As a newbie Investor, what qualities do I need to look for in a Realtor? Maybe some experienced Realtors can shed some light as to what kind of service a new investor can expect to receive from a Realtor.
What services should I ask my Realtor to perform without being out of line and actually expect them to perform those services to earn my business?
What are BPO's? How do they differ from CMA's and ARV's?
Looking forward to your input.
Thanks,
Pierre
Random observations:
There are ethical and unethical people in every profession. An ethical RE agent can be a tremendous asset.
People deserve payment for services rendered.
People deserve Full payment for services rendered regardless of 'potential' future business.
All things being 'equal' - Knowledge and experience from an 'ethical' professional (in any field) trumps young, eager and hungry.
Money 'wisely' spent today will save you a fortune in mistakes later.
------------------------
Are there lazy, unethical RE agents whom you should avoid like the plague? Absolutely!
Are there hardworking, knowledgable, ethical agents who can and will save you a ton of money, time and aggrevation and be your best ally? You'd better believe it and you can take that one to the bank!
Are there investors who are unethical and take advantage of RE agent's time, knowledge and resources and then leave them high and dry? Yep... it happens.
--------------------------
Consider this: "We teach people how to treat us."
--------------------------
Analogy:
A person hears a strange sound coming from his car and brings it to a reputable mechanic and asks what is wrong. The mechanic takes time from his busy day to check it out; locates the problem and tells the person what needs to be done to correct it. The person thanks the mechanic and drives home where he proceeds to fix the car.
A week or two later the same person brings his car back to the mechanic with another issue... again the mechanic identifies the problem, tells him how to fix it and again the person goes home and fixes it himself.
Question: How long will it be until the mechanic stops taking time out of his busy schedule for this 'non-customer'?
Now, let's look at this same situation from a little different angle. Suppose the person leaves the vehicle for the mechanic to make the repair. When he returns to pick up his vehicle and pay for the repairs he says, "how about you give me a discount on this work you just performed and when I have problems in the future I'll bring my car back to you for repairs?"
Huh?! Nope... that's just not the way it works, does it? After all, the mechanic utilized his time, knowledge and skills and performed a service. Most people would agree that he deserves payment for those services without any discount based on any 'potential' future business.
Now, on the other hand if this car owner does continue to bring his car in for repairs and maintenance over a period of time it is very likely/probable that the mechanic will give him FREE advise and/or discounts in the future.
This is a timeless principle of life and business that is repeated time and again in all different venues/professions. Real estate is no different.
------------------
Regarding an agent working with/for several different investors and being an investor himself -- We (my wife and I are agents and investors) have been working with several investors for a number of years and cannot recall even one time that there was any kind of conflict regarding a particular property.
The reason, I think, is because everyone's business model is a little different and everyone is on a little different schedule. Some like to purchase mid-range single family properties on the Westside; others want multiplexes on the Southside; etc, etc. Even if they/we are interested in the same 'type' of property, we are ready to purchase at different times.
Our 'practice' is to let our investors know of a property as soon as we know about it. They know that the best deals sell fast so they need to move pronto if they are interested. If none of them are interested and we are, then we make the bid for ourselves... however, if one of them wants it we ALWAYS back off. That's just good, ethical business in my opinion -- and it works for us!
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One final thought (sorry this is so lengthy) - while there are bad apples in every profession, it may be unwise and financially damaging to broad-brush any of them. If working without the help of a competent RE agent works for you, then that's great. However, don't make the mistake of ruling out the probability that a good agent is worth his weight in gold!
Here's wishing each of you the very best in 2008!!!
As an Investor I would say that a Realtor in general is not looking for your best interests as they want to receive a commission from you. Unless you have a long lasting relationship with one that wants to help with your investing success and likely benefit from your deals somehow.
Services they might offer would be pulling comps from MLS for your deal analysis and the like, although you can get these on your own from a Title Company. Don't expect them to take a lot of time unless they will be benefiting from you down the line. In my investments I tend to NOT do the deal if there is a Realtor already involved
A BPO is a Broker Price Opinion. They are often a lot more sloppy than an actual appraisal as typically the bank sends a Realtor not an appraiser to do the job. It is primarily based on comps.
What other services would you think to look for from a Realtor in your endeavors?
Jason,
I would want a Realtor to do CMA's and update me daily regarding any possible deals that fit my investing criteria. I would also think that having an experienced Realtor on my side that can spot flaws in properties, just based on their experience. Since I'm still new, maybe have the Realtor give a fair estimate of repairs that need to be done. Of course I know the Realtor is not a Home Inspector, Appraiser, Contractor, Etc. Etc. But I want to be able to ask the questions that can get me a Realtor that will go that extra mile to work for me.
