Why Do I Need A Real Estate Agent?
Rental Property Investor · Rockville, MD · Member since 2018 · 23 posts · 17 votes
Why Do I Need A Real Estate Agent?
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Investor · Saint Louis, MO · Member since 2016 · 970 posts · 1k+ votes
7ySo I'm going to go against the grain here. I used to use agents, but now I don't. I'll work with a selling agent if there is one but taking one middleman out always helps in terms of communication. I think agents are good if 1. you are a noob homebuyer/investor who doesn't have time or doesn't know anything about the buying process. 2. you are a seller who doesn't have time or know the process. 3. trying to invest out of state/or your area of expertise.
Once you familiarize yourself with the process, you can do what an agent does and sometimes better. No more scheduling through them, cutting out costs, miscommunications, etc.
personally, my last 6 deals have been without buying agents. I'll take my 2 page office depot sales contract to the seller, have them sign it, and let the title company do most of my legal legwork. I have my appraiser/inspectors/contractors run through the place and give their reports to my bank and bam. 2 week close.
87 Replies
- Investor · San Jose, CA · Member since 2015 · 89 posts · 46 votes7y
@Stephen Witkowski
It’s very simple, you come in with an offer without a buyer agent and the sellers agent sees an extra 1.5-3 % into their pocket; no need to share the commission. Suddenly you are treated like royalty! You’re looking like Brad Pitt. They don’t care if a better offer comes in, they will hint to you that if you want the house offer this much, which is the best deal on the table; Is that shady? Maybe, but the only losers are the ones with buyer agents. You can practically pick and choose whatever house you want and usually your offer will get accepted. You have to be creative to get the best advantage. My poor friend used a buyer agent and got outbid many times, took him over2 years until he finally found a house! So he probably only got his 6th choice in a house! That’s too bad.
There’s this thing that Al Gore invented, it’s called the internet. It’s made many things obsolete, buyer agent being one of them.
- Investor · San Jose, CA · Member since 2015 · 89 posts · 46 votes7y
Funny thing is that those seller agents then start calling you about deals off market.
Seller agent: "I have an REO coming up soon, the bank will accept this much, do you want it?"
Me: “sure! Let’s look at the numbers “
Rinse repeat
Originally posted by @Johnny Lau:
Funny thing is that those seller agents then start calling you about deals off market.
Seller agent: "I have an REO coming up soon, the bank will accept this much, do you want it?"
Me: “sure! Let’s look at the numbers “
Rinse repeat
This also happens if you have a good agent... Hey you sold Jim Bob's portfolio can you sell mine...
I'm just a small fish with not much volume, but networking through my agent I can leverage other people's buying power either through reputation or just getting the left overs of bigger deals (which aren't always terrible).
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes7y
At least for me commercial and residential is very different.
I am often dealing with clients with high 7 figure to 8 figure net worth. They own businesses or are high level professionals. They are looking for the best at what they do when investing millions into a property. They want white glove service.
In residential I can see a starter investor with barely enough to scrape for a new investment trying to cut corners and save a buck. My clients already have tons of money enough to never work another day in their lives. The return is further down the list compared to quality of the asset and dirt over time with tax benefits. They already have ultra high incomes and want to shelter some of the tax burden and grow equity and money with higher quality assets that preserve wealth and keep up with inflation.
I do not know why it is a shock to residential investors when a broker/agent doesn't want to JUMP FOR JOY for these low end properties. Say a 50,000 house to the agent that is 1,500 before they split with the brokerage. The investor is thinking about making tens of thousands in profit. The agent is looking at maybe 1,000. That is nothing for return to a broker/agent for the hassle involved. You might get a new agent with nothing better to do but twiddle their thumbs. Seasoned brokers/agents that are investors want the same thing such as the best client with the highest return for their time just like investor wants the best quality property at the best price so they make the most money.
Seasoned brokers/agents place a high value on their time and have lot's of money like investors do. Many of them are millionaires or multi-millionaires. It doesn't bother me that some investors do not see value in brokers/agents. I have lot's of buyers that do everyday of the week. I can understand a residential broker not returning a call for an investor if they do not focus on that. If they sell houses to home owners for 300k or 9,000 in commission then a 50k house for 1,500 and very difficult to find quality does not seem appealing. Generally buy and hold rental investors pay more money for houses than the flippers do. Wholesalers are generally worse and most do not perform or have the ability to perform they are just trying to assign a contract. A broker should ask to see proof of funds bank statement valid in the last 30 days from a buyer in their personal name. If it's a corporation account then the buyer should provide documentation that they are a controlling majority shareholder and they have authority per the corporation to enter into such a purchase agreement and be binding upon them.
