Investors are from Mars, Realtors are from Venus

So Realtors and Real Estate Investors are the dream team right? One of you is in the business of selling properties and one of you buys and sells a lot more properties in a year than the average retail client, what's not to love?

The problem is that real estate investors have no real understanding of what's involved in being a Realtor and most Realtors have no idea how to analyze properties to ensure that the deals they are presenting their clients are really deals.

I am one of those hybrid individuals, I am an experienced house flipper as well as a licensed Realtor in Austin, TX so I am in a great position to help both sides communicate and get along.

Investors as a Realtor I want you to know that I work on commission, I only make money when I close on a property, or if a bank hires me to perform a Broker's Price Opinion (BPO) which is the paid version of a comparative market analysis or CMA that we do for free for clients who are buying or selling a house that is listed on the multiple listing service. The houses on the multiple listing service have the commission that I will be paid for selling the house written right into the agreement and if I've done my job right after presenting my buyer or seller with a CMA they will sign a contract with me which guarantees that I will earn a commission if they buy or sell a home. A bank pays from $100 to $500 for a BPO because there is no guarantee of commission on the property so they pay the Realtor for their time.

Are you sensing a theme here? When you ask a Realtor for comps - which are the basis of CMA's and BPO's on an off market property that you are thinking of purchasing you are asking the Realtor to work for free. In general Realtors are nice people and we know that if we can get you on our list you have the potential of becoming a client so we will try and accommodate you but you are asking your Realtor for a favor. You also need to be aware that if there is the prospect of real money in front of a Realtor vs. potential future money from you, they will work the deal in front of them and put the non-paying work off.

Another thing that Investors do that piss Realtor's off is ask us to waste our time writing trash offers. Realtors are in the market everyday, they know what a house is going to sell for and when and offer is a waste of time or worse yet an insult. Imagine this scenario, you ask your Realtor to write an offer for 50% of list price on a home, they send it to their colleague, who is also a trained professional who agreed to put the property on the market for the list price, which conceivably means their colleague thought the list price was fair market value or at least reasonable. Your Realtor's colleague has been sweating this transaction sending out fliers, holding open houses, trying desperately to keep their client's (the seller) spirits up and an offer comes across their e-mail. Your Realtor's colleague is ecstatic and then they open the deal and it's a low ball offer. Massive let down. You don't care, you figure that if you make enough of these wild offers someone will accept eventually, right. After all that's what all the books say. What you haven't taken into account is that your Realtor will see their colleague at the next Board of Realtors meeting and possibly be shunned. Furthermore, real estate is a really small community and your Realtor's colleague is deeply disappointed and totally pissed off about the offer your Realtor wrote so they tell everyone they come into contact with about what a crap deal your Realtor tried to pull off, what a scam artist they are, etc. and so on. So why exactly would a Realtor want to spam their community with a bunch of unrealistic offers? They'll try it once or twice and then they'll stop taking your calls.

We also get offended when you ask us to cut our commissions. First of all, I want to make sure you understand how the commission system works. If we tell you that we will charge 6% commission if we sell your house, we don't earn the full 6%. First of all it is usually cut in half right out of the gate, 3% goes to the agent that brings the buyer. Then if your agent works for a broker they split the 3% they earn with their broker, this commission split varies but it can be anywhere from a 60/40 split to a 90/10. Even if a Realtor is on a 100% commission plan they still pay their broker a monthly or yearly fee. Finally, if your Realtor works for a Broker they might not be able to negotiate commissions, if you look at the way the contract is written it is with the Realtor's broker and you, not your Realtor. This means that if your Realtor is in this position and you push for a reduced commission they need to go to their boss and plead your case. In my experience this involves a none to pleasant conversation about how we should be telling you how much we are really worth and what a bargain we are. Your Realtor also pays for any and all advertising they do for your property, any food that they purchase for the open house and any number of other expenses that they won't be reimbursed for if the house doesn't sell.

What Realtors want or at least what I want as a Realtor is to be respected. I have spent a lot of time and money researching the market, getting my license, continuing my education and looking for clients. We have a lot to bring to the table and we'd like you to acknowledge it.

Realtors as an Investor the most important thing that I want you to know is that as an Investor I move really fast. When I find a deal I need to have a contract on the property signed as soon as possible, hopefully the same day I find it. This means I need all of my comps immediately. If you don't answer my call or you can't get me what I need I have to move on to the next person. I'm sorry, it's not personal but deals move fast.

Secondly, while you know the retail market I know the investing market and I know what numbers I need to hit to make money. If you want to work with me so should you. Nothing makes me madder then you sending over what you think is a great deal and it's not. Having tenants in a home doesn't guarantee that it's a good deal for an investor, it only means that there is no way you can sell the home to an owner occupant. If you have a listing that has tenants in it show me the numbers. I want to know the cap rate, cash-on-cash, net operating income and the monthly expenses. I want you to put it together in a neat package with pictures and all of the listing information. If you as a Realtor don't know what these terms mean you need to get educated because I don't have time to waste on bad deals.

If you have a deal that you think would be a great flip prove it to me. The investors golden rule is 70% of ARV minus repairs. You should do at least that basic level of math before you send me a deal. Also, don't fudge the facts, give me accurate comps, within a mile preferably a half a mile that have sold in the last 90 days. I would also like to see the current listings within a mile so I know what my competition is and I want you to give me your opinion of the as repaired value of the house. In a great and perfect world you would also give me a rough estimate of repairs. There are numerous free tools that will let you estimate repairs in less than 5 minutes, you would be a rock star if you used them. If you have a property that you don't know what to do with go ahead and give me a call but be honest about the fact that you don't know if it's a deal or not.

Finally, I want you to know that all investors are not the same. We all have different strategies, some of us fix and flip, some of us buy and hold, there are some the buy, rehab, rent and refinance. Some people do fix and flip in two years. Take the time to find out what my investment strategy is so that you are sending me deals that work for me. If all I get from you are buy and hold deals and I'm a flipper I'm going to delete your e-mails without even looking.

In short, don't waste my time. Respect the fact that we investors have a place in the market and we know what we are doing. Respect our education and our experience and we will try and do the same for you.

Thanks for your time. 

Originally published on my blog