Real Estate Investor · Select a State · Member since 2010 · 79 posts · 17 votes
Hi BP family,
Please help me understand, why using an agent in the deal makes sense?
I have been flipping apartments for the past few years. Now I got a job as a real estate agent in a small local real estate company and I will be starting in 2012.
The main reason I have decided to become an agent again, is to have a cheaper access to the advertisement of my own flips, to get more leads, and find more properties to flip while I serve as an agent helping to advertise and sell properties, that have rejected "the offer from our partner to buy for flipping", but need to sell at market value. A commission from a deal every now and then is welcome :)
So it's all money.
I personally have sold my flips as FSBO-s, and I have avoided using an agent, because the % seems to be unjustified. Unless the agent has come to me with a client, who ended up buying the property from me.
Please help me see the other side of the coin, how does the customer win from using an agent?
What makes the service worth the price (5-6% from the selling price) to you?
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
14y
I've written about this before on the BiggerPockets blog, but as a licensed agent and an investor (along with my wife) who sells a decent amount of houses (about 15 of my own per year and about 25 for other investors per year), here is what I consider to be by-far the biggest value we provide when selling properties:
We have a strong reputation and a strong network of agents who we work with.
Our average DOM for the houses we sell is 17, and if you take out the two properties that took the longest to sell, it's closer to 12; the reason this number is so low is that my wife and I know most of the successful buyers agents in our area, and all those buyers agents know us and our reputation.
When an agent in our area has a buyer in our price range, they call us first. They want to get into our houses, for several reasons -- quality of rehab, value, and ease of working with us. We often get competing offers the first weekend, and we often have a list of buyers waiting for our houses to finish up so they can have "first dibs."
Don't get me wrong -- getting your listing on the MLS is important; I'd venture to guess that 95% of our traffic that doesn't come from direct correspondence with our network comes from the MLS. But, the MLS (and any FSBO marketing) pales in comparison to working with an agent who has a strong network, a great reputation and the ability to market your properties.
In my opinion, you have two choices:
1. Find a great agent who has the ability to market and sell your property quickly and pay him/her the 3% (or whatever they want); or
2. Use a flat-fee broker and list on the MLS for $400.
I don't see any reason to pay 3% to a typical agent who is just going to list on the MLS and maybe send an email or two.
Real Estate Investor · Select a State · Member since 2010 · 79 posts · 17 votes
14y
Can not seem to find the edit button. Just clarifying that being an agent and a flipper at the same time has been talked through with the company and there are no ethical or legal problems.
This thread is here, hopefully, to find ideas how an agent could bring more value to the table.
Residential Real Estate Agent · Costa Mesa, CA · Member since 2008 · 1k+ posts · 380 votes
14y
It comes down to time and money.
Do you have the time (and expertise) to effectively market the property, exposing it to the maximum amount of buyers? This requires more than just putting it on the MLS and calling it a day.. otherwise all agents would be equally successful.
If you don't, then you have to determine whether or not a quality agent could garner their fee or more in the sales price. If so, use an agent. If not, don't.
For me, it is never worth my time or effort to market these myself (on my flips), aside from sending an email blast to my internal database to see if anyone is interested, so the decision to hire an agent is always made.
Real Estate Investor · Milwaukee, WI · Member since 2008 · 1k+ posts · 671 votes
14y
As a seller, I would always use an agent becasue they have the MLS and a good one will have a website and a good network of buyers and brokers to get the deal done quickly.
Most of them do not know what they are talking about. You will also need a lawyer.
When you are buying they are next to worthless. I do all of the work. They come in handy because they get the deals from time to time. You always want to go with the seller's agent. Their value comes from greed. They want both sides and will often have a way of telling their cleint that your offer is the best even though they are not representing you.
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
14y
Jeff the greed part is funny but in many cases true!!
Although it depends if this is a one off transaction or the seller has significant holdings.I would put the client first regardless as I believe long term relationships are best.
A smart broker will evaluate each clients potential "book of business" to them.I like listing the properties to control the deal rather than work with all buyers.I do work with buyers but it is riskier.
Some do not have integrity and will try to cut you out of a deal you sourced.In the long run it hurts the buyer and their investment goals just like a listing broker hurting a buyers broker.
In the future you might do many deals together and if you burned someone last time they won't bring the deal to you or will try to sell their buyer on something else.I am not talking about shrewd professional negotiations but dirty dealing.
I believe in the end the people with good Karma and integrity will outpace and outlast crooks in terms of success in the business.
Bismarck, ND · Member since 2011 · 142 posts · 16 votes
14y
So then the next question has to be why haven't we aggressively developed and marketed a FSBO website for those of us who would not like to us a Real Estate agent? Im new to most of this but it seems to me that most of the leverage a real estate agent used to have is they had access to all of the MLS listing so we had to go through them.
