Using a buyer's agent versus contacting the seller's agent every time and why REALTORS need a special level of TRUST with their "investors"

11 Replies

I'm a licensed broker here in Upstate NY and I'm amazed at the lack of understanding that new investors have when it comes to agency.  A close colleague and mentor in the business put it quite simply when I shared my frustrations with time sucking clients who then turn to the listing agent to write an overpriced offer on a terrible investment.   He said, "My friend, they don't care if you put steak on your table or hamburger helper"

 As someone who points out all the flaws, runs conservative pro formas and struggles to attain REAL deals for my clients, it drives me absolutely bonkers when something like this happens.  What the "investor" doesn't realize (but will down the road) is that the listing agent just wants to sell THAT property.  They don't care how it compares to anything else.  They just have to get the seller and the buyer to come to terms on price, it is completely irrelevant to other opportunities.  Sometimes overpriced properties don't sell because the seller is un-realistic about it's value.  Enter seller's agent to sugar coat things and sell investments that are more like an anchor for a capital starved young investor.  

I'll give a recent example of how this situation may play out for those investors that believe always contacting the listing agent is the best way to "get a deal"

I received an email this morning from a client whom I have previously given much advice on the local market he is interested in, shared resources, shared contacts etc.  Lot's of back and forth, a sit down meeting where I paid his tab, etc.  In his most recent email he said something like this "I figured I would check with you before I contacted the Listing agent"  Great!  This is about 1 step better than going behind my back after I've allocated some of my most precious resource to you (my time).  Here is a case where though I can obviously see either their naivety on how I make my money, OR just the plain downright inappreciativeness that some people have.  I've learned a lot in this industry since I started investing about a decade ago.  But what I think is the most important aspect to building a successful real estate business is appreciating those that help you along your way.  Had I treated my team the way some of these new "investors" do, I would not be where I am.  I can only hope that this thoughtlessness will come full circle as they struggle to find deals and rely on selling agents so they can "get a better deal"  

The jury is still out on this client.  We will see how he responds to my email.  In this case he is interested in an apartment complex that is a 1/2 way house for convicts.  Do you think the LA would disclose that info?  Probably not.  And I've viewed the LA's pro forma.  Not even ball park close to my pro forma on the same property... Plus the insight that comes from a buyer's agent on other opportunities that are comparable... my goodness, from my perspective a buyer's agent is a no brainer!!!  What is it that makes the "investors" think that 3% of an unsound investment = a great deal??  I just shake my head....

I would like to thank all my clients who understand the importance of having a dedicated buyer's agent, and who do respect my time and effort.  Not all agents are created equally, and when you disrespect a professional that takes his job seriously by being a thoughtless selfish "investor" you ultimately just hurt yourself.  In the world of agency it is better to be friends with the top agents, rather than known as a snake.  What seems like a huge world of investment get's a lot smaller as you head to the top.  Even the majority of Broker's suffer from poor business practices, bad debt, and laziness.  What things seem on the surface are often an illusion.  

Sorry for the rant, I do have thick skin and brush off those that act in such a manner without care.  However, I never forget who they are.  You're either a game player, or business person.  

Hopefully you can see the difference and choose to be the latter!

awesome write up @Mark Updegraff  

Some people need to understand that it's not solely about the buildings, its about relationships & who you know.

I choose not to work with those that think all agents are a dime a dozen (admittedly many agents are) If someone thinks agents are a dime a dozen they will work with a dime a dozen agent every time.

James Wise, Real Estate Agent in OH (#2015001161)
216-661-6633

@Mark Updegraff  great post. From the other side of the table I think it can be very hard for someone that doesn't know a lot about real estate or investing to separate the vast majority of agents that are much more suited to deal with owner occupied properties and just do not have an investor mindset to those true gems that are a huge help to investors like me. There are definitely a ton of agents that are transactional in nature and don't care about the long-term success of the client but there are also a ton that just don't have the toolkit to think like an investor and as such are not as helpful. However, without any knowledge its hard to know this fact and to realize that an agent that thinks like an investor is a true gem.  

