Do I Misunderstand the Role of My Realtor?

57 Replies

So I'm about to make an offer on my first deal and I'm very excited. I asked a friend of mine who is a realtor in my market to assist me, or to refer me to someone who would handle a deal of this smaller size (it's currently priced at $48k, and my friend typically sells $300k+ homes). He was more than willing to help me out himself, and about a week ago we got to work.

I have to confess that I either had a serious misunderstanding about the role of a realtor, or else the size of the deal is making my friend not put much effort into this. To start with, I told my friend what I was looking for:

A condo or single family home that needed cosmetic work but was otherwise solid and in a decent neighborhood. Monthly rent at least 1% of purchase price. I also gave him my budget.

I guess what I was anticipating was that the realtor would assist me in combing through listings to find solid possibilities. Instead, he signed me up for his listing service and told me to let him know when I found something I liked and we would tour it. When we did tour properties, he had no insights on them whatsoever. As an example, we were viewing a condo in a very upscale part of the city, but the condo community itself was very low price. I asked him why these condos would be so inexpensive compared to everything else for miles around, and his response was "Well, it could be because of a lot of things....like square feet." These condos were almost 1300 sq ft, which is larger than almost all of the other condos in the area. 

So as far as locating properties, I felt like I could've just done fine on my own looking at listings through redfin or realtor.com and setting up showings. He wasn't helping me search and couldn't tell me anything useful about what I was seeing.

Now we are about to make an offer. I've gone over my numbers with my friend on why I like the deal, and exactly what I would like to get it for. In the same email, I asked how we should determine what our first offer will be. His only response was a single sentence, "We determine the initial offer based on where we want to end up while leaving room for some negotiation."

Well, thank you for that definition of negotiation. Again, I could have reached that conclusion totally on my own. Is where I want to end up reasonable? How do we determine how much room to leave for negotiation? What are strategies for feeling out the other side to see how desperate they are to sell? These were questions that I had hoped someone with decades of experience in this real estate market could provide me insights to.

Am I just expecting too much from my realtor? I certainly don't expect him to do all the work. I've crunched my own numbers, determined my own budget, and determined very particular criteria for what I'm looking for. I expected to comb through the listings, and expected both of us to come to the table with some options. I expected that based on his experience and my criteria, we could put our heads together and find the right option. I expected that based on my budget and his negotiating experience, we would determine the correct price to buy it and the right negotiating strategy. Instead, I feel like he's just a gatekeeper of sorts: just an extra official step I need to go through to close the deal without bringing anything really concrete to the table.

@Lee Self

Your last sentence described almost exactly my feelings. The majority offer little in terms of value in finding deals.

Do you expect the same type of service when buying a a used 30 year old Hyundai as you would in buying a brand new Mercedes?  Would you expect the same level of service at McDonalds as you would at a nice high end steak house?  It is going to be the same in any industry. If you are buying a $48k property, you will get a different level of service than someone buying a $500k house.

My two cents as a real estate broker here in Chicago that works with both residential clients and investors... I learned very early on to leave any personal opinions out of my client's decision as we come across all types of clients in all types of situations. Things like what is a "decent" neighborhood are arbitrary, but regarding understanding market trends and why one unit is relatively low priced to the inventory around it can usually be explained with hard data. In my market, my role is not only provide the data but help my client's understand it and interpret it relative to what they are looking for. In this day and age of technology, most clients have access to the same listings I do. It's not uncommon for my client's to find the homes at the same time or even before I do but it's what happens after we find a potential purchase where our value lies. Things like contract presentation, negotiating methods, access to qualify service partners i.e. attorneys/inspectors/insurance contacts.  Regarding how much to offer on any particular piece of property, it comes down to determining market value, local selling price vs. asking price trends, and property specific aspects like condition, sale type, location, etc etc. Good luck with your offer.

I agree and made a similar post a couple months back.

Even for a low commission transaction I would hope a realtor that is a friend would put a little into this for you.

Either way, I take the time to discover the market value, when they bought, what they paid, what they owe and why they are selling.

The when, how much and what they owe I look up quickly online through the county tax assessor's site and recorded docs to see mortgages.

Hopefully your realtor can provide you some comps to estimate FMV as that can be difficult for us to figure out.

How long has it been on the market @Lee Self ?  If you do make an offer, make it a specific number like you ran a detailed analysis.  Too many zeros and it looks PFA that begs to be countered.  Good luck!

In regards to knowing why a particular unit is lower priced than others, the realtor can't really say until they see it in person, which they would do when showing you the property.  At that point their guess is as good as yours if the price still seems off, but if you are interested in the property they should be able to dig a little deeper (check other comps in the same area, get in touch with the listing agent and ask questions, etc.)

