Why Investors need Realtors and Vice Versa

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It often appears that real estate investors and Realtors are at odds with each other when it comes to the value and quality of services that are provided in real estate transactions.  Can each of these groups conduct their businesses without the other?  Sure, but can they be more successful working together?  We think they can!

BiggerPockets is as diverse a group as we have ever seen that is tied together by a single element, Real Estate.  We have been members for over a year now and have seen a lot of very strong opinions out there when it comes to what type of real estate investment is the best, how to structure deals, how to finance your investment and the list goes on and on!  We think the biggest issues and the “liveliest” discussions are about the investor / real estate agent relationship.  There seems to be a lot of mistrust, lack of respect and lack of understanding that is expressed in the forum discussions involving Realtors and investors.  Investors often think that Realtors (I will use this term since it is easier to use and a large share of real estate agents are also Realtors) are not worth the expense, do not have the skills and work ethic to be of much benefit and do not understand real estate investing. Many Realtors do not like investors making (what the Realtor considers) low ball offers, feel that that investors take undo advantage of buyers / sellers / lenders, etc. and that as experts in real estate sales, it is in the investors best interest to be buying and selling through them.

As real estate investors as well as a real estate broker and business owners for about 30 years now, we can see and relate to BP members on both sides of the fence.  We would like to share a few of our thoughts on the subject.

How Investors Should Best Utilize Realtors

Investors: communicate not only your needs, but also (briefly) why you have the requirements, or why your offer is $ XX.  Check out several Realtors or get recommendations from other investors. There are great Realtors out there that will make you money. We work with Realtors nationwide in listing short sale properties. Many are good, a few will not be working with us again and some of them are exceptional and save us lots of time and really improve our bottom line. When we market to Realtors, we talk about letting them do what they do best — list, market and sell real estate, and let us work with the lenders and negotiate our short sale deals.

Well guess what?

That same logic works the other way!  Investors, spend your time and resources doing what you do best…….finding, analyzing, rehabbing, etc. your deals and let a good Realtor market and sell them.

A Little Insight about Investors for the Realtors

Realtors, not all investors are the devil! Sure, there are lots of “investors” that take an on-line course from some guru or read a couple of books and give the true investor a bad name. Investors are repeat buyers and sellers. They look at real estate as an investment and leave out the emotion that causes many retail buyers and sellers to drive you nuts. When talking to a new Realtor about negotiating short sales, we often hear the lecture about fiduciary responsibility and the Realtor’s Code of Ethics, implying that as investors we are not ethical and do not care about what is good for the seller. From our point of view, even as Realtors, we don’t need a code of ethics to conduct our business in an ethical way! And sure, we are investing to make a profit, but still, avoiding a foreclosure for the seller comes before profit. Yep….…we’ve done them for nothing if all other exit strategies fail! Too many Realtors hide behind the Code of Ethics. Just like a church…………..NAR has its share of sinners!

We’ve said it before and we’ll say it again. In any group of people — Realtors, investors, attorneys, etc., you will find competent, ethical, hard working (these three equate to “successful”) professionals that are well worth their fees. There are also the ones that everyone complains about. They don’t know what they are doing, a bit on the “shady” side and spend more time telling others how good they are or what they claim to have done rather than actually producing results. Keep an open mind and work with the good ones. It will save you time and money and as an added benefit, you may learn something new!

About Author

Bill and Jackie Patterson are Nationwide Short Sale Investors. Both licensed Realtors, they have an eclectic background including development, construction, apartments, and restaurants since 1980.

11 Comments

  1. Yes it works both ways. Many pretenders on both sides of the fence.

    The brokers want to work with capable investors who want a great deal but are REALISTIC to what solds are selling for.

    If the investor is looking for a 40,000 house and one sold all year long they are searching for a needle in a haystack.

    That agent will get a 1,200 commission minus brokerage fees for looking all year long for the property.Meanwhile when the investor lands the deal of the century if they get lucky their margin will make it worth while.

    So on each side you have to analyze your business and the probability of the event occurring which will get you to a payday.I know investors 1 year later still looking for that mega deal and haven’t found it.

    That’s great for them but I won’t waste time chasing a pipe dream with low returns running a brokerage that has monthly bills regardless.

    So people need to be honest about the funds they have to invest and have a conversation with a broker/agent about expectations upfront.Then once agreeing you can form a partnership working together moving forward that benefits you both. If you don’t spell things out in the beginning then the blame game starts.

