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Investors: Think Real Estate Agents are Useless for Finding Great Deals? Consider THIS.

David Greene
10 min read
Investors: Think Real Estate Agents are Useless for Finding Great Deals? Consider THIS.

It’s a controversial issue when it comes to real estate agents around here. One side says agents are lazy, corrupt, and useless. They just want to send you a few emails, show a house or two, write up an offer, and collect their commission.

On the flip side, I hear it all from the agents, too. They complain that investors are way too picky, too lazy, want the world but don’t want to pay for it. They also complain investors have no problem wasting their time or cutting them out of the deal. Investors have a bad reputation to most agents.

So who’s right?

For a long time, I sided with the investors. Not surprisingly — because I was one. I was constantly frustrated with real estate agents looking for deals for me. Then when they did send me deals, they clearly didn’t meet my parameters. When I asked how much a property would cash flow, it was immediately clear they had no clue what that even meant. See, I didn’t understand much of what a real estate agent goes through, and I didn’t understand their training. I didn’t know what they were conditioned to think, look for, or see when they looked at the same houses I looked at. Shoot, honestly, I didn’t even what their job was. I assumed they were sending me crap because they didn’t value me as a customer and must not want my money.

Man. I could have written a book with all the things I didn’t know.

Now I’m an agent myself. However, I’m still an investor. This gives me a unique perspective. I can see both sides of the coin. I know what it’s like to be frustrated by an agent who isn’t providing me much value, and I also know what it’s like to be jerked around by clients who have no respect for me or my time and are perfectly fine treating me like dirt.

And most importantly, I can finally see the playing field from a vantage point that shows me everything.

This gives me an advantage over other investors. And guess what? I’m about to share this advantage with you, so YOU can take advantage of how to develop a better relationship with your buyer’s agents and start finding more success in your quest for income property and flips. I wish I had someone like me back when I was trying to figure all this stuff out. This post sure would have been a whole lot less embarrassing to write! Haha.

cash-on-cash-return-real-estate

What It’s Like to Be an Investor

As an investor, it’s your job to find the very best deal you can. Oftentimes (and especially if you are inexperienced or have a full time job), this is done through having an agent find you the deals and negotiate them for you. This is how I have found the majority of my deals, and I’m a big advocate of this system. For the last seven years, I’ve been a full-time police officer and I’ve worked between 70-100 hours a week. I just didn’t have the time to be looking for deals while I was eating donuts, directing traffic, getting shot at, and saving cats from trees. At least not the home run-type deals we usually see people bragging about. Those are the best of the best. I wasn’t going to be hitting many home runs; I had to settle for singles and doubles (but I learned how to steal bases, draw walks, and advance on sacrifice flies — that’s what you gotta do when you’re the little man, and I’ll teach you all about how to do that stuff later).

Related: Why You Should Stop Looking for an “Investor-Friendly” Real Estate Agent

Enter the real estate agent.

While I was busy at work, making and saving money, I had a small network of agents that would send me deals that fit my criteria. I would evaluate the deals, have my agent write offers on the ones I liked, and try to close on the ones whose offers were accepted. Now, the frustrating part was, I felt like:

  1. My agent was sending me a lot of deals that didn’t meet my criteria, and
  2. My agent wasn’t working hard enough to find me deals at all.

This led to a subtle and inner resentment towards the agents who I felt were making money from me but not doing much to earn it. They were a necessary evil in my opinion, and I begrudgingly continued to use them.

Many of you can probably relate.

While I was smart to use agents as a resource to find me deals, I was foolish to view them as someone working for me. Subconsciously, I saw them as an employee. And I was not satisfied with their level of service.

What It’s Like to Be an Agent

As an agent, it’s my job to find my clients a house that meets their criteria and assist them with the formalities of purchasing it. In a perfect world, there would be a line of people waiting for an agent to help them, and when it was my turn in the rotation, those clients would meet with me and we would discuss their needs. This, however, is not how the real world works. In the real world, I have to not only provide this service, I have to go out and actually find my own clients.

Imagine being a server in a restaurant. Except not only do you have to help your customers with the menu, recommend food and drinks, communicate their order with the kitchen, and facilitate the food being brought to the table in a timely fashion — but you also have to do all this while actively looking for new customers walking around the streets near the restaurant where you work.

Oh, and not only that, but the restaurant doesn’t pay you. Instead, you pay the restaurant 30% of everything you make for the privilege of bringing them business. You are also responsible for all your own advertising costs and the labor costs you have to pay the bus boys, hostesses, cooks, and bartenders (can you tell I was a waiter at one point as well?).

THIS, my friends, is how real estate works for agents.

They have to find their own clients.

They have to pay their brokers a large part of their commission for oftentimes not much help or value.

They have to do all the work themselves or pay someone else to help with it.

Oh, and that commission you’re paying them? If you’re a buyer, you’re likely not paying them at all. The seller of the property is paying them, not you. And do you think they get to negotiate their cut of the pie? Nope. That is predetermined before they ever bring you the property. And let me tell you, people are getting more and more stingy about the commission they pay the listing agent. This, in turn, means the listing agents pay a smaller and smaller commission to the buyer’s agents. Which means your agent, the one you’re not actually paying, is making less and less money on the deals.

And we haven’t even gotten to the worst part yet.

These buyer’s agents have to do their job of looking for a property for you, while at the same time looking for more business for themselves and also juggling whatever issues they have in their personal lives. It’s not easy. Now, considering this, you would think most clients would be understanding. That’s rarely the case.

Clients want their phone calls answered immediately. Their texts responded to right away. They send addresses and pictures they want checked out right that minute, oftentimes just out of curiosity — not because they actually want to make an offer on the house.

