Should you trust a broker.

10 Replies

I was told by an experienced investor to never work with a broker that is in the real estate investing game because they can or will undercut you when your attempting to buy rental property. In other words, send in a straw buyer to out bid you. Does anyone agree?

Of course it's a possibility that that can happen but I think it's a stretch to say never work with one because of it. 

Thanks for the response.

It does the broker no good to undercut their investor clients.  They will quickly get a reputation and won't have any business amongst investors.  A long term relationship outweighs the short tem gain. Get to know a reputable broker and learn to trust them.  

I have an excellent relationship with my broker and have received some awesome deals as a result of the relationship.  As an investor herself, my broker understands what I'm after.  She has often given me first option on a property that fits my profile before moving on it herself.

I'm sure not every broker operates this way, but there are plenty of ethical people in the business.  Go build some bridges and make some deals!

I'm not exactly sure what sort of scenario that investor was thinking of, but to me it sounds like that would be a pretty inefficient way for a broker to do business. Most brokers make money off of actually helping clients buy/sell property. Very few of them would be looking to purchase every property that came along. And if they did want to do that, why would they even be showing you the property? Your investor may be being a wee bit paranoid, just sayin...

Truth be told, if you're in it for the long haul, at some point you will have to work with a broker/agent. Maybe it won't be until you close on your first multi-million dollar deal but they'll either be on your end if not definitely sitting on the other side of the closing table. At times they can come in handy. 

Every job title / career field has a few shady individuals, white & blue collar industries alike. Vet them, perform your due diligence, dot your i's and cross your t's. Follow your gut feeling and of course if it sounds too good to be true... you know the rest.

Kudos,

Mary 

This is a good question indeed.  Answer - depends on hos you look at it:

If you buy SFRs and your broker is @Mark Ferguson then hell yes - he will undercut you every day of the week and twice on Sunday. In fact, he takes the first look at the MLS and picks out the good ones for himself first - that's his business model and it works for him.

Mark, however, has integrity and as such he is not likely to take your business in the first place. Unfortunately for you, Mark likely happens to be one of the most knowledgeable guys in his marketplace relative to SFR, so it would be nice for you to have him on your team. Alas - find someone who is not as good.

Or - go play in the big leagues.  When looking at large projects, brokers are usually all about commission checks - those are some big 6 figure checks, so I don't blame them.

Finally, I've sold duplexes two doors down from the exact similar ones that I own to my clients.  Had I wanted to buy more of the same for myself, I could have.  But, I have moved on to bigger things.  In a sense, these were good enough for me at one time, but they no longer are.  However, they are perfect for my clients who are in a different (earlier) season in their career.

There are 2 sides to this coin.  Be smart and you'll benefit from the broker's knowledge and yet get plenty good enough deals...

@Ben Leybovich  is right on.  I have had many investors come to me looking for the same deals I talk about on my blog. I tell them straight up I'm going to buy the best ones myself.  Depending on the deal they are looking for many still work with someone on my team and others go to agents that don't invest.  

I have still passed on some great deals that I could not buy because they were y own listings to investors. 

Mark Ferguson, Real Estate Agent in CO (#IA40029358)

The reason why I posted this is because I recently met a realtor who told me he has many properties and would be willing to find me property and manage them for me. However the statement from the professional real estate investor just burned in my brain making me paranoid. (afraid this broker will run circles around me). You know what, I'm going to take him to lunch and check him out. I have been reading books and studying bigger pockets blogs, forums, podcasts and such. I'm trying to learn enough so that I want be a total dummy.  Anyways, thanks for sharing.

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That is true for me to take responsibility. For instance, to ask for references from other clients he's worked with. I know how to find out who really owns a particular property. And know if a property is a good deal. If I don't understand the numbers, I can pass the information to someone who does. I just don't want to buy a property. I want to buy it right. Thanks for sharing John.