Realtors know properties in the area or at least they should know them. Especially in these times, Buyers can expect that the part-time Realtors have taken other jobs and the experienced Realtors will work harder for their Clients. They should be looking out for my best interest because I may become a streaming source of income.
You have some very valid and good points. I was speaking from my personal investing experiences and meant the comment to be very general in nature.
I agree that there are many great Realtors that will work hard to get new business. But I've also found that there are many who will not if they don't see a transaction in the near future. Especially when approaching the deal as an Investor.
Please don't get me wrong as I am a licensed agent as well. :D
I will not fault you this time :D
I agree with you as well ... there are Realtors out there that just do as you said and don't waste their time to "help" someone if its not in their best interest, ie. commission. Some of these Realtors have been burn before. Working for little or no money is not fun most of the time. :D
How/What do I ask a Realtor to see if they are competent in investing? What qualities do you look for in a Realtor?
Jason - As a Realtor, What do you think your best qualities are?
Again thanks for your input
Pierre
" Since I'm still new, maybe have the Realtor give a fair estimate of repairs that need to be done. "
I think this may be like asking a contractor what he thinks your home might sell for. I would not trust a realtor to estimate repair costs on anything unless they are or have invested before. You can always walk through the property again with a contractor until you get comfortable estimating repairs.
If I am looking for a realtor I am looking for young and hungry. I want somebody that needs me as much as I need them. For them to want to work with you they need to see the potental to make money. I had an agreement with the agent I used to work with that he would be the buying agent in the beginning and the selling agent after I rehabbed the house. He wasn't making much on the buying end since they were REO's and such, so his incentive was the pay day at the end of the deal.
Hope this helps.
An experienced realtor that understands investing is probably going to be already working with investors. You may be able to find one like this to work with you, but in my head they aren't going to spend a lot of time with a green investor. My opinion. I would just find one that is going to do what you need them to do, send you possibilities that pop up on the MLS, run comps, show you these houses, and then make your offers for you. My two cents!! :D
It will probably help to find an agent that is also an investor themselves. If not, make sure they have worked with plenty of investors in the past. A lot of times with a quick phone interview you will be able to tell if you are talking to someone that knows what they are doing.
It totally depends on what you are looking for. If you are looking for a good flip you can ask the agent if they have ever helped a client purchase a property to flip or if they have ever done one themselves. You may also ask what properties on the market they know of right now that are very good deals? I usually know of a few properties that I have seen off the top of my head that are the best deals out there and I think any good agent should know the inventory well enough to be able to discuss a few properties without the need to check the mls.
Good Advice OcBroker.
I appreciate your input on this topic.
As a Realtor, if you were approached by a new investor, would you give that new investor some of those good deals or would you have some obligation to first run those properties by your investors (ie. past clients)?
As a REI, wouldn't you want to act on these very good deals?
I think this is why bluestarhomes chooses a young and hungry Realtor.
Pm_Broker
if you're thinking that a realtor will steer you into good deals, you're spinning your wheels. you've got to find those yourself. the ones that have been around long enough to be in the know are buying up the great deals leaving the scrapes for you.
most realtors i run across know squat about repairs but can be helpful at suggesting fixtures and finishes. don't depend on them to budget your rehab.
realtors are helpful at marketing your finished product. negotiate a lower commission rate based on your repeat business potential.
Not all realtors are investors. I would expect most young and hungry Realtors not to recognize a good deal. I would expect most experienced Realtors to send their good deals to previous clients.
I don't know ... just my opinion. I have a few choices either go with a green Realtor that may not be able to get me the best deal or go with an experienced Realtor that will most likely guide me in the right direction but not offer any real deals.
What do you think?
i think that most saavy investors are licensed agents and scan new mls listing at least 3 times a day to cherry pick the best deals. i work in a tight market and your typically good mls deal is gone in a matter of hours because the sharp investor is laptoping from the car on the hour every hour and can email a contract from the car on the spot.
I'm not implying that these licensed agents are actually practicing, they use their license simply as a tool to troll the mls, not to represent you or anyone else.
now, its not a bad idea to find a green agent to low ball offer through if you aren't licensed but again, if you're waiting for a licensed agent to deliver a good deal to you, you're backing up.....
Random observations:
There are ethical and unethical people in every profession. An ethical RE agent can be a tremendous asset.
People deserve payment for services rendered.
People deserve Full payment for services rendered regardless of 'potential' future business.
All things being 'equal' - Knowledge and experience from an 'ethical' professional (in any field) trumps young, eager and hungry.
Money 'wisely' spent today will save you a fortune in mistakes later.