Originally posted by @Russell Brazil :

Do you expect the same type of service when buying a a used 30 year old Hyundai as you would in buying a brand new Mercedes?  Would you expect the same level of service at McDonalds as you would at a nice high end steak house?  It is going to be the same in any industry. If you are buying a $48k property, you will get a different level of service than someone buying a $500k house.

Do you expect your dentist to do a good job on your one filling even though another customer is doing 4 and giving them more money? Do you expect your doctor to give you the same level of care even though they are earning less money from you? The answer is Yes, they are in the service industry and providing a service to their customers. If a realtor can't understand the service they are providing and only sees their client in $$$s then they are not useful. The people buying 50K investments now are the customers that are buying million dollar investment properties in 10 years. Maybe if the realtor provided a high level of service they would continue to be used. As it stands they only see the short term goal of a small commission and not the long picture, in which case they will never get to the long term bigger clients because they don't understand the value of the people that can get them there. 

IMHO, yes, you have unrealistic expectations of a real estate agent.  Their job is to get you through the buying process.  That means getting listings, viewing properties, writing offers, getting an offer accepted, and then shepherding that offer though the closing process.  An agent is not going to help you analyze properties.

You say:

I told my friend what I was looking for:

A condo or single family home that needed cosmetic work but was otherwise solid and in a decent neighborhood. Monthly rent at least 1% of purchase price. I also gave him my budget.

Those are not criteria an agent can search on:

  1. needed cosmetic work - no way for an agent to search on this, nor is even clear with "cosmetic work" would be.
  2. otherwise solid - what does that mean?  Again, not a search criteria
  3. decent neighborhood - what does that mean?
  4. rent at least 1% of purchase price - not a search criteria

These are things a agent can search on:

  1. condo or single family
  2. budget

So, its up to you to turn those non-searchable criteria into something the agent can actually use.  Number 1 and 2 are out the door.  There's no way to figure this out without looking at the place.  Maybe from pictures, but even that's shaky.  And the agent is NOT going to look through the pictures and determine what work is needed.  Number 3 and 4 are ones that you need to research and identify locations.  I've always done this by zip code, but there may be other factors and search criteria.  

So, you should figure out what areas you want to target then have the agent produce listings for those areas, SFRs and condos, under your target price.  That's something an agent can do.  Then YOU need to look through those listings and identify which ones to look at.  The agent will set up viewings.  Go look.  Do your own evaluation of the properties.  Decide which ones you like and what to offer.  The agent can help you with comps.   Then write offers.

What you describe would be reasonable expectations for a business partner.  But not for an agent.

Originally posted by @Steven D. :
Originally posted by @Russell Brazil:

Do you expect the same type of service when buying a a used 30 year old Hyundai as you would in buying a brand new Mercedes?  Would you expect the same level of service at McDonalds as you would at a nice high end steak house?  It is going to be the same in any industry. If you are buying a $48k property, you will get a different level of service than someone buying a $500k house.

Do you expect your dentist to do a good job on your one filling even though another customer is doing 4 and giving them more money? Do you expect your doctor to give you the same level of care even though they are earning less money from you? The answer is Yes, they are in the service industry and providing a service to their customers. If a realtor can't understand the service they are providing and only sees their client in $$$s then they are not useful. The people buying 50K investments now are the customers that are buying million dollar investment properties in 10 years. Maybe if the realtor provided a high level of service they would continue to be used. As it stands they only see the short term goal of a small commission and not the long picture, in which case they will never get to the long term bigger clients because they don't understand the value of the people that can get them there. 

 Yes I expect a different level of service from a doctor or dentist who are taking HMOs from ones at a very expensive concierge practice.

  

If I am paying someone minimum wage I do not expect the same kind of service as someone I am paying $350 an hour to.

Someone expecting phenominal expectations of service for paying someone minimum wage because in 10 years that person might pay them a lot of money for their services, has an unrealistic expectation for how the world works. You get what you pay for. 

If someone wants better service, pay for it.  I pay higher amounts to get better service or better products all the time. If I want a good lawyer, a good realtor, a good maid, a good doctor, a good employee...whatever it may be, the good ones simply cost more, and I dont expect them to discount their fees to me because I promise to pay them more 10 years down the road.

To me it sounds more like the problem is with the friendship as opposed to the fact they are an agent.  I recommend you sit down and have a plan to go forward.

Good Luck!

i agree with @alcanaveral.  Only you can decide the price, however, the agent should be able to give you an idea as to why a certain area sells for less than others if they look the same.  Ask you said, however, you picked an agent that doesn't focus on the cheap investment homes, so he/she may not have known why.

