Real Estate Investing Basics

Yes, You Absolutely Do Need a Solid Real Estate Agent as a Newbie Investor. Here’s Why.

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As I was browsing through my notifications this morning on BiggerPockets, I came across a question that quite frankly scares the crap out of me.

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“Why do I need to get a real estate agent involved?”

If you're a seasoned investor, then maybe I can understand trying to get by without an agent. But if you're brand new starting out and haven't even purchased your own home yet, then there is no excuse in the world for not having an exclusive agent to represent your interests.

In this article, I am going to outline the basics of different types of agents you will encounter and give you some reasons why having a dedicated investor-friendly agent is going to keep you from losing out on thousands of dollars and benefit you in the long-term.

First, Let’s Cover the Types of Agents You’ll Encounter

The Listing Agent

This agent represents the seller's interest only. Legally, they cannot advise you on anything related to the sale because of their fiduciary duty to the seller. Their only goal is to get the best deal for the seller—period.

The Buyer’s Agent

This is the person who will be your friend and mentor if you have never purchased a home before. This is the person who will get you the best deal because they represent you and your interests only—oh, and, by the way, it's free to you because the seller is going to pay your agent.

It is important to choose this person wisely. I feel that the best agents are passionate about real estate. True passion is easy to sense when talking to them. If you’re not getting this feeling from them, move on. If you have not read my article about how to find an investor-friendly agent, give it a read now.

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Related: 5 Simple Ways to Be an Attractive Client (From a Real Estate Agent’s Point of View)

The Dual Agent

In this scenario, the only person benefitting is the agent, as they get to collect the commission from the seller for both sides of the transaction, and they are not allowed to advise either party because of the fiduciary duties to each party. In some states, this form of agency is not allowed. In any case, this shouldn't matter to you, because you are becoming smarter today by reading this and shouldn't be dealing with the seller's agent at all.

Now that you know the different agents you will encounter, I am going to give you some reasons why you want a competent buyer's agent in your corner.

3 Ways a Buyer’s Agent Can Help You as an Investor

1. They are legally required to put your interests first.

When you're driving around and see the perfect property to purchase for a buy-and-hold rental and dial the number on the sign, you're being connected to the exclusive representative of the seller. Do you think the seller's agent cares if you think the price is too high, want your closing costs paid, or don't want to make repairs? No, they do not.

They want to get the highest possible asking price, they want you to pay all your closing costs, they want you to pay for every possible thing—and no, the seller does not get a discount if you do not bring an agent. The commission has already been negotiated long before you came along. The money is there for you to have an agent. Use it.

2. They will keep money in your pockets by helping you avoid pitfalls you don’t know about.

Let me give you an example. Bank representative sends an email saying the property you want to buy is not on the FHA/VA “approved list.” Because of that, you need to take certain steps that involve paying money, a substantial amount.

You tell your real estate agent about this, and she is ahead of the game. She tells you that the bank representative is wrong because the agent looked up the property before an offer was submitted. Turns out the bank representative just didn't know how to use the website to find the property.

I recently experienced this exact scenario. If you don’t have a competent representative, you will never know, and the dollars will be flowing out of your checking account. Oh, and don’t expect to receive an apology from the bank—just an email saying, “It’s been a long day.”

No one will care about you more than your agent.

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3. They might be your first mentor.

A lot of folks on BiggerPockets have not purchased their first property, and those same people are out seeking mentors to wholesale, flip, or whatever else. Many are having little success.

Guess what? The first step in long-term success as an investor is investing in yourself and purchasing a home. Then you can move on to other goals in real estate.

Related: 9 Things Real Estate Agents Wish Their Investor Clients Knew

During a purchase transaction, you will learn the basics of real estate if you ask your real estate agent to give you a basic rundown:

  • How to find motivated sellers
  • How to find comps
  • How to evaluate a property
  • How to negotiate with sellers
  • The basics of a title company and what they do
  • How to submit an offer
  • How to structure an offer for the best possibility of acceptance
  • Home inspection basics
  • A lot more!

These are all things you need to learn to have long-term success as an investor, and you can learn them all during the purchase of your own home. Find a real estate agent who enjoys educating clients, and you will have your first mentor in real estate, you will gain a valuable asset at the end of the transaction, and you will learn valuable skills you can build upon after the deal is done.