------------------------
Are there lazy, unethical RE agents whom you should avoid like the plague? Absolutely!
Are there hardworking, knowledgable, ethical agents who can and will save you a ton of money, time and aggrevation and be your best ally? You'd better believe it and you can take that one to the bank!
Are there investors who are unethical and take advantage of RE agent's time, knowledge and resources and then leave them high and dry? Yep... it happens.
--------------------------
Consider this: "We teach people how to treat us."
--------------------------
Analogy:
A person hears a strange sound coming from his car and brings it to a reputable mechanic and asks what is wrong. The mechanic takes time from his busy day to check it out; locates the problem and tells the person what needs to be done to correct it. The person thanks the mechanic and drives home where he proceeds to fix the car.
A week or two later the same person brings his car back to the mechanic with another issue... again the mechanic identifies the problem, tells him how to fix it and again the person goes home and fixes it himself.
Question: How long will it be until the mechanic stops taking time out of his busy schedule for this 'non-customer'?
Now, let's look at this same situation from a little different angle. Suppose the person leaves the vehicle for the mechanic to make the repair. When he returns to pick up his vehicle and pay for the repairs he says, "how about you give me a discount on this work you just performed and when I have problems in the future I'll bring my car back to you for repairs?"
Huh?! Nope... that's just not the way it works, does it? After all, the mechanic utilized his time, knowledge and skills and performed a service. Most people would agree that he deserves payment for those services without any discount based on any 'potential' future business.
Now, on the other hand if this car owner does continue to bring his car in for repairs and maintenance over a period of time it is very likely/probable that the mechanic will give him FREE advise and/or discounts in the future.
This is a timeless principle of life and business that is repeated time and again in all different venues/professions. Real estate is no different.
------------------
Regarding an agent working with/for several different investors and being an investor himself -- We (my wife and I are agents and investors) have been working with several investors for a number of years and cannot recall even one time that there was any kind of conflict regarding a particular property.
The reason, I think, is because everyone's business model is a little different and everyone is on a little different schedule. Some like to purchase mid-range single family properties on the Westside; others want multiplexes on the Southside; etc, etc. Even if they/we are interested in the same 'type' of property, we are ready to purchase at different times.
Our 'practice' is to let our investors know of a property as soon as we know about it. They know that the best deals sell fast so they need to move pronto if they are interested. If none of them are interested and we are, then we make the bid for ourselves... however, if one of them wants it we ALWAYS back off. That's just good, ethical business in my opinion -- and it works for us!
---------------------
One final thought (sorry this is so lengthy) - while there are bad apples in every profession, it may be unwise and financially damaging to broad-brush any of them. If working without the help of a competent RE agent works for you, then that's great. However, don't make the mistake of ruling out the probability that a good agent is worth his weight in gold!
Here's wishing each of you the very best in 2008!!!
What services should I ask my Realtor to perform without being out of line and actually expect them to perform those services to earn my business?
Hi, Pierre:
I think Tim's done a great job answering your question. Without restating too much (I hope), I would like to add that if you're a new investor, I believe you need an experienced Realtor, not one who is new and "hungry."
I would look for a Realtor, not just an agent--someone who has subscribed to the code of ethics of the NAR and more importantly can afford to pay the dues to belong to that organization, as well as the local MLS dues. In addition, I'd look for someone who has some certifications, those acronyms after their name that indicate they have invested in some extra education beyond the mandatory courses they have to take every year to keep their license.
Depending on the size of the market--try to find someone who is full-time and has a few years of experience. All agents make mistakes in their first year or two; hopefully, they work with a broker who can correct or prevent the mistakes. Don't let them make their mistakes on you when you're just learning, too.
And it would be nice to work with a Realtor who is familiar with investment properties and who can call on contractors and property managers to help come up with the numbers you need to make good decisions.
As far as the services the Realtor should perform for you, they should include giving you information about the neighborhoods and properties that would work best for your investment goals. This includes bad news as well as good news. If they know what they're doing, you should listen to them. You may want to rehab and flip a $100,000 house in a run-down neighborhood, but you may be better off renting it for a while. The market doesn't care what you want, so you need to work with the market or find another one.
Many Realtors don't like to work with investors because they think it involves a lot of running around showing cheap little fixer-uppers that the investor will be too hesitant to buy in the end. (And sometimes, it does. I have been there a few times.) So try to be efficient and only pick out the properties you really think you'd be interested in and schedule a viewing trip in one day.