It seems like there are a decent amount of amateur FSBO websites but I haven't found one for my area that does a good job. Are we missing an opportunity here?
Real Estate Investor · Milwaukee, WI · Member since 2008 · 1k+ posts · 671 votes
14y
craigslist.org is the best you are going to get. I do not think there is money to be made here. Realtors have a very strong lobby and make it hard to break in.
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
14y
Zach,
You need to look at it this way.You are not paying an agent for the MLS.You are paying them for helping negotiating the contract and guiding you to not make mistakes.
In a survey conducted by NAR the most selected thing clients needed help with is doing the contracts and the other items fell way down the list.
Most regular sellers on sell property once every 3 to 5 years or longer.So even if they did FSBO 5 years ago they might want to use an agent now as they haven't kept up with all the changes.
It is smart for investors especially newer ones to use a broker/agent in the beginning for help.
Some investors say I don't know why people use an agent blah,blah,blah. That investor might be doing 20 deals or more a year and they are used to doing it on their own.The majority of the population will not fall into that category.
They will simply use the broker/agent they use and trust the next time they have a real estate need if they had a good experience before and that broker/agent stays connected to them over time.
There are plenty of FSBO sites out there.They suck you in with a low fee and then upsell you on this or that item.Only a few have success selling on their own. The rest then go to a limited service or full service brokerage and pay more money then it they would have used them in the first place.
You will never see a FSBO site overtake broker/agent and put them out of business.Real estate is a LOCAL BUSINESS where buyers will gladly pay for the expertise.
A FSBO site doesn't care what you list it at as they get the money regardless.A broker will tell you like it is if they are any good because if it doesn't close they don't get paid.
I am not for or against either way agent or FSBO but I am just sharing my experience with years in the business.
Real Estate Investor · Ottawa, Ontario · Member since 2011 · 217 posts · 14 votes
14y
There is a research comparing MLS and FSBO in Madison, Wisconsin. The conclusion is (1) listing on the MLS does NOT helps sellers obtain a higher sale price, however (2) listing on the MLS does shorten the time it takes to sell a house.
There is another research comparing the sale price and time-on-market in two cases: (1) when agents sell their clients' houses and (2) when they sell their own houses. The conclusion is that agents sell their clients' houses cheaper and faster than their own houses. However, this conclusion only applied to institutional clients (banks, HUD, etc) but not individual house sellers, like us.
Investor · Louisville, KY · Member since 2011 · 1k+ posts · 1k+ votes
14y
For anybody who is just starting out in RE investing, I recommend sifting through your local RE agents until you find one that deals with investors quite regularly and also has their own investment properties. Not only will they have a better idea of what you're looking for, but they will have access to TONS and TONS of contacts.
If anybody needs a good one in Louisville, just let me know.
Wholesaler · Salt Lake City, UT · Member since 2009 · 1k+ posts · 401 votes
14y
I definitely would question the research quoted here on fsbos. I was an investor for 10 years and then decided like the original poster to make some extra money by selling properties retail that we turned down as investments, etc. so I got my real estate license. That was 46 years ago and the number of fsbo sales that were worth it is minimal.
So the real criteria is how quick can it be sold for, and for how much, which means what was the true net to the seller. If I'm selling a rehab home I know that 80% of the retail buyers I am trying to reach are working with an agent, so I don't hesitate to list it on the mls. I offer slightly more to the buyers agent then the norm. If my property sells a month sooner then that little extra to the buyers agent is nothing because of my holding costs per month.
I would have no problem selling on a just by owner basis but my net is the number one factor. And I have tracked fsbos for over 46 years now and it is not very often when a fsbo saves any significant amount of money, especially when you add in their time, effort, and out of pocket expenses and figure their true net, and often times on the smaller investor with the time they spent on that one deal they could have been putting another together so there is a hidden cost in there too.
A real fsbo study was done in California in 1964 and the results were out of every sale that started as a fsbo only 1 in 100 sold fsbo and saved any money at all (1/2 of 1% error factor)and the study failed to take into account their out of pocket expenses. Just for the heck of it I did a local smaller study every 10 years prox, 1975, 1985,and finally 1994 and then quit as it was just to much work and time, and the results were the same, their net was not that wonderful dollar wise,it cost them money, but I am sure many were proud they got it done and closed by themselves successfully and could brag to others.
As a matter of fact a very early study in Palo Alto, California showed most sellers that actually sold by fsbo, never intended to do it again after their experience, but they were not investors, selling multiple properties during the year and thus experienced.