@Mark Updegraff   when things go bad or the buyer realizes his mistake guess who s/he will be calling to help save his investment?? YOU!

Sometimes you have to get slapped in the face to differentiate those realtors who really know the investment arena vs. those that just want to get that one-time comission.

@Mark Updegraff  - unless I am missing something, it sounds like most if not all the problems you are describing would be solved by, before committing any substantial (billable) amount of time to any buyer, having the buyer sign a well-written Exclusive Buyer's Broker Agreement. Your commission would be protected in the event the buyer attempts to use any other broker to buy a property. 

Thanks @Jason A.   you are correct.  I should be implementing this document as part of my procedure.  I've been licensed for 2 years and am trying to close as many transactions as possible while strategically building the businesses.  I was just reminded of this by another mentor when a client thought they were doing me a favor by "not bothering me because it was a small deal" and I almost lost a transaction and had to pay a referral fee on it for the stupid phone call / showing.  This was after showing the client a 1/2 dozen inexpensive houses... Proper paperwork implementation!  I'll dig up my state's document and review it now!!

I wouldn't argue that it is "always" best to contact the listing agent directly. Doing so benefits my business plan, since I make offers on MLS properties that are often sold on the first day of the listing. Contacting the listing agent has enabled me to win out over the other offers on more than one deal, since they have an incentive to accept the offer, getting additional commission.

Originally posted by @Wilson Churchill :

I wouldn't argue that it is "always" best to contact the listing agent directly. Doing so benefits my business plan, since I make offers on MLS properties that are often sold on the first day of the listing. Contacting the listing agent has enabled me to win out over the other offers on more than one deal, since they have an incentive to accept the offer, getting additional commission.

 I don't doubt you close deals this way.  The proof is in the pudding as they say and I still think my clients make more money than those that chase listing agents.  Having a dedicated buyer's agent with YOUR BACK yields to more wins, and better wins.  This is my opinion as a REALTOR that is involved in a ton of agency for investors. 

Originally posted by @Mark Updegraff :
Originally posted by @Wilson Churchill:

I wouldn't argue that it is "always" best to contact the listing agent directly. Doing so benefits my business plan, since I make offers on MLS properties that are often sold on the first day of the listing. Contacting the listing agent has enabled me to win out over the other offers on more than one deal, since they have an incentive to accept the offer, getting additional commission.

 I don't doubt you close deals this way.  The proof is in the pudding as they say and I still think my clients make more money than those that chase listing agents.  Having a dedicated buyer's agent with YOUR BACK yields to more wins, and better wins.  This is my opinion as a REALTOR that is involved in a ton of agency for investors. 

 In situations where there are multiple full-price offers on a property during the first day, why would they select my offer over any other, assuming my offer isn't any higher? $$$

@Mark Updegraff  amen! Same boat.

Lol good luck on exclusive agency with investors.

But kidding aside, I have directed my investors to go directly to listor with reason listed above but ask if they get it.. Please give me the opportunity to list it, bc I gave them all the info needed to offer.

I also screen my investors now, and work with a handful. As an investor myself I make my $$ through my own stuff. My Realtor side is negative cash flow now but I'm new. And bidding on foreclosure all day and losing deals not helping with commission. But network and education is priceless. I'm hoping it'll all balance out one day.

@Mark Updegraff , I would be careful about going the exclusive agent/contract route.  Would you really go to court to try to enforce one?  We have only one agency here that tries to do that.  They are very aggressive and made a big splash just after arriving.  When things turned bad between an agent and his client the fallout was quite bad.  Would you want to have a lawsuit Complaint advertised in the newspaper saying how upset they were with the realtor and how they were trying to force hm stay with them?  I will not sign an exclusive listing in part because I buy off market deals.  Why should I pay a realtor for doing nothing?  I understand your thoughts, but you have to win by being a better realtor not one who forces them to stay with you.  No relationship thrives under that type of system.

I would explain to the investor up front what you have to expect. I use one agent per "area" I work in. I have had to explain to many people how using multiple realtors in the same are is a no go. While there are certainly dishonest people. I think even more just dont "get it".

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