Good luck. Hope it goes great for you.
- Rental Property Investor · Rockville, MD · Member since 2018 · 23 posts · 17 votes7y
Wow! So many great responses.
Thanks everyone who replied - this really helps clear things up. To my understanding now, an agent acts as a liaison and a resource to an investor. A real estate agent is very familiar with the process and other individuals in the industry. They can help newer investors (like myself) or seasoned investors navigate through different deals, or even manage most of the acquisition process.
They'll also help you secure a lower price and get more information on the property and why the owner is looking to sell.
Thanks for all the patience and help everyone!
@Stephen Witkowski A good agent knows the inns and outs of transactions, contracts and the deadlines that come with it. If a property is on the MLS then you have to use an agent, either your own or the listing agent. At least in my state you do. And the best part is that the seller pays the commission, not the buyer.
- Real Estate Broker · Dayton, OH · Member since 2016 · 22 posts · 17 votes7y
@Stephen Witkowski I would say you don't necessarily need an agent, but if purchasing from the MLS the agent commissions have already been negotiated. So why not use an agent?
Some purchasers naively think they save the buy side commission, and a listing agent may credited the seller, but a lot of them don’t. As an example when the seller signs a listing agreement they may agree to list for 6%, of which the listing agent may agree to pay the buyers agent 3%. If a buyer enters into the transaction without an agent the listing agent is entitled to keep their 6% unless otherwise pre-negotiated with the sellers. So now you have a buyer who is not represented and it didn’t save them a dime...
Now to simply answer the question... why? Well the same reason we hire an accountant, attorney, or any other specialized service. Because if you select the right agent they are more skilled at buying real estate than you are. They can assess a deal and determine how good or bad of deal it is, they have a network of lenders, inspectors, Title co., photographers, contractors, etc that may be required in a transaction.
Should you use a different agent each deal... personally I'd say no depending. I'd use the same agent for SFH as long as I felt they were skilled in both residential and investment properties. Possibly for 2-4 units as well. If you're talking commercial I'd recommend a separate agent for that from your residential stuff, they are two different beast. For instance you may be a good divorce attorney but not a good RE attorney. Not all agents are the same but I'd use a good one for their niche over and over.
Hope that helps!
- Rental Property Investor · Denver, CO · Member since 2018 · 36 posts · 16 votes7y
@Stephen Witkowski Agents are great to have but if you’re an investor, they won’t likely be able to find the deals you need to be looking at because the best deals aren’t on the market, they are off-market wholesale deals. Not sure what market you’re in...but once you find a wholesale deal, you need to be able to know how to analyze the deal to make sure it is a good deal by the numbers. That being said, an agent can help you with the contract and negotiation but you’d have to pay them out of pocket because off market deals most often don’t have a seller’s agent involved. If you are trying to find out how to find wholesale deals and then analyze them, reach out anytime, I’d be glad to walk you through a few steps on a GoToMeeting.
- Los Angeles, CA · Member since 2018 · 95 posts · 46 votes7y
Originally posted by @Stephen Witkowski:
Hi everyone!
I’m a new real estate investor. I’ve started to learn more, browse the forums, listen to podcasts, and attend meetups. I keep seeing people seek out and utilize real estate agents, but I’m not sure why.
Simply put, why do I need a real estate agent?
Sorry for the ignorant question, and I don’t mean to offend any agents out there, but I don’t fully understand the role of a real estate agent.
Why should I find a real estate agent when looking to buy an investment property? When should I involve an agent? Do you generally have one agent you work with, or does each property have its own agent?
Thanks for the help!
oh boy, don’t even think about buying a home without a realtor, do you even realize how dangerous it is out there? don’t be reckless! you need their expertize, their protection and they will make you earn so much money! And you know what? it’s free!
Seriously, If you have internet and can read, chances are you probably don't need one
unfortunately, it is often impossible to avoid them as this parasitic cartel is unfortunately deeply ingrained into the system, but you can maybe save half the commission.
Anyone with average intelligence can go on internet and figure out what's a property worth. Anyone can upload pictures on internet. You can get your listing posted on the MLS for a few hundreds.
Hiring a realtor will not protect you at all.Only a good RE attorney will cover you. Quite the opposite, high are the chances they will push their own agenda which is generally against your interest. There is a huge conflict of interest.