Other services a good Realtor will provide besides market research/knowledge and driving you around (not insignificant considering the price of gas!) include helping you evaluate properties, preparing an offer with terms that are beneficial to you, negotiating the contract, dealing with inspections and due diligence, obtaining rent rolls and leases, and following up with all the details and tasks during the transaction to make sure it closes. The Realtor should give you a list of recommended service providers you can contact for inspections, repairs, insurance, and property management so you don't have to go through the phone book.
It goes without saying to have your financing strategy in place before you start looking to invest. It will make your life simpler, and will make a Realtor happy to work with you!
Best of luck!
wordbrd
It's refreshing that you're being encouraged to use professionals in our business. Having been an agent for 4 years now, i haven't run across one yet (in our market) that i would depend on to bring me the hottest deals in a timely fashion, meaning within a couple of hours of being listed. If you don't believe that the best investors are working that quickly, you may as well pack it in.
you also must consider that someone is paying a licesnsed professional to perform these services for you. I can hear everyone now saying that the seller pays these fees....you're paying the seller so you may as well be picking up the tab yourself. In our market, a rule of thumb for buyer agency services is 3%...that can be the difference between taking a risk on a deal and not....
I understand Tim's hesitance to accept a lower commissions in exchange for your future business. I happened to turn wrenches professionally for 10 years and the analogy Tim made has little relivance as i worked 5 times harder for my wages as a mechanic. Many professional in this business, IMHO, feel that a handsom wage is a birth-right and they'll fight to educate the masses that taking a discount is a huge no no...
whatever!!! i'll take a lower commission in a second if i think i can sell 3 of your homes in a year and you have enough ability to produce. making a living is often a team effort but unfortnately, the investors around here with the real ability are....LICENSED AGENTS WORKING FOR THEMSELVES...go figure. if you can't find a realtor to work with you on their compensation, find another realtor.
Realtors are good at marketing your property on the back end but if you're depending on one to run your comps, provide you with info about the arera and the school districts etc, find your deal and help you get it closed, you won't be buying many deals because these are retail services....
point being, you should become a licensed agent if you plan on being successful.
you also must consider that someone is paying a licesnsed professional to perform these services for you. I can hear everyone now saying that the seller pays these fees....you're paying the seller so you may as well be picking up the tab yourself. In our market, a rule of thumb for buyer agency services is 3%...that can be the difference between taking a risk on a deal and not....
I understand Tim's hesitance to accept a lower commissions in exchange for your future business. I happened to turn wrenches professionally for 10 years and the analogy Tim made has little relivance as i worked 5 times harder for my wages as a mechanic. thats an absurdity... Many professional in this business, IMHO, feel that a handsom wage is a birth-right and they'll fight to educate the masses that taking a discount is a huge no no...
whatever!!! i'll take a lower commission in a second if i think i can sell 3 of your homes in a year and you have enough ability to produce. making a living is often a team effort but unfortnately, the investors around here with the real ability are....LICENSED AGENTS WORKING FOR THEMSELVES...go figure. if you can't find a realtor to work with you on their compensation, find another realtor.
Realtors are good at marketing your property on the back end but if you're depending on one to run your comps, provide you with info about the arera and the school districts etc, find your deal and help you get it closed, you won't be buying many deals because these are retail services....
point being, you should become a licensed agent if you plan on being successful.
Ken raises some good points. Should you expect your Realtor to send you the hottest deals the instant they appear? Or lower their commission as your buyer's agent?
I disagree with many investors who think that there are no deals to be found on the MLS, that they are all FSBOs, wholesales, or REOs (also on the MLS). I've found plenty of deals on the MLS. The asking price is not the final sales price. Some sellers will negotiate. You have to read between the lines on the MLS listings to discern seller motivation. I could send out deals to various clients every day, but I honestly don't have the time to troll through all the listings (San Antonio is a big market) looking for possibilities and matching them to my various clients' requirements. So I set them up with an automatic notification of new/changed listings, and if they see one they're interested in, they let me know. Maybe that's lazy, but unlike lots of agents, I preview listings on a regular basis, too. Whenever I have sent out "blanket" e-mails of listings I have previewed, I have not gotten much response because my various investors are not ready to buy at that time. So my previews are in the nature of market research, not selling individual listings.
However, if you are looking for a specific kind of "hot deal" and are ready to make a move, I am not going to slow you down. I'll move to stage 2 and do the hands-on research, including previewing and taking photos if you're an out-of-town client. Some of my clients have never seen the properties they've purchased. Some of my clients have never seen ME.
Another fear that investors have is that agents are beating them to all the hot deals and scooping them up. This is very unlikely. The average real estate agent does 3-4 deals a year, makes about $30,000. The really successful ones are too busy to be jumping on many properties. I am a moderately successful broker, working on my own, and I see deals all the time, as I said, but I can't buy everything I see. I average one or two rentals a year. I got a real estate license (and access to the MLS) to buy houses, not sell them, but I ended up becoming an agent to support myself and feed my habit!
