For this article I am going to set aside the usual “investor talk” and focus on another area of real estate: the Realtor business. Whether or not your main business model is that of generating Realtor commissions, odds are, if you are a licensed salesperson, you will be approached by people seeking help.
This is the exact situation I am in. I run an investment real estate company, but I am also licensed. My family, friends and social circle know this, so every now and then I am approached to see if I’d be willing to help in some fashion that is outside of my core business model. Being a buyer’s agent is not easy and is a time consuming process, especially if you are working with people that are very unsure of what they want. When it comes to family and friends though, that’s a whole different ballgame. I always try and help when it comes to this. Besides, bringing in some extra revenue while getting to hang out with friends at the same time? Seems like a good bargain to me!
The point of me sharing all that was to demonstrate that while you may be an investor first and foremost, you CAN still generate some extra revenue by acting as a traditional real estate agent. When you do take on the role of a buyer’s agent (meaning, you are helping a 3rd party find a house to purchase a house), you enter into the ultimate role of customer service and responsibility. We’re not talking about buying a candy bar at the checkout lane. This is a HOUSE.
(*NOTE: This article already assumes you have asked the important, “Are you prequalified with a bank? For how much? Do you have a preapproval letter?” round of questions.)
How to Purchase Real Estate With No (or Low) Money!
One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
The “Floodgate” Question You Should Always Ask
When you decide to work with someone as a buyer’s agent, there is one question that will really make your life much easier, but more importantly, it will allow you to help your customer to the maximum extent.
What time plan are you on?
“Time plan” refers to the estimated time period the buyer thinks they will live in the house. If they are a first time home buyer, statistics say they will only be there for five years give or take. Regardless of if they are a first time home buyer, you need to ask this question.
Why is it so important to ask?
The answer to the question will dictate what type of house they should be buying. If they know they plan on moving in a certain amount of time, you need to make sure they are able to sell when that point in time arrives.
Although this is pretty basic and there isn’t much to say about it, it still remains very important in regards to providing solid customer service. Let’s take a look at few examples.
“I’m on the 3-7 year time plan.”
In this situation, you need to…
- Find homes that are very desirable and pretty “universal”. Three bedrooms minimum is the perfect example. If they want a 2 bedroom, make sure they understand that when it comes time to sell, it’ll be much harder than a 3 bedroom.
- Explain the need to NOT get too artsy/”unique”. They should be making crazy updates or adding their own “spin” too much. Sure, they can add their own little preferences here or there, but if it is “too unique”, it is going to make the house harder to sell. Having a neon pink wall is going to turn-off the majority of buyers.
- Make sure they don’t over upgrade. Make sure they aren’t planning on putting in granite counter-tops if the neighborhood doesn’t justify it. While this will certainly make the house “easier” to sell, it will also require them to put a higher price on it if they want to get their money back out. Explain to them that just because they put “x amount into repairs”, it does NOT mean that they will automatically get “y amount in sales price”. This is a big point lots of buyers overlook.
- Consider the Schools. Property values will hold the better the school district is, so if they want to have extra comfort that their property value isn’t going to get hammered, you should point this out. This of course is no guarantee, if the market decides to crumble, there is only so much the school district can do.
“I’m on the 40 year time plan”
In this situation, you need to…
Sit back and enjoy. Make sure they get a fair price for the property, but because they plan on being there and having it paid off by the time they are ready to move on, this is their time to essentially get whatever they want.
If they want a house that they plan on rearranging a way that would make you scratch your head, then let them. If they want to paint unicorns and rainbows on the walls, then let them. No doubt doing these sort of things will make it hard to resale in 40 years, but at that point, they’ll own it free and clear and if they want/need to, they can just sell it quickly to an investor 🙂
What YOUR Thought Process Should Be
Treat your customers right who are on the 3-7 year plan, and odds are, they are going to be calling you saying, “Hey, we want to sell and buy our 40 year house”. Don’t just tell them to buy any house for the sake of collecting a commission. While being pretty darn unethical, it’s also bad business on your part. Get them into something that you know you will be able to easily sell when the time comes. You can make your life much less stressful by doing the planning upfront. While you may have to wait 3-7 years for your ‘overall’ plan to come to fruition, when it finally does come time to sell, you’ll be so glad you did.
A basic question no doubt, but hopefully as I’ve shown, the answer will dramatically impact how you must educate and assist your buyer. What about you? What other questions do you find useful to ask your buyers when acting as a buyer’s agent? Leave your comments below and let’s get a solid collection of questions to ask to ensure we offer our customers the best possible service.