As for fsbo sites, why would I devote time to looking for a property there, well of course they are not paying a commission and I want it, and I know most of them will take an offer just to get it over with if the commission is the only factor so they saved nothing, and if they are not too sharp or frustrated enough I can get even a bigger discount. Plus a successful mls depends on repeat postings like an agent does, and most of the people are one timers on a fsbo mls site and the sites are not really localized, what do I care about fsbos out of the state I am going to live in, there are generally just a few at the most where I'm interested. The local Realtor MLS has the listings.
SFR Investor · WY · Member since 2011 · 115 posts · 15 votes
14y
Looking at this question from the point of the buyer who is a new, small investor...
timelines, deadlines
knowledge of unusual/exceptional situations
MLS access, and knowledge of all contained therein
I was working with one real estate agent who missed deadlines, didn't notice a sale was a short sale, so didn't have me submit SSO, typed wrong dates on contract, kept recommending his unlicensed, un-bonded friend (who happened to have a business card) to do all the rehab, and in one house closed the door with no knob on the inside. He nearly panicked when he couldn't find another door out. I just crawled through the window and shimmied out like a sixteen year old on a hot date. (Yes, I did go open the door to let the poor agent out.)
I have since found someone who better matches my needs: to the point, watches dates and paperwork like a hawk, advises me to keep my next steps going, is assertive on presenting my offer, keeps everyone informed in a timely manner. In short, he makes sure he's an asset, not a 'friend.'
Investor · Reston, VA · Member since 2011 · 683 posts · 191 votes
14y
When I was buying at the Courthouse and flipping alot of properties in the early 2000's, I used a broker that charged me $295 to put the listing on the mls with some pictures, a sign and a lockbox. All inquiries came to me directly. This worked well as I knew what I was doing. In my opinion it is critical to be on the mls and foolish to use a service that identifies you as a fsbo. The broker I used had an obscure name but clearly gave no indication of a fsbo outfit. I'd bet many buyer-agents have zero desire to deal with fsbo's as most of these seller's are clueless and it just means doing both sides of the work for half the commission.
On the buy side, I find the deal and need zero handholding. I will use the lister or my regular agent. Using my regular agent can be worth it because he does bring me some deals. So there is value if you are getting first crack at some deals. He also gives me the combo on the lockboxes so I can view a property on my own. If you are finding everything and getting nothing in return, you may as well go straight to the lister.
Residential Real Estate Broker · Edmond, OK · Member since 2011 · 452 posts · 183 votes
14y
Cheryl -
First I want to address using your agent or listing agent. For someone seasoned like yourself it might not matter on a case by case basis. Just be sure your usual agent keeps bringing you deals. However, for a beginner or someone that doesn't do more than a couple of deals a year, I think it's best to have your interests represented every time by someone (here's the key) that knows what they're doing.
Secondly, there are people who list their houses on the MLS entry only for a small fee. However, if you are marketing to the end consumer, let's say on a residential flip, this might not help as much as you think. Having a full service agent can add a lot of value for you in terms of time on market. There are many Realtors that are wary of these "entry only" type of listings. Many are regular homeowners who have no clue what they are doing, and the buyers agent will have double the work and liability. With 80% of buyers already being represented by a Realtor, then you potentially miss out on many buyers. Conversely, if you have an agent with a great reputation and network, other agents would love to show your house.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
14y
I've written about this before on the BiggerPockets blog, but as a licensed agent and an investor (along with my wife) who sells a decent amount of houses (about 15 of my own per year and about 25 for other investors per year), here is what I consider to be by-far the biggest value we provide when selling properties:
We have a strong reputation and a strong network of agents who we work with.
Our average DOM for the houses we sell is 17, and if you take out the two properties that took the longest to sell, it's closer to 12; the reason this number is so low is that my wife and I know most of the successful buyers agents in our area, and all those buyers agents know us and our reputation.
When an agent in our area has a buyer in our price range, they call us first. They want to get into our houses, for several reasons -- quality of rehab, value, and ease of working with us. We often get competing offers the first weekend, and we often have a list of buyers waiting for our houses to finish up so they can have "first dibs."
Don't get me wrong -- getting your listing on the MLS is important; I'd venture to guess that 95% of our traffic that doesn't come from direct correspondence with our network comes from the MLS. But, the MLS (and any FSBO marketing) pales in comparison to working with an agent who has a strong network, a great reputation and the ability to market your properties.
In my opinion, you have two choices:
1. Find a great agent who has the ability to market and sell your property quickly and pay him/her the 3% (or whatever they want); or
2. Use a flat-fee broker and list on the MLS for $400.
I don't see any reason to pay 3% to a typical agent who is just going to list on the MLS and maybe send an email or two.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
14y
Originally posted by Michael Stole:
Should the seller always pay 3% to the buyer agent, no matter whether the seller sell through MLS or FSBO?
This needs to be negotiated *BEFORE* the agent brings the buyer to the property.