Are you using an agent as a newbie investor? Any questions about how to find an investor-friendly agent?

Comment below!

Brandon is a U.S. Army veteran, serial entrepreneur, and real estate investor who helps others improve their life through writing for online publications such as "Bigger Pockets" and "The Good Men Project" Find out more about Brandon on his website www.theroundlife.com

    Nina Grayson Real Estate Agent from Los Angeles, CA
    Replied 11 months ago
    Hi Brandon, While it is true that Investors should seek out an Investor-Friendly Buyer’s Agent, they do need a Listing Agent when they are ready to sell, especially flippers! Dual Agency does have it’s limitations, but Agents like myself, have off-market properties or access to a large network of agents who have off-market properties, and these are what our Investors want. And the savvy, experienced Investor knows how to negotiate price and terms, which we cannot do under dual agency.
    Brandon L. Real Estate Agent from Falls Church
    Replied 11 months ago
    Thanks for taking the time to share your thoughts Nina. I agree with you, if a NEW investor has a home that needs to be sold, they would benefit from agent representation, but an experienced investor can probably manage it on their own, and that includes a flipper. This article is meant for the large population of BP members who want to make some progress, who are looking for mentors and are still renting the home they live in. It scares me to think of all the individuals who want some real estate so bad and then sit on these forums for years, find out wholesaling is hard work, and get nothing done. To the dual agency comments, to the NEW investor being in a dual agency relationship with an agent has no benefits to the seller or the buyer, unless the broker assigns designated agents for each party, but this should not happen because a buyers agent should be secured as one of the first steps of the process, in my opinion. Hope you have a great day
    Katie Rogers from Santa Barbara, California
    Replied 11 months ago
    The dual agency problem happens to buyers with buyer’s agents whenever they are interested in house listed by a agent who works for the same broker as their buyer’s agent. Since both agents work for the same broker, the only one with actual representation is the seller because the seller is the one who signed the listing agreement.
    Susan Maneck Investor from Jackson, Mississippi
    Replied 11 months ago
    One key reasons for having a real estate agent, IMO, is that some of the best deals are with HUD, Fannie Mae, etc. You *must* have an agent to get houses from them. I’ve only bought one house through a wholesaler and it was one which for various reasons could not qualify for financing.
    Katie Rogers from Santa Barbara, California
    Replied 11 months ago
    “This is the person who will get you the best deal because they represent you and your interests only—oh, and, by the way, it’s free to you because the seller is going to pay your agent.” This entire sentence is a myth. The agent primarily represents the interest of the broker they work for. This is why if the the buyer’s agent and the seller’s agent work for the same broker, your sales contract will notify the buyer that the buyer effectively has no agent, that the buyer is in a dual agency situation. and that the actual agent, who is the broker, is the one who signed a listing agreement with the seller before you, the buyer, ever came along. And the buyer pays both the seller’s and the buyer’s agent because the agents are paid out of the proceeds of the sale, AND the proceeds come from the buyer. Buyer’s agents do not like to be too good at representing the buyer because seller’s agents will balk at working with them. So the buyer’s agents and the seller’s agents do this complicated dance to figure out what sale price will be most mutually beneficial in terms of their commissions. One way buyer’s agent do this is by choosing the three comparable sales they think will most help them toward their objective. Here is an example. I was interested in a particular house. My agent presented me with three comps and then concluded we should offer the average of the three comps. I went home and looked up the comps. The house I was looking at was a fixer. Two of the three comps were recent remodels, so naturally the average was higher than it should have been. There were other, more applicable comps , but the agent did not choose any of those. Needless to say, he was not my buyer’s agent for long. (an aside: DO NOT sign any exclusive agreements with a buyer’s agent. If there are problems, you may find yourself out of the market for three months–a very common duration for these agreements). Buyer’s agents do indeed have a legal, fiduciary responsibility to represent only you. They tend to narrowly define putting your interests first as getting you to close on a house, after you want to buy a house, right? Meanwhile you, the buyer, probably have a more expansive view of what your interests are. Your buyer’s agent may very likely be your first mentor, and you will pay dearly for that mentorship, such as it is. Even so, the chances of a newbie closing on that first property without an agent The entire real estate system aligns primarily with the seller’s interests. The entire real estate system needs a complete overhaul.