It is up to the client to search through the listings, because the agent wont know what you will rule out or what you will love. Thatis up to you. He sends you the list within your parameters and you narrow it down from there. 

Once you have seen the top ones, he can analyze which ones should get you the best rent (again, this may not be this agent's specialty)

Originally posted by @Russell Brazil :
Originally posted by @Steven D.:
Originally posted by @Russell Brazil:

Do you expect the same type of service when buying a a used 30 year old Hyundai as you would in buying a brand new Mercedes?  Would you expect the same level of service at McDonalds as you would at a nice high end steak house?  It is going to be the same in any industry. If you are buying a $48k property, you will get a different level of service than someone buying a $500k house.

Do you expect your dentist to do a good job on your one filling even though another customer is doing 4 and giving them more money? Do you expect your doctor to give you the same level of care even though they are earning less money from you? The answer is Yes, they are in the service industry and providing a service to their customers. If a realtor can't understand the service they are providing and only sees their client in $$$s then they are not useful. The people buying 50K investments now are the customers that are buying million dollar investment properties in 10 years. Maybe if the realtor provided a high level of service they would continue to be used. As it stands they only see the short term goal of a small commission and not the long picture, in which case they will never get to the long term bigger clients because they don't understand the value of the people that can get them there. 

 Yes I expect a different level of service from a doctor or dentist who are taking HMOs from ones at a very expensive concierge practice.

  

If I am paying someone minimum wage I do not expect the same kind of service as someone I am paying $350 an hour to.

Someone expecting phenominal expectations of service for paying someone minimum wage because in 10 years that person might pay them a lot of money for their services, has an unrealistic expectation for how the world works. You get what you pay for. 

If someone wants better service, pay for it.  I pay higher amounts to get better service or better products all the time. If I want a good lawyer, a good realtor, a good maid, a good doctor, a good employee...whatever it may be, the good ones simply cost more, and I dont expect them to discount their fees to me because I promise to pay them more 10 years down the road.

I am not a realtor so do not understand all of the relationships. I thought that part of the business of a realtor was building good relationships with your clients in hopes of having a customer base that keeps coming back and sends you other referrals? If you don't provide good service to them because they are not in a high enough purchasing bracket why would they refer you or come back to you for the next (possibly larger) deal?

YES  and to the other agents in this thread  @Russell Brazil @Mike Cumbie   what this person is expecting might have happened in the 1970's 

when I started we had a book.. and to sell real estate you had to preview properties.. IE you had the weekly tour of new listings.. that practice had basically gone extinct like the DODO bird.

lets fast forward to today and todays realty of real estate so the OP understands ( as their expectations are way off base)

Today its internet.. buyers find the deals on their own @Anthony Gayden   end of discussion.. at least at that level.. unless your a buyer like me who can move into a market and buy 15 houses in one month.. your not going to get ANY agent  ( nor would you ) spend the amount of time it takes to cover all of YOUR bases.. even if its one 300k house.. this simply is not how business is done in todays market.

AS @Jon Holdman   said half of what you want is subjective and subject to inspection. Put the shoe on the other foot @Lee Self no matter the price point are you going to go look at 20 or 30 houses do physical inspections and then report back to some buyer who may then just go buy a FSBO lol...

so to answer you question .. yes your understanding or expectations of ANY realtor is not reality in todays world of internet real estate.

@Russell Brazil @Mike Cumbie   and the next thing you are going to have in these low value asset vacant homes is a rently box  like rentals... so these buyers can simply go look themselves..   I know as a seller I would allow a rently box on a vacant home.

Originally posted by @Steven D. :
Originally posted by @Russell Brazil:
Originally posted by @Steven D.:
Originally posted by @Russell Brazil:

Do you expect the same type of service when buying a a used 30 year old Hyundai as you would in buying a brand new Mercedes?  Would you expect the same level of service at McDonalds as you would at a nice high end steak house?  It is going to be the same in any industry. If you are buying a $48k property, you will get a different level of service than someone buying a $500k house.

Do you expect your dentist to do a good job on your one filling even though another customer is doing 4 and giving them more money? Do you expect your doctor to give you the same level of care even though they are earning less money from you? The answer is Yes, they are in the service industry and providing a service to their customers. If a realtor can't understand the service they are providing and only sees their client in $$$s then they are not useful. The people buying 50K investments now are the customers that are buying million dollar investment properties in 10 years. Maybe if the realtor provided a high level of service they would continue to be used. As it stands they only see the short term goal of a small commission and not the long picture, in which case they will never get to the long term bigger clients because they don't understand the value of the people that can get them there. 

