In the real estate investing community, there are a lot of mixed emotions about realtors.
We all have different levels of experience with these folks, and there are differing options on the impact (for better or for worse) a realtor can have on one’s real estate investing endeavors.
Some investors are raving fans of the work that realtors do, and others think of them as nothing more than unnecessary “middle men” who stand by and wait for their cut after each deal is done.
Personally, I understand where both of these perspectives are coming from. In my investing experience, I’ve found that there are certain situations when realtors are highly beneficial and others where they just aren’t necessary.
The truth is you can’t lump all realtors into one category of “worthless” or “worthwhile.” It’s not a black and white issue, and there are many different variables that need to be measured in order to determine whether it makes sense for you to put one of these folks to work in your business.
Some realtors are amazing at what they do. They understand how to sell properties (both in good times and in bad), and they know how to find new investment opportunities that you most likely would never find on your own. These people can offer solid advice based on their years of experience in your market, and they’ve learned all the right ways to make themselves indispensable by bringing incredible value to the table. THESE are the kinds of realtors you want to find and retain for your business.
Most markets also have their share of realtors who have no idea what’s going on. It might be because they’re new to the business, or it’s also possible that they’ve been around too long and have failed to change with the times. Either way, a lousy realtor can waste a lot of your time and money, so if you’re looking to enlist the services of one in your area, it important to know what a “bad apple” looks like so you can avoid bringing one into your business.
Do you know how to tell which realtors will bring the right ingredients to your business? A lot of them know how to “talk the talk,” but can they really deliver what you’re looking for? If you aren’t sure how to separate the wheat from the chaff, I’d like to offer you 5 simple questions you can ask when you’re interviewing realtors. With any luck, these will help you determine when you’ve found one who will work seamlessly with your operation and leave your business better off than when they found it.
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5 Simple Questions Every Realtor Should Be Able to Answer
1. Why do you want to be my realtor?
It’s a pretty simple question, but you might be surprised at the kinds of answers you’ll get on this. Some people will respond with the completely unhelpful and overly generic, canned response:
“Because I want you to help you find the home of your dreams!”
And others will just be honest about it:
“Because I’m looking for new business, I understand what you need and I think we can help each other.”
(Word to the wise: If someone claims to know what you need, they should also be able to spell it out for you with some clarity.)
Now, I’m not here to tell you that any particular answer is right or wrong, but I do think the answers you get from this question will tell you very quickly whether you’re talking to someone who knows how to be honest with you (even when the truth hurts) OR a someone who is a people-pleaser (and has no idea how to contribute anything new to your thought process).
Beware of anyone who feeds you a sugar-coated answer. If someone can’t be real with you in this simple conversation, will they be able to challenge your thinking and help you grow as an investor?
When I think about the best realtors I’ve ever worked with, half of the value they brought to the table was purely in their honesty.
If my asking price is too high, I want to know!
If I’m trying to buy a property in a terrible location, I want to know about that too!
If I’m trying to do something that doesn’t make sense, and if I legitimately need re-direction, constructive criticism or sage advice, I want someone on my side who is both experienced enough and honest enough to give it to me straight. It does me absolutely no good to build a team of “Yes Men” who are going to tell me what I want to hear.
2. This past year, how many properties did you sell as the seller’s agent?
Are you looking for a realtor because you need to get a property sold? If so, you may want to know how often this person has actually sold their own listings.
Anybody can throw a listing on the internet and wait for another agent to swoop in with a buyer, but this is a very limited marketing strategy. When a realtor creates a good listing AND finds the buyer on their own accord (and they’ve done it on multiple occasions), this is a strong indication that they’re probably doing something right.
Of course, there are many variables at work here, and the answer to this question isn’t entirely conclusive, but an agent’s ability to drum up new business and make things happen is something that can help you decide whether you’re talking to the right realtor for your situation.
3. This past year – how many transactions did you get involved with as the buyer’s agent?
Over the past few years, my primary use for realtors has not been to sell properties; I’ve been using them to help me find new buying opportunities.