On an average home, a realtor will cost you more than one year of mortgage; you will basically hand over one year of savings to a realtor for having hustled a listing from you and posted a few photoshopped pics on the MLS. So ask yourself if that real estate agent desserves that hard earned money for making a few calls and eventually opening the door a couple of times. Probably not. A flat fee of $500 would be more like it
Sorry for this rant, but i don’t like this old middle man, mob like business which is a huge weight on businesses and households and add absolutely no value to the market and the society. I think lawmakers should act swiftly to restore ethics in this business, break this monopoly and promote low cost / tech solutions for home owners. Unfortunately this lobby is is quite powerful, and little progress is made in that direction
- Real Estate Broker · Dayton, OH · Member since 2016 · 22 posts · 17 votes7y
@Matt K. That’s a misconception... by removing a sellers agent you’re not reducing the commission you’re simply allowing the listing agent to keep 100% of the commission vs splitting their commission 50/50. Unless it’s be arranged with the seller ahead of time. At leas that’s how it works here in Ohio in my market.
- Real Estate Broker · Dayton, OH · Member since 2016 · 22 posts · 17 votes7y
@Russell Brazil this. I bet most buyers think they either get equal representation through dual agency and not what happens more often than not which is a listing agent working on behalf of their client in negotiating with a CUSTOMER.... Which as you know means an unrepresented buyer! And the buyer is none the wiser.
To me it’s like saying I could hire a lawyer for free OR I could just deal with the prosecutor myself LOL.
- Real Estate Broker · Dayton, OH · Member since 2016 · 22 posts · 17 votes7y
@Daniel Pierson that’s an entirely different circumstance. In that situation your simply acting as a facilitator helping both parties navigate the transaction correctly. I’ve done that several times for a flat fee.
- Real Estate Broker · Dayton, OH · Member since 2016 · 22 posts · 17 votes7y
@Johnny Lau kickbacks are illegal
- Specialist · Little Ferry, NJ · Member since 2017 · 12 posts · 2 votes7y@Stephen Witkowski unless you're doing your own analysis of the market you don't really need an agent you can buy on your own. But if you're buying in a market that you know little of an agent should know the local market. Or you can always hire me 😊 I work and have managed hedge fund portfolios.
- Whittier , CA · Member since 2013 · 176 posts · 96 votes7y
Do a few deals without one and see how it turns out!
- Rental Property Investor · Ithaca, NY · Member since 2015 · 1k+ posts · 1k+ votes7y
@Stephen Witkowski
Buyers agents are free to use, so an extra set of eyes is always nice. Sellers agents are your gates, they stop all non qualified buyers from coming in and put up with the BS inquiries that don’t pan out. An agent is a contractor, you find a good one, you want to keep them.
- Real Estate Agent · Falls Church · Member since 2012 · 2k+ posts · 1k+ votes7y
@Stephen Witkowski The real estate agent is there to be your advocate and get you the best deal possible. Simply put.
There are agents who represent the sellers interest exclusively, there are agents who represent the buyer exclusively, and there is a situation where the agent represents the buyer and the seller (dual agency) This form of "representation" is misleading as the agent legally cannot advise either client because of the agents fiduciary duties to both individuals.
In your case you should seek out a competent buyer agent to represent you. They will ensure you get the best deal possible in your transaction. For example: In the last deal I negotiated which closed last week I was able to negotiate a subsidy from the seller so large that all closing costs were paid by the seller and the buyer was able to leave closing with the keys to a home, and a substantial check. In addition, the seller paid for a premium home warranty, pest inspection, and some upgrades to the property. At the closing table, the attorney commented that the interest rate on the loan was the lowest she had seen in months. The reason for that is I track the interest rates daily and when they dropped I was able to speak with the lender 2 days before closing and get them to lower the rate. This caused them some extra work in having to redo the closing disclosure paperwork but in the end it's all about getting the best deal for the buyer.
You will not get a deal like this working with the sellers agent.
If an agent ever tells you something can't be done without even trying to do it first, walk away from them fast.
Hope this helps if you have any other questions feel free to ask.
- Rental Property Investor · San Antonio, TX · Member since 2018 · 2 posts · 0 votes7y
@Stephen Witkowski you don’t need an agent to find and close on a deal. It’s feasible to do on your own.
However, do some research on the amount of marketing dollars investors are spending for each closed deal. I think you’ll find that the impact to your costs of having an agent on your side, looking for deals that you aren’t privy to, especially when getting started, is negligible versus not having agent.
Also, agents have insight to other RE services that you may need. For example, property management. Most investors want to be investors and not rent chasing landlords. When you’re starting out, there is often a cycle in your growth where your value add is in locating and procurement of new properties and not management or maintenance of your portfolio.
- Real Estate Agent · Louisville, KY · Member since 2017 · 1k+ posts · 1k+ votes7y
I'm an agent in Louisville. I model my business as come from contribution. I run comps for the wholesalers and send out their assignable contracts. I run comps for my investors on deals I have nothing to do with. I just want to make sure they get themselves into good properties. Pay it forward!
