Real Estate Agents — Are They Valuable To Investors?

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Real Estate Agents — Are They Valuable To Investors?

This is a discussion savored best as an observer. 🙂 Having been on just about every side there is in the industry, I can tell ya this. Put 10 agents in a room and you’ll get 11 answers to the question. Ditto with investors. Experience tells me that a reasonably worded survey given to investors on the subject wouldn’t look good for agents. Then again, ask a room full of agents about investors and you’ll discover what venting is all about. Thing is, when both sides’ complaints are objectively analyzed, they both make excellent points, and foolishly silly ones.

1. Investors, as a group, haven’t been impressed with agents. This is largely based on experience.

2. Agents pretty much think investors are perpetually high. This is also based on experience.

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Thing is, They’re Both Right, at Least Much of the Time.

The problem is shared. First off, mea culpa to my brothers ‘n sisters in the business. But most real estate agents couldn’t spell investment if you spotted them the ‘invest’. It’s for the best of reasons though. It’s not what they do, not anything close to either their training or experience. Yet some persist in learning a few quick formulas, some catch phrases, and convince others, if not themselves they know enough to be a part of the solution, not the problem. Much (most?) of the time they’re dealing with investors who’re merely a few chapters ahead of their agents in ‘the book’. This only exacerbates the problem. (Understatement of the year, maybe?)

Three Types of Real Estate Investors

I’ve learned, broadly speaking, there are three kinds of long term investors.

1. The beginner. They’ve read all the books and articles. Attended all the Real Estate Investing meetings. Made themselves spreadsheet blind. Maybe they’ve even been mentored by a solid veteran for awhile. They know every formula ever concocted since Moses’ son died. They know every single person who could possibly be involved in the acquisition of long term real estate investment property.

Except Mr. Murphy.

2. The veteran. Their experience includes lessons learned the hard way. They’ve been there, done that, and have the scars to prove it. Their success has been earned. They know what they’re doin’, and know when an agent is, shall we say, knowledge challenged. For many of these vets, real estate agents are to be seen and not heard. They’re only value is to do what they’re told, quickly, and without deviation. To the experienced investor, on their best days, most agents are merely a necessary evil.

3. The expert advisor based investor. They’ve found somebody they trust to advise them. It’s often a more experienced investor or a real estate agent. This investor could just as easily be a virgin investor as a grizzled veteran. It’s a personal preference, usually based upon their comfort zone.

#’s 2 and 3 differ mainly in approach. One’s a DIY type, while the other prefers to rely on expert advice. Or at least blend it into the mix. The fact that one doesn’t use an expert advisor and the other does, isn’t anywhere near a predictor of their ultimate track record. Frankly, the proof is in the pudding, right? I’ve met dozens of investors who’ve never used an advisor or at least not since their first investment. I’ve also met a ton of successful investors whose experience with ‘expert’ advisors has been dubious at best. Go figure.

Again — It’s Almost Always About Your Comfort Zone.

I’ll go out on a limb and confidently declare that all real estate investors wanna be as successful as possible. Whether they’re a rank beginner or the aforementioned grizzled vet, they’ve chosen their M.Os based upon what makes them most comfy. Some end up with an expert at some point, lookin’ to take their game up a notch or three. Some begin with one, and keep it that way. Others go their entire investment lives doin’ almost everything themselves.

In the end, what matters is their bottom line. Did it work out to their satisfaction?

Yes? Then they did it the ‘right’ way. ‘Nuff said.

Photo: http://www.freedigitalphotos.net/

About Author

Jeff Brown

Licensed since 1969, broker/owner since 1977. Extensively trained and experienced in tax deferred exchanges, and long term retirement planning.

20 Comments

  1. And I thought I was the only one that thought agents were worthless, glad I am in the majority not minority. I don’t know what to think about them anymore. I use to think all I needed them for was MLS, now I’m thinking that is not true everyone is on it. Go were others have not is my new motto, forget the RE license plan.

    • Jeff Brown

      Hey Terry — They’re worthless the same way a dentist is worthless when fixing your torn ACL. 🙂 Ask yourself what your expectations were. Did you really think Century/21 Larry was gonna be the answer to your needs?

      The principle that applies here, in my view, is the right tool for the right job.

      • My only expectation of the last three I dealt with was they do their job. I always go by the house first to not waste their time, and I can even see in the windows. When I’d call them I’d tell them I been by the house and would like to see inside, and ask politely if they would bring me three comps. I know this is a less than 5 min task, why they don’t have an electronic link or copies upon request in their car is beyond me. I asked where the comps were and they said they forgot. Let’s see, if I treated my customers at my job or in my business that way I’d be fired or fail! The last one even told me if I didn’t like the fact that he forgot to get another agent. He was a real jerk and even said some choice four letter words to me in front of my son and his wife. I was going report him to REC but they said my complaint would go public and I may get dragged into court. Forget that!

        Let’s see what else, oh yeah. Last year after waiting for 2 years for several agents to sell my house I finally sold it within two months when I went to a flat fee service for $300 that listed it on MLS. Not paying selling agents commission allowed me to drop the sales price on my house $6K.

        Need I say more? LOL!!

  2. Ok Jeff, this one made me chuckle “most real estate agents couldn’t spell investment if you spotted them the ‘invest'” LOL, that was pretty accurate. I do my best to invest some time with the “right ones” and educate them on how the inside of our business works. That seems to make everyones expectations much better. However I agree 100% with your above comment! Most don’t have a clue, but when you find one you like, train them to work with your style and take it one deal at a time. Nice article!