If you’re in “acquisition mode” and you’re looking to find the best real estate deals in your area, it’s important to know if your realtor is skilled at identifying good investment opportunities (i.e. not just any property, but properties that are actually worth buying). This kind of question can help tell the story of whether a realtor knows how to bring value to the table in the form of finding great deals.
One of the best realtors I’ve ever worked with is extremely gifted at finding new investment opportunities. He is able to explain his opinion and rationale as to why a deal is worth my consideration and he sends me multiple listings (and some deals that are unlisted) per week and when I ask him to, he bombards me with value and that’s why I love the guy. He is hungry for business, and he knows how to deliver exactly what people in my position want.
4. What percentage of your clients are investors vs. owner-occupants?
This question is important because it will give you an idea for how a realtor’s thought process works.
Most investors (“absentee-owners”) have very different reasons for buying real estate than those who intend to live in the property they’re buying (“owner-occupants”). If you’re approaching this business like an investor, it’s important for your realtor to understand an investor’s motivations because when they understand how an investor thinks, they can cater to your needs much more effectively.
I’ll give you a couple examples from my own life…
When my wife and I bought our house, there were some very specific things we needed to see in the house we bought:
- A nice kitchen
- Cathedral ceilings
- A washer & dryer on the main floor
- At least 3 bedrooms & 2 bathrooms
- A big backyard
- An awesome neighborhood
- The best school district around
We were pretty particular in the kinds of “luxuries” we wanted to live with. They made absolutely no sense from an “income generation” standpoint (because they didn’t make money; they cost money!). Nevertheless, we wanted the best possible living experience we could afford without breaking the bank.
This is how owner-occupants think. In this situation, we were best served by working with a realtor who thought like we did. Since our realtor understood our priorities (and was accustomed to working with people in our same situation), it was very easy for them to understand serve us effectively.
When I bought my first duplex, there were some very specific things I needed to see in the property I bought:
- High Rental Revenue
- Historical Profitability
- Low Vacancy Rates
- Low Property Taxes
- Minimal Improvements Needed
- OR a significantly lower purchase price
- Tenant-Paid Utilities
- Low Ongoing Holding Costs
This is how investors think. Their primary concern isn’t about having an award-winning floor plan or state-of-the-art kitchen appliances. Investors are looking for properties that are “cash cows” (to put it bluntly). Their priorities are completely different from an owner-occupant and as such, they need a realtor who understands their needs and knows how to bring them new investment opportunities that will serve the right purpose.
5. What can you do for me that I won’t find anywhere else?
With all the realtors I come in contact with, it can get difficult to understand what makes one better than another.
Generally speaking, they’re all in business to do the same basic thing, right?
Is there any unique value proposition that one realtor can offer over the other?
Are there any “special skills” you should be looking for, or does it ultimately boil down to which realtors you like the most?
To answer this, you need to know what’s missing in your business. Think about it: Why are you looking for a realtor’s help in the first place? What’s holding you back from just doing this whole thing yourself?
For example, some investors might struggle with one (or more) of the following things…
- They aren’t good at getting properties sold.
- They need help facilitating the closing process.
- They aren’t good at marketing and advertising.
- They don’t know how to find motivated sellers.
- They aren’t good with communication between various parties.
- They don’t have any connections with title companies, attorneys, contractors, etc.
It’s okay to admit it: We all have certain things we’re just not good at — but have you taken the time to figure out what you really need? Is there some kind of specific solution you’re looking for? If you don’t already have these issues nailed down, it’s worth your time to think this through. Once you know what’s missing, you’ll know exactly when you’ve heard the “right answer” to this question.
One Size Doesn’t Fit All
From my years in the business, I’ve found that different realtors are great at different things. In the same way that you aren’t great at everything, you shouldn’t expect one realtor to be the solution to all of life’s problems.
If you haven’t already figured it out, the best thing you can do (before you ask these questions) is to understand what you need. Once you’ve identified these areas in painstaking detail, finding the right person will be easier than you think!
Your turn to weigh in:
- What has your experience with realtors been?
- Have you found the perfect fit?
- What questions would you add to my list?
Leave a comment, and let’s discuss!