 Yes I expect a different level of service from a doctor or dentist who are taking HMOs from ones at a very expensive concierge practice.

  

If I am paying someone minimum wage I do not expect the same kind of service as someone I am paying $350 an hour to.

Someone expecting phenominal expectations of service for paying someone minimum wage because in 10 years that person might pay them a lot of money for their services, has an unrealistic expectation for how the world works. You get what you pay for. 

If someone wants better service, pay for it.  I pay higher amounts to get better service or better products all the time. If I want a good lawyer, a good realtor, a good maid, a good doctor, a good employee...whatever it may be, the good ones simply cost more, and I dont expect them to discount their fees to me because I promise to pay them more 10 years down the road.

I am not a realtor so do not understand all of the relationships. I thought that part of the business of a realtor was building good relationships with your clients in hopes of having a customer base that keeps coming back and sends you other referrals? If you don't provide good service to them because they are not in a high enough purchasing bracket why would they refer you or come back to you for the next (possibly larger) deal?

 Relationship building is a part of almost any business...but a realtor, and any business has lines. No business works for free right? You wouldnt show up at your job and work for free.  You show up in exchange for a salary, and you likely wont take a job that pays you below what you customarily make right?  Your lawyer is not going to work for minimum wage because they want to build a relationship in hopes of a referral that will pay them their normal and customary fee. 

Most good agents simply just would not service properties at this price point. (Depending on the market). I would not service a property at this price point as I would lose money servicing the price point. If I were to do 30 transactions at this price point, I would be about $50 to $60k in the hole.   The agents who would service this price point in my market, would be part timers or bad agents. There will simply be a level of service difference at different price points because of who services them.  Trying to use the expectations of the service you get from top tier professionals onto the lowest people in that profession is just a recipe for frustration. 

Its like the people who get upset their order from the Burger King drive through is wrong, when if you have realistic expectations that yeah the person at Burger King serving me food is likely not going to be as good at their job as say Bryan Voltaggio or some celebrity chef.  

Like any profession, there are people great at their job who command higher fees for their work, and there are people that are not good trying to just scratch out a living and barely getting by. I dont expect the same level of service from the two.

@Russell Brazil   let me expound on this a tad as I work as a buyer in both realms high end and utra low value assets.

my brokers that feed us the low value assets simply send us an address that's it.. and then if we want it we tell them how much and they write the contract and do the transaction.. and since we only pay cash pretty easy.. buying low value assets and then having to work with financing too boot would be a non starter for most agents that work these and bring good deals.  simply not worth the effort. as you say time put in does not equate to any kind of profit for the agent.. this is why turn key exists at these price points.. the seller is selling their own deal and making 5 to 15k per door.. its worth their time .. and the marketing agents that sell this price point.. we know who they are .. all west coast they usually make around 5 to 6k per door.. but I can tell you all they really do is hand a name over and help a little with the escrow.. they are in CA the asset is in the mid west how much can they do.. other than they are good at webinars and marketing.

Now take your high end stuff like I Do in Charleston my full service broker does a ton for me there and I expect it.. as they make a commish selling to me and they get list backs on 500 to 2mil dollar properties from me.. and we do half a dozen or more a year.. plus my agents there are just very good.. one of them even gave me a construction loan  when I was tapped out at my bank... now that is a good agent.

My wife who sells real estate also is full service.. and her clients love her and she works ONLY on referral.  

I think there might be some misunderstandings about some of what I've said. Let me clarify some things:

1) I'm not expecting the real estate agent to find the homes for me. Rather, I would expect him to throw out some suggestions. (Hey, I saw this property and think it might be a fit for you, etc.) while I ALSO am looking for deals.

2) When I tell you the criteria I gave the agent, I am HUGELY summarizing. We spent nearly a half hour discussing what I'm looking for and I'm trying to condense that into a single post. I did give him specific zip codes, sizes, number of bedrooms, price range, etc.

3) I don't want the agent to decide the price. I gave him the exact price that I wanted to get it for, both if the seller paid closing costs and if they didn't. I was hoping for negotiation strategy from him. I don't know where to start an offer on a house to leave appropriate room for negotiation because I don't know how hard the other side will negotiate. I understand that the realtor doesn't either, but he's handled A LOT more than the zero negotiations that I have for real estate, and I would think has some idea based on neighborhood, square feet, price, time on the market, etc. to determine where we should start.

4) I understand that a realtor who deals in large homes might not give me the same attention because I have such a small deal. That's exactly why I came to him for a referral to an agent who handles deals of this size. He decided to take it on himself, so yes, I do expect to get full service from him. 