  2. I found this article very interesting, and as a Realtor, who works with many investors (successfully), I want to provide a little insight regarding short sales in Nevada. I can’t speak about any other state, as I’m not licensed anywhere else.

    As a Realtor, the only person allowed to negotiate a short sale is the listing agent or another licensed real estate agent in the same office. Anyone else must be licensed to do loan modifications (which is what a short sale is considered) with the Mortgage Lending Division of Nevada. This falls under NRS Statute 645F. I’m happy to provide anyone interested with the specific law and paperwork outlining all of the above.

    I have gotten too many phone calls from investors offering their services to negotiate a short sale listing that they will give me. I’m very happy to work with investors, but not at the expense of my license or my reputation. I hope this helps to bridge the gap as to why some informed Realtors just say no.

  3. Yes, it is so true that investors do get beaten up by realtors, but at the end of the day, investors are business people and have to look for the best deals and get them at the best price. No seller has to say yes to an investor>

    And yes, it is hard for a real estate salesperson to take in a really low offer, but that is all it is, an offer and the start of negotiation.

    Essentially it is no different than trying to get the best price on a car you are buying.

    • Bill Patterson on

      Kaye,
      We also make it easy on the Realtor that submits all of our offers. She does this for other investors that have different criteria. It works well for her since a property that won’t work for one of her clients may be a good prospect for another.
      Bill

  4. Bill Patterson on

    Dustin,
    It sometimes works out that you find good deals from friends, relatives and other networking, but I still would not discount a good Realtor (especially for the re-sale). I still believe that if you keep looking, you can find an agent that will provide good service and increase your bottom line.
    Bill

  5. Bill Patterson on

    Joel,
    I understand your point, but what many agents see as a “mega deal” doesn’t end up that way. I guess it depends on what degree of rehab that you feel the property needs to meet your standards. Then (at least in our case on a rehab and re-sale) the comps don’t lie. We would have the best house competitively, but if a 3 bedroom, 2 bath ranch sells in the$130,000 range , that is what we need to look at as an after rehab value. Those same comps will be used by the appraiser when the buyer is seeking his financing.
    I also don’t think that a $25,000 profit for the work involved and the risk of selling the property would be a mega deal! Many of the properties we offer on are in rough shape, need major updating, etc. We don’t often go for the paint and carpet deals because of the competition.
    Bill

  6. Thanks Bill.

    Just like an investor a broker/agent needs to define their business plan and profit projections.

    If a broker finds a property for a buyer for 40,000 and makes 1,200 on the buy and then on the sale at 100,000 makes 3,000 then in a 4 month span for the broker they have made 4,200 in commission based on a 3% commission. If they double end then the money increases.

    I am counting 4 months as time to get property under contract and close and the rehab and sell and close. Many investors are long term hold and not flippers.So in that case the broker would only make 1,200.

    I am just writing this to explain why investors buying small properties many times say ” I can’t get a broker/agent to do what I want them to do”.The investor feels for the payout the broker/agent should do XYZ .

    It’s not that the broker/agent is lazy it depends on how hungry the broker/agent is to how much they will work for a tiny fee.This is why many of these guru’s teach to find a new agent and shotgun offers all over God’s creation and hope to get lucky.

    I agree that 25,000 is not a mega deal or profit margin. I guess my point as a broker is I would have to close 100 transactions at 1,200 commission to make 120,000 a year.For an investor they can flip 4 houses and reach the same profit margin in a year.

    Whether an investor or a broker/agent you want to increase profit per transaction to work less and make more.

  7. Bill Patterson on

    I agree that 100 sides for the $120,000 is a lot of closings. Still, if as a buyer’s broker, I had investors that purchased 100 $40,000 properties a year, I’d be happy. Some would be bound to be my listings and I sure should have a system down and closings should be easier than as is the norm. Also, if as an investor, I had an agent that brought me many good deals per year….I’d make sure they were compensated well for making me $$! If not on the resale, there would be some other way for a buy and hold. Win, win works well in a long term relationship.
    Bill

  8. I think in general investors give Realtors a bad rap and vice versa. If you form a good mutually beneficial relationship where both parties can put ego aside it can be great!

    I see that too many investors think they know it all from one perspective while many Realtors act the same way from an opposite end of it.

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