In the case of a listing on the MLS, it is already disclosed in the listing; in the case of an FSBO, the agent should be smart enough to verify the commission before showing the property.
While you can always offer less than 3%, this is pretty standard and you may lose potential buyers if you offer less.
Specialist · Cleveland, OH · Member since 2011 · 1k+ posts · 852 votes
14y
Silver,
To me the value is only if the agent has a buyer that I do not have, a property that I want to buy, or if I need to have an agent present to make a bank happy. Other than that, I really do not use them. I hope it works out well for you getting your license. Good luck.
Real Estate Investor · Ottawa, Ontario · Member since 2011 · 217 posts · 14 votes
14y
I find that most REOs in my local MLS offer buyer agent commissions as low as 1.5% in their listings. Then what will eventually be in the pocket of the buyer agent? The whole 1.5% or only half of it (0.75%)?
Do I need to call the listing agent to figure it out?
Investor · Lucas, TX · Member since 2010 · 620 posts · 352 votes
14y
Most banks selling REOs don't allow the broker/agent to double end the deal anymore. Apparently there have been some problems. Let's just say that they wish to avoid any legal entanglements.
Involved In Real Estate · Torrance, CA · Member since 2012 · 6 posts · 0 votes
14y
Hi Silver A I think you answered your own question. You say help you understand why using an agent in a deal makes sense. You admit you're an investor, yet NOW you're a realtor. Then you go on to state the obvious facts about becoming a realtor. To get more leads, have access to the mls, etc... well, you just answered your own question. I'm an investor too and was for years. Once getting my license, I could operate on both sides of the coin and understand an investors side, yet a realtor's side also. I think the main reason anyone may need the help of a realtor is twofold. One, not all investors have the time or knowledge that a realtor can bring to the table. Two,they may want the protection of going thru a realtor instead of dealing with papers and dealings themselves.
You may be knowledgeable, yet alot of investors out there are newbies and don't understand legalities of negotiations, etc.. or have access to getting leads, and navigating escrow. Hope this helps...
Involved In Real Estate · Torrance, CA · Member since 2012 · 6 posts · 0 votes
14y
I'm confused. No disrespect Silver A but in one instance you ask the question and in another instance, you state you GOT your license and became one yourself and then go on to say why...so you can get more leads, access to the mls and info you didn't have before.....etc.. I think you just answered your own question????
Bismarck, ND · Member since 2011 · 142 posts · 16 votes
14y
My take is that a very good realtor is more than worth it. The problem that Im finding is that those good realtors are very few and far between. I can't tell you how many handouts I have given over the years...
Commercial Real Estate Broker · Nashville, TN · Member since 2008 · 151 posts · 46 votes
14y
I love Brian's study info. That must have been an interesting one to conduct.
I got my broker's license when many of my clients whom I had done financing for started to ask me to represent them with sellers. That way I acted as their broker too and got a piece of that commission. It was a smart and profitable play.
But for my own investments I always used a broker. Here's why it worked for me in my MF properties:
The broker was also an investor himself and had both owned and managed a few properties. he knew how to analyze deals and talk with sellers. He knew how to write a good contract and practically did all the work for me up to the point where i needed to do a final analysis and sign the offer docs. He also acted as manager for a few smaller properties and was all around a helpful guy.
If you can find an agent/broker like that, you will find alot of your time is freed up to do better things. Well worth the commission split.
Investor · Marion, IA · Member since 2010 · 177 posts · 117 votes
14y
I'm in the process of purchasing a property from a seller and neither one of us is using a realtor. The purchase price is $125k, which puts a 7% commision (3% buyer, 3% seller, 1% MLS) at almost $9,000.
Neither one of us can justify paying $9,000 to fill out the purchase agreement and schedule some showings. Nice to have, but IMO not worth the money.
Real Estate Investor · Select a State · Member since 2010 · 79 posts · 17 votes
14y
Thank you for your replies.
The question was kind of vague on purpose, I wanted to see how you will answer it.
Sheyenne, thank you for clarifying the problem. My problem is more of an inner game thing, I'm just confused. Why do people use an agent when they can list their property FSBO and sell it just as easily. Everything seems easy to me, but only maybe because I have been in this business for years. I'm confused.
What I wanted to know is how can the client, who is not an investor, feel that the agent is worth the % of the sale when the agent finds the client?. And why choose an agent when they could list the ad themselves.
And then get 5 calls a day from different agents who would like to list their property, come to a couple of showings with a client, and pocket a fair amount for little work.
Mike brought up the problem best, "Neither one of us can justify paying $9,000 to fill out the purchase agreement and schedule some showings. Nice to have, but IMO not worth the money."
What would it take to make you feel like the service has been worth the money?