    • Question, seems to me the need for agents is diminishing, if I can pay a flat fee service a small fraction of what I pay an agent, why would I as a REI have them in my business model? Glen in you case for flips? I think if I remember right you have to one to sell, one to acquisition, the fee for the local monopoly ranges from 1-2K/yr how are you paying their cost?

      • Jeff Brown

        Terry — Can’t tell ya how many times in my nearly 44 years in the business that I’ve heard how brokerages are on their way out, completely unnecessary. This is usually concurrent with a market in which a dead cat could sell a property, like we have now. Thing is, survey after survey since the late 1960s have conclusively demonstrated that the net proceeds from a sale using an agent are generally higher, even with the normal sales costs. The history of the public’s behavior is its own proof though. Not only has the industry grown, but despite predictions goin’ back to when LBJ was in office, the public has consistently opted to pay their broker to sell property, and have that broker find them property. They’ve done this at a decade by decade consistency that is beyond impressive as a trend. In point of fact, a far greater percentage of property owners now opt for brokerage services at traditional rates, than when I began back in 1969.

        Opinions do vary though. 🙂

        • Interesting stuff, back in the day we sell property w/o agents, no biggie! Even today poor people do it out in the country around here, and their own inspections. IMHO the only thing an agent does and the reason people pay their ridiculous commissions is it gives the a sense of security. I use to think it was scary going to the closing table without one until I seen the title/lawyer co handles everything and it’s not that hard to understand or write a sales contract.

          All these agents do is showing’s we can do ourselves for their price, most have internet marketing links that do most of work for them, the same links the flat services provide.

          I hope sites like Zillo continue to get sponsors so we don’t need the MLS anymore, for comps, etc…..I hope the internet kills the whole MLS monopoly, something we did not have back in the day. 🙂

        • Terry,Where do you think Zillow gets the information? Through the MLS WE do not need that. Then Zillow will be out of business. YA!! They cannot get all that info from public records.

        • I am hoping more sites collect sales history, a know some flat fee/FSBOs do. I’m finding Zestimate can be on sometimes and way off other times depending on where you live, since some county records lag more than others. I think Zillo draws off county records too, here you can get the country appraisal online, but the register of deeds does not record sales price but others do. Anyone can write a simple program to get into both sites with a legal description, you don’t need the MLS in some counties.

          I been writing all these bad things about agents and ironically meet a good broker/REI at the sheriff courthouse auction today. He calls the owner being foreclosed on sells their house and buys their redemption rights in some cases with equity. He knew his stuff and taught me few things, he has been going down there for 20 years. So I got him bird doggin and mentoring me. Got to talk to some attorney’s too. Seems like a much better place then the MLS to hang out 🙂

  3. Jeff –

    I can totally relate to this post. It is both funny and true at the same time. Most of the time, these two groups of people think the other half is crazy or worse.

    When Glenn said that he spent a great deal of time managing expectations, that is exactly what we did with both buyers and Realtors during the 17 years I owned and operated a home inspection company.

    Experienced, professional agents were rarely the problem. It was those that couldn’t tell their buyers, “they don’t report on cosmetics; they are here to report on the big things like the mechanicals, and other things that affect the safety and hability of the property” so we won’t be asking for those things.

    Great post Jeff.
    Sharon

  4. Who do you call when you need to sell??? Your FSBO sign, a ugly yellow sign sure,that works. When you go to a doctor do you research credentials? Did you hear from a friend,get a referral. Realize- just because you are a doctor does not mean you graduated at the top of your class. There are D- doctors that just made the grade. Lawyer’s are the same there are D- lawyers. In every profession there are good and bad. DO YOUR RESEARCH! Sell your property and deal with the CRAZY buyer. So many things can happen. You can get the short end of the stick. A GOOD REALTOR is very beneficial. They know deals that YOU the public will not hear and have no chance to even get in on it. I have several investor clients and the have no problem buying through our team. YES a team. We have pocket listings. Look that one up. They never hit the MLS and have equity built in. O wait we can not even spell,let alone put together a deal that has PROFIT all over it. Get a GOOD REALTOR,see what a relief it is. When you cash your check,remember who helped you with your endeavor. You make money when you spend,you get paid when you sell. Simple not easy. From a 12 year and still in business Realtor. Yes I have investments.

    • Jeff Brown

      There are many investors who assume they’re the smartest person in the room by default. To those folks there’s no such thing as a ‘good’ RE broker/agent. I’ve spoken to a few who couldn’t hide their surprise when hearing possibilities and strategies completely foreign to them. As a rule, I figure a way to politely avoid having them as clients. Not worth the trouble.

  5. Agreed. I am have an excellent buyers agent that works quickly, diligently, and puts my interest at the forefront every day. She has relationships and gets things done quickly. She works hard to make the deal work every single time, every day. I appreciate that and feel that she helps me make the deal, not hinder it. That is value. We have also worked with similarly minded sellers agents. These are smooth, happy transactions.

    Conversely, seems many agents are the opposite. Just yesterday I got word back that the seller’s agent was just verifying that we actually wanted to offer the terms we had since “the seller won’t make any money”, “the first buyers were so difficult”, and “he may de-list the property out of frustration”. I feel for the guy, but none of that is *my* problem. Now please present my offer.

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