As far as the customary 3% commission being negotiable, of course that's up to the individual agent and the circumstances. What can you give the agent in exchange for working with you at a lower pay rate than they could get working for someone else? What is the alternative--FSBOs? REOs and HUD homes? With many FSBOs, you're going to have to find the properties yourself and negotiate the price with the seller, who will likely overvalue the property based on numbers from Zillow and be hard to work with. The FSBO is not going to routinely sell you the house for 6% less than what they would have paid agents--they are selling the house themselves to avoid paying that commission.
REOs and HUD homes are sold by listing agents. If you represent yourself and avoid using a buyer's agent, the listing agent gets the buyer's agent commission as well, which can be 5% for HUD homes. Again, the seller is unlikely to reduce the price since they're paying the full commission one way or the other, just like a builder would (so don't go there expecting a freebie either if you don't use an agent). And lender-owned properties are usually advertised at full market value--another reason to read between the lines on the MLS.
I am of course biased, since I am one of those Realtors I described in my first post above! One good thing about the shake-up in the mortgage and housing markets is a lot of the part-timers and not-so-professional folks will be forced to do something else.
Cheers,
wordbrd
I want an agent who can ramrod a deal through escrow. It isn't always easy and a lot of agents are too lazy to force things through if they start to get sticky.
I want an agent who knows how to fill out a contract so all the t's are crossed and the i's are dotted. I want one who knows how to word a contingiency so I am protected.
I want access to the full lsiting, so I can assess wheither or not it is worth my time to lowball.
I'd like to be called when a good deal comes along, but I honestly do not expect an agent to be able to tell what is a good purchase and what isn't. An agent is a salesman, not an investor.
On a really basic level, I would like for an agent to show me properties within the perameters that I asked for. You'd think it would be simple, but the world is full of agents who want to show houses $100,000 more than the price band requested, or who will show a 3 bedroom when you've asked to see 4 bedrooms.
I've told agents I won't buy in the *** area and then had them bring me 6 listings to look at, and 4 of them are in the *** area. I say I don't want that area, they tell me I should look because they are great bargains.
That's right. They are bargains because there are no paved roads and no water in that area. I don't buy in that area, so there is no point in looking.
AFAIK, whenever a property is listed on the MLS, it will advertise commision splits so everyone understands what to expect on the HUD1 form at closing. the listing agent isn't entitled to the buyers agency commission unless you entered into a buyer agency agreement with them prior to closing. it has been advertised what their commission split is so there should be no confusion or double talk regarding exactly what they are entitled to.
if the listing agent is being paid both sides of the deal at closing, insist that the buyers end be taken out as they weren't representing you.
Ken I have to disagree just a little... Although the split is advertised in the MLS that in itself doesn't require the Agency with the listing to honor the split and in fact some will not honor it with "discount" companies.
And on the listing agreement although it has a place to indicate the split to the selling side the verbiage is so vague that the listing company doesn’t have to honor that commitment.
Which is why it is common to see a commission agreement signed prior to submitting an offer on a property.
Weird little rule but I guess in the past it was determined that it was a violation of fair trade..
And in order for it to be MLS friendly the listing broker is only required to send via certified mail a letter stating that no commission will be paid to "X" company...
Michael Quarles
I kinda disagree with BOTH of you, but maybe because it could vary from state to state.
In my market, the buyer's agent commission advertised on the MLS is what the listing agent has contracted (clearly spelled out in the listing agreement with the seller) to pay the buyer's agent. The buyer's agent is entitled to that fee if they are the procuring cause. Whatever is listed as the commission on the MLS, neither the listing agent nor the seller is entitled to change that without the buyer's agent's agreement.
If there is no buyer's agent and the listing agent handles both sides, he/she is entitled to that share of the commission as well, unless otherwise agreed with the seller. However, this dual agency arrangement must then be agreed to by the buyer, seller, and the dual agent's broker.
The listing agent can certainly agree to a lower commission for dual agency at the buyer's request, but is not obliged to do so.
Texas may be different, but that's how it works here.
Cheers,
wordbrd
in NC....
If you haven't entered into a buyer agency agreement, the agent isn't legally entitled to the buyer side commission. I've never seen nor been asked to use a commission agreement in NC....i'm assuming to streamline the paperwork at least a little so we work straight off the listing sheet.
beyond not being legally liable to do so, I will not pay a listing agent a buyer agency commission if they didn't show me the house, write up the contract, help handle my financing etc etc.....they don't deserve it.