I'm just trying to understand the value added by the real estate agent since they make a decent chunk of change on these deals. If he's adding me to an automated listings system based on basic criteria, I can do that myself. If his only advice on negotiating is to just not throw out my final price as the first offer, that isn't telling me anything I don't already know. If we are standing in a property that we've planned to see for a week and he has no further information or insight beyond what's on the listing sheet, then he isn't bringing any new information to the table. If his job is just to guide me through the steps and make sure all the boxes get checked, I could just have my attorney do that.

I'm not trying to knock the job of realtors, I'm just trying to understand what they are bringing to the table.

And if he IS going to give me only partial service because it's a small deal, I circle back to the question of why I need him and why he's getting a commission on the deal if he isn't  bringing anything helpful to the table.

Okay....Let's put this in perspective, shall we?

How many of you rehabbers out there would go through the effort of doing a rehab project for a $,1440 profit at the end (that you had to share with a partner)?

That's what this Realtor stands to make on a $48K purchase.....and that is IF he gets a full 3% co-broke, and IF his broker doesn't take a cut.

Keep in mind, there is a 30-45 day transaction that the Realtor has to facilitate AFTER this property search and contract negotiations are complete.  People forget about that, and just think that once they have a contract accepted, it just magically closes on its own.  It doesn't.

So again, how much are you expecting that this person would do, and for how long before he has earned past his $1,440 paycheck for this transaction?

Now, I see some obvious issues. You and your Realtor friend didn't properly sit down and set expectations for your working relationship. He didn't share with you what his capabilities are, or the limitations of the MLS search criteria. The MLS search is not capable of searching for the kind of criteria that you are looking for (properties with tenants that pay $700+/mo). He would be doing well to just get results for properties that have a tenant in place. Equally, he cannot comment on areas being "good" as this is illegal.

However, he should be offering more insight into the negotiations aspect of your offer, as well as provide answers to questions surrounding different price points within an area (maybe some are co-ops instead of fee simple condos, maybe the HOA is higher, which makes the price lower, etc). That should be something he can get answers to if he doesn't already know.

I absolutely agree that if this agent was willing to take on this low of a project to help you out as a friend, then he owes you some basic duties as your representative.  However, I think you may be reaching a little beyond what is a reasonable expectation that he would apply the same level of effort and passion into searching for a good investment property for you as you would yourself, knowing exactly what you want.

To add on to what everyone else is saying, you may also be working with the wrong type of agent. Your friend probably on sells to homeowners not investors. If you want an investment agent you go to brokerages such as Jll, cushman cbre etc. Just because he is an agent, that doesn’t mean he actually deals in the types of properties you want. You don’t go to a real estate attorney to do m&a work so you don’t go to a average residential agent for your investment properties.

I’m with @john holdham. I don’t feel like it’s the realtors job to go through and analyze every property for you to see if it’s investment worthy. On the other hand he has to step up his customer service and be able to answer basic questions as to why one property might be priced lower.

There are very few realtors out there who will give you the kind of service you want in terms of finding deals.

Keep in mind the 90%+ of the business a realtor receives is from retail customers, not investors. These are people looking to spend the maximum amount they can borrow to buy a personal home to live. Not an investor who wants a deal that has the perfect combination of cash flow and appreciation.

@Lee Self   your missing the point  realtors no longer preview homes..  its YOUR job to preview them.

you do that buy looking at them on line..

who ever said get a commercial broker like Cushman or CBRE I almost fell out of my chair.. those boys make 48k a deal not sell 48k properties.. LOL..

no you need beginner agents or one's that are willing to represent you for these dollars.

there is a reason that wholesalers dominate the low end price points.. but you think realtors are over paid.

wholesaler will try to make as much off of you as they humanly can.. many times 10 times or more what an agent fee would be..

those price points are tough.. plane and simple so instead of trying to get the agent to fit your box all for the whopping 1,400 they stand to make plus they don't ake that they have to share with the house.

you do the leg work .. and they will write it up.. either that.. or you just contact the listing agent directly and do not bother an agent with what you want.. listing agent might give you a little more time as they are double ending it.. but don't waste your friend or realtors time.

Again, I don't want him to go through and analyze every property for me. Not by a long shot. Not at all. I expected him to throw out some ideas. "Hey, you might want to check out this neighborhood then, it's really up and coming" or "It's going to be hard to find a 2 bedroom at that price point in this neighborhood" or something along those lines.

I'm trying to say that I don't expect him to do EVERYTHING, I expect him to contribute SOMETHING. 

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