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes7y
Asking if you need an agent is like asking if you need a contractor or an accountant. What are you trying to do? What knowledge, experience and expertise do you have about that given task?
Mainly I wanted to disagree with the concept of buyers agents being free. Been said numerous times (by agents) and it's NOT.
As a buyer, you don't pay out of pocket, but it is not free. Just because the bank rolls your loan fees into the loan, does that make it free? Give me a break.
A buyer's agent (selling agent) costs nothing down, but it does cost. Example:
I sold 2 houses last year by owner. I knew I could list one if I got it retail ready with a listing agent on the MLS for $249. This would have costed me $13k and 60 days straight without a nap. Unacceptable!
My price of $226 (my net if I listed and did the work) got a ton of activity on CL and Zillow.
In the ads I stated- Have an agent? Add 2.5% (customary for $200k+ here) to the price. Want closing cost help? Add that, too. New roof, water heater, hvac? You get the idea. Add it!
It sold in 3 weeks for $236k & a 1 year home warrany ($495). They added $6k for their agent + $4k in closing cost help. Tell them their buyers' agent was 'free'. Their agent was awesome and kept our deal together, but she certainly wasn't free.
A la cart pricing shows what truly happens. Sellers could and would sell for less without, but most buyers and sellers need an agent's expertise. Just don't tell me their services are free!
- 7yDan RaygorPro MemberReal Estate Agent · Stewartville, MN · Member since 2014 · 2 posts · 1 vote
I think it depends on your situation. A good agent that understands real estate investing can be extremely helpful for lots of reasons. For example...
- Finding and analyzing deals
- Processing contracts and necessary paperwork
- Extra level of liability
- Setting up closing and making sure that everything is moving along
- Understanding the market rent and value of properties in specific areas
- Connections with quality contractors, handymen, plumbers, electricians, etc.
- Connections with lenders and private investor
- Connections with other investors looking to buy or sell
- I'm sure there's many more, these are just the reasons I've seen and experienced.
I am an investor and an agent. I was an investor first and I used to think the same thing and that agents didn't really have a lot of value and that they had kind of a fluff job. Then I became an agent and realized all the steps and time spent that the agent I used to use had to go through that I had no idea about. Sure, sometimes a transaction is pretty easy and straight forward, but then other times (like foreclosures and Fannie Mae properties) it is not and they take a lot of time throughout the whole process.
Also, I think the majority of investors out there and here on BP have full-time jobs doing something else and have families and don't have a ton of time to give to all the things that I stated earlier. There are also many agents and brokers that are involved in property management as well. Having a great agent/broker can also allow an investor to scale and grow their empire/portfolio in ways that they never anticipated or dreamed of. If you are not a real estate agent yourself, I think that having a GREAT agent can be the most important relationship you ever have as an investor.
Originally posted by @Jonas Helbert:
@Matt K. That’s a misconception... by removing a sellers agent you’re not reducing the commission you’re simply allowing the listing agent to keep 100% of the commission vs splitting their commission 50/50. Unless it’s be arranged with the seller ahead of time. At leas that’s how it works here in Ohio in my market.
Not sure where I came across as saving the commission, rather you save the sellers agent from splitting like you said. Which could help get your low-ball offer accepted as it's more money in the agents pocket vs a higher offer that's split...
- Real Estate Broker · Dayton, OH · Member since 2016 · 22 posts · 17 votes7y
Why would a seller take a low ball offer because their agent gets to keep 100%? The only logic behind that is the listing agent takes a lower cut which is the misconception I mentioned in my initial reply.
- Investor · San Jose, CA · Member since 2015 · 89 posts · 46 votes7y
@Jonas Helbert
Lol, kickbacks are illegal? It was structured in the contract but was probably called something else, I don’t really remember but things like that were common back in the day, maybe more so now, who knows.
In the Wild West days of real estate, I saw and experienced many shady things. One seller agent had over a dozen offers and told us (me and wifey) that if we wanted the house we have to offer 1000.00 over the best offer. She showed us the contracts. Then she tells us to ask our buyer agent to give her 1/4 percent of his commission back to her. He was shocked at that and told us that isn’t the normal way things work. We were newbies.
Another seller agent took us to houses she was listing for the banks and gave us the numbers that the bank would accept for their REO. These were not on market yet so we had first dibs. - because we didn't have a buyer agent!
These are just examples of agents behaviors we saw, the lenders and appraisers did things that would make your head spin! Lol
One lender who worked for a major bank would give me and my business partner official documents for whatever amount we asked, and she never even met me. 1 million approval? 2 million? Sure, no problem.
Cash buyers from overseas? Another story for another time...,
Wild West for sure
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