remodel them? No! Real estate agents SELL houses. They’re sales people. And as such, the training they go through is, by design, tailored to selling.
Realtor Sales Strategies
Now, when you’re dealing with a new couple buying their first home, the realtor’s job is to ‘sell you the dream’. A realtor that does that well, makes a lot of money and sells a lot of homes — making them successful as an agent. But that doesn’t mean they’re a good match for an investor, especially long-term.
As a real estate investor, you don’t need an agent:
- Who makes vague and unsolicited comments like “You’ll make a mint on this one!”
- That has the same cookie-cutter response on every house they show you — “This one is a perfect investment…”
- Who redirects all your questions with other questions that lead to…no answers.
- Who treats investors as ‘just another buyer’.
Believe it or not, I just described MOST real estate agents (and the sales training they go through). Remember the first two groups of investors and how they view agents? Well, the four points I just mentioned are the reason for those views.
How Agents Can Make A Positive Contribution
The right agent (and yes, finding them takes leg-work), can offer valuable knowledge that will grow your rehab business. The right agent understands that for a successful long-term relationship with an investor, they have to look at the relationship from the investor’s point of view. Because it’s not about showing you a property that will rush you to the closing table and scoot you out the door so they can focus on the next sale.
The right agent provides key components you DO need:
- Local Market Experience — Location, location, location. Good agents know the best districts and the best price-points. New investors tend to over estimate their own knowledge of the local market. You can save yourself hours of research and thousands of dollars by having an agent who knows where to focus your efforts. They understand what you’re trying to accomplish.
- Growth Analysis — Some agents I’ve worked with have been selling real estate for 30 years or more. That means they’ve literally watched entire neighborhoods blossom (and others wither up and die). Have you ever left your home town for a decade and come back to see completely new areas of development? It’s quite a shock isn’t it? You may think a drive through the neighborhood will tell you all you need to know, but valuable agents know what areas are truly on their way up the developmental stage — and what areas are on their way down.
- Tenant Acquisition — If you are doing a buy-n-hold, you want tenants that aren’t going to be problematic. Agents often serve as mediator between tenant and landlord — but lousy agents will sign the next available warm-bodied checkbook. An agent who is worthy of a long-term relationship, will take the time to ensure your tenants aren’t going to cause you trouble. That’s how you know the agent appreciates the value of your partnership.
Finding And Cultivating Agent Relationships
Speaking of partnerships, what I’ve described here is just bare-minimum list of value-added service. The right agent is going to work closely with you to establish a strategy. They see your business 10 years from now and they see themselves fitting into your team like a well-oiled gear that keeps the machine moving forward.
As an investor, your job is to identify and cultivate a real estate agent who is willing to suppress their inherited tendencies to focus on ‘the sale’ and instead, focus on ‘the relationship’. Explain to them that you are looking to work up to 10-12 houses a year or more (whatever your goal is) and don’t want to be ‘sold’ a house. You don’t just want to see houses that fit your niche (single-story ranch, distressed, 3-bed/2-bath, large lot, no pool) — you want to see houses that fit your strategy as a whole (type, location, seller-motivation, price, growth-cycle).
I’m not saying it’s going to be easy. We’ve worked with agents of all types. At this point I can identify good potential fits within 2 minutes of a first showing. Trust me, you can literally lay out exactly what you are looking for in an agent, and most of them will just have a glassy-eyed, deer-in-the-headlights look on their face. It’s almost like their internal program just froze. Without missing a beat, they’ll move on to showing you the next house.
When you DO find the right agent though (we have 20-year+ relationships with some of our agents) the value they bring to the table, is cash in your pocket.