I could go on and on. The important point to take from this is, agents get jerked around. And underneath it all, many, if not most buyers they come across, won’t actually pull the trigger and buy something. The buyers won’t feel bad about this either.

The Breakdown in Communication

What we have here is a failure to communicate. Investors treat their agents like employees they don’t have to pay. Agents. in return, have learned to be skeptical, cynical, and defensive. They turn off their effort at the first sign the buyer is a flake.

Both sides end up frustrated, and things usually fizzle out. This ensures both sides lose and move on to new relationships that start the same cycle.

I would like to share some insight on how to change that. If you’re an investor, a good agent is the lifeblood of your business. Any successful investor will tell you that finding deals is the most important part. All the other aspects can be worked out, but if you’re not finding deals, you’re not making money.

One of the single most important aspects to success is learning how to make sure all parties succeed, not just you. The people who figure this out sooner rather than later go on to do big things. The ones who can’t quite get it usually spend their time frustrated, discouraged, and disengaged.

wholesaling-market

The Necessary Paradigm Shift

Allow me to propose a different way of thinking. Rather than looking at your real estate agent like an employee that you “hired” or someone who works for you, start looking at them like a partner. It’s a paradigm shift that will no doubt lead to more success for you in your investing business. Honestly, it’s a more accurate way of looking at the relationship anyway. You’re not paying your agent for the work they do for you. Heck, if you’re the buyer, you’re probably not paying them at all. In all honesty, both the buyer’s agent and the seller’s agent are both working for the seller to find them a buyer that is willing and able to purchase the property. Your agent just happens to be responsible for representing your interests in this transaction, while the listing agent represents the sellers.

It’s important to understand this because you treat a partner much differently than you treat an employee. The expectations are different. With an employee, you expect them to do work for you whenever you ask because you are paying them. With a partner, work is split up evenly depending on the responsibility each partner bears.

This is all obvious. You guys are smart. You already know all this.

But think about it — your agent needs you to keep your word that you will buy a house if it meets your criteria. You need your agent to keep their word they will find you a house that meets your criteria. Both of you lose if both of you don’t keep your end of the bargain. Both of you win if both of you keep up your own end. But if one of you does and one of you doesn’t, you both still lose.

This is a partnership. Not an employer/employee relationship. You need each other. I need my agent to give a crap that I make money. He/she needs to know that I give a crap about them making money. Let me give you some examples of how things started working out for me once I figured out this little secret.

Real World Examples From the Life of David

I’ve mentioned before that if I tell an agent I will buy a house, I buy the house, even if I later wish I didn’t have to. Sometimes something better comes along; sometimes I want to use the money for something else. Doesn’t matter. If I give my word, I do it. Period.

Related: The New Investor’s Guide to Hiring a Real Estate Agent

People appreciate this, especially in real estate. I recently said I would purchase two townhomes for an agreed upon price. I later found out my wholesaler was making more than I thought. I could have squeezed another $5,000 out of them, which would have made the deal considerably better. However, I didn’t feel right about that. So I let them make a killer commission, and they knew it. I closed like I said I would.

The wholesaler was appreciative, as they got to make their money and didn’t look like a flake to the client who was selling. I explained why I went through with it and confirmed they could expect the same in the future.

A month later, they had a deal someone else wanted. They went out of their way to hold it for me. Then, they sold it to me for 20% LESS than the other guy was going to pay. I got a steal at 50% of the appraised value, more than making up for the last deal. All because of how I treated the wholesaler.

I have an agent in Arizona who rocks. He’s on a great team. I told him to spread the word to his team I’m looking for ugly houses to flip. If a team member of his brings him a home and I buy it, they get the commission, but he gets a $1,000 bonus. This can be 40-50% of his average commission out there. Not only does he get the bonus, but he also gets to list the house after it’s ready for sale. Now, I don’t have to pay him that bonus. He doesn’t expect it. But he knows I’m concerned with making him money. That’s important to me. And he respects that. Do you think he sends his best deals to the new guy from BiggerPockets who treats him like an employee and wastes his time? Or do you think the deals go to the one he knows cares about him as a person?

I know that the vast majority of agents make their money from first-time home buyers or residential real estate. Taking this into consideration, I know that most agents will send me homes that they have been conditioned to think most home buyers will love. You know, the gorgeous cabinets and open floor plans and landscaped yards. Problem is, for an investor, these properties are functionally useless to us. No meat on the bone. So with the agents I know, I tell them I want them to only send me houses that make them cringe. I want the stuff they can’t sell. Give me your tired, your poor, your huddled masses yearning to breathe free — you know, all that stuff.

tax-savings

I also make it a point to check in with them every few weeks to remind them I’m looking for ugly houses. These are my partners — I want to help them sell a home no one else will buy. When I communicate with them, I ask them what I can do to help them sell houses, what kinds of referrals they like, and how I can help promote them on social media. Sometimes I even write blog posts I let them use. I am working together with these people so we can both benefit, and sometimes I have to help them learn my world, what I want, and how to find it.

I hope this article has provided some new insight for you on how to have a better relationship with your real estate agents. It is an emotionally heart breaking world in real estate — agents are constantly lied to, disappointed, and have the rug pulled out from under them by clients who don’t keep their word. Additionally, most agents don’t have a clear delineation between their lives and their carers. This means clients double as friends. Make friends with your agent. Let them know you care. Look for ways to help make them money. Then watch the power of reciprocity bring you back deals for your troubles.

Always remember, people will do the minimum amount of work necessary to not get fired by their boss, but they will go out of their way for their friend or partner. Recognize that your real estate agent is a partner in your success, and you in theirs — and watch your investing momentum really take flight in time.

Investors and agents: What is your experience working with the other party? What message would you send for a better working relationship if you could?

Let me know your thoughts with a comment!

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.