    Brandon L. Real Estate Agent from Falls Church
    Replied 11 months ago
    Katie, If you had a less than perfect experience with a real estate agent in the past I apologize for that. Thanks for taking the time to share your opinions.
    Katie Rogers from Santa Barbara, California
    Replied 11 months ago
    If it were only “a” real estate agent. It does no good to imply that my comment should be ignored as if my experience was a fluke. Agents work for their broker. This is a fact. Because the seller’s interest aligns well with the broker’s interest, sellers can get decent representation. The buyer’s interest conflicts with the broker’s (and lender’s) interest. If you find a good buyer’s agent, you have found a rare gem.
    Account Closed from Kyparissia, Messinia
    Replied 11 months ago
    This couldn’t have come at a better time. Almost bought a house in a bad area. It was my real estate agent, who had gone to see it and had told me better to stay away! I wouldn’t have know that. First lesson learned.
    Brandon L. Real Estate Agent from Falls Church
    Replied 11 months ago
    Thanks for taking the time to share your comments Estelle. I hope Greece is treating you well.
    Account Closed from Kyparissia, Messinia
    Replied 11 months ago
    This couldn’t have come at a better time. Almost bought a house in a bad area. It was my real estate agent, who had gone to see it and had told me better to stay away! I wouldn’t have know that. First lesson learned.
    Wendy Stauffer Realtor from Lancaster, PA
    Replied 11 months ago
    As a Realtor, we should be working with our buyer clients to help them purchase a solid investment – flip or rental. Ask good questions before signing a buyer agency contract. Select an agent that understands your goals and will help you accomplish it. There are many excellent Realtors out there, take your time until you find one that you know will work for you. Happy Investing!
    Katie Rogers from Santa Barbara, California
    Replied 11 months ago
    Don’t sign any buyer agency contracts. If things go sour, you will likely find yourself out of the market until the contract expires. There is little to no consequence on the agent.
    Joseph Konney Real Estate Agent from Forest Park, IL
    Replied 11 months ago
    A couple other benefits a good agent can do for you is to provide exports of search data from the MLS which you can then analyze. Many markets have a PLN or private listing network which contain listings that are not publicly searchable and must be pushed to you by your agent. Also, agents may have or hear of pocket listings or pre-mls deals before they hit the market. Like Brandon said, it usually costs nothing to use a buyer agent, so why not add another fishing line to the pond? I am a Realtor from Chicago with LJS Realty, Inc.
    Katie Rogers from Santa Barbara, California
    Replied 11 months ago
    It is not that having a buyer’s agent costs you nothing. It is that it doesn’t cost the buyer extra. It is the buyer’s money that provides the “proceeds” that pays everybody’s commissions.
    Naftal S. from Brooklyn, New York
    Replied 11 months ago
    Great read! If you can eleborate though, how do I find a good “buyer’s agent”? How do I know for whom they work? And where do I find them?
    Katie Rogers from Santa Barbara, California
    Replied 11 months ago
    You can find a buyer’s at any real estate brokerage. Agents are sellers’s agent if they have signed a listing agreement with a seller. Agents are buyer’s agents if they agree to serve as a buyer’s agent for a particular buyer. ALL agents work for the broker. How to find a good buyer’s agent? You can interview them, but they are likely to tell you what you want to hear. After you begin working with them, you will figure out if they are a good agent or not.
    Brian Jolliffe Rental Property Investor from Northern New England
    Replied 11 months ago
    “It’s free to you because the seller is going to pay your agent.” This is not true. The commission is reflected in the purchase price. “They are legally required to put your interests first.” Great statement on paper. There’s also the real world we operate in. For a first time buyer, an agent is a safety blanket that provides psychological comfort knowing you have an “expert” to rely on. You shouldn’t need one after the first purchase if you’re willing to put in the work.
    Katie Rogers from Santa Barbara, California
    Replied 11 months ago
    Depends on the state. In some states, if you do not have a buyer’s agent, then by default you are in a dual agency situation.
    John Wright Real Estate Agent from Cincinnati, OH
    Replied 11 months ago
    I would find an agent who has investment properties of their own or has extensive experience working with investors. Working with investors who buy one or more properties a year is much different then working with someone who will buy three properties in their lifetime.
    Roderick Mills Jr. from Cincinnati, OH
    Replied 11 months ago
    I think that’s a very good point that you should look for people who are actively doing what you want! As I start getting to buy my first property and building a team, those are the people I’m going to look for!