Some investors are adamant about not working with real estate agents. They don’t like them, see them as the enemy, and won’t even consider doing a deal where one is involved. The same is true for many real estate agents when it comes to investors. They’ve heard all the bad stories, have been burned by newbies who have no idea what they are doing, and feel they are wasting their time and reputation by constantly fielding unrealistic lowball offer for investors who may not even really be qualified to close.
But there are collaborations that seem to work. So when and how can it make sense to work together?
If you do the complete math, it can make sense for agents and investors to work together. Of course, this still relies on finding a good match and finding a great agent. So how can you make the numbers work, and find agents worth working with?
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What Investors Need in an Agent
- Understand investors’ needs and strategies
- Willing to be flexible on commissions when needed
- Serious about long-term relationships
- Hungry and ready to hustle to get deals done
It’s also worth noting that the agent may need a broker who is equally as flexible in order to allow them the freedom to get deals done on your terms.
Low-Ball Offers & High Volume Business
As investors, we typically put in low offers in order to buy right and make the numbers work. We generally aren’t trying to pay retail (which is what most properties are listed on the MLS for, if not way more).
This creates two dilemmas for the agent. First, it can make them feel as if they are going to get less commission if offers are low. In a hot market, they may be better off working with a retail buyer willing to pay more if they have the extra leads. However, more significant is that spending all their time throwing out offers that have little chance of being accepted burns up their time without any pay. This can mean they are snubbed by listing agents in the future.
Related: Investors: Think Real Estate Agents are Useless for Finding Great Deals? Consider THIS.
However, there are ways to make this work for both sides.
3 Constructive Ways to Work With a Real Estate Agent as an Investor
Focus on the deals.
Instead of trying to hammer listings that just aren’t going to work, have your agents focus on ones that will (80/20 rule). Have them use their access and connections to instantly alert you to new deals that may work for your criteria. These can be hot new distressed listings from other agents, listings about to expire, back on the market properties, or even off-market properties that aren’t listed on the MLS.
If they can find deals that match your numbers, then you should both feel great about making offers on them. We can all use more sources of deal flow. So having a dozen agents feeding you property leads is great, even if they only come up with 2-4 potential deals a month.
Negotiate volume discounts.
Investors can also negotiate volume discounts on agent commission. This may be difficult if you are brand new and have no deals under your belt. That will change significantly once you are buying 4, 8, or 15 properties a month. You may even start out with a sliding scale. Perhaps you pay the agent’s full asking commission on the first deal, decrease that if you do 4 of more transactions a month, and so on. You may be surprised at how low they will go if you ask.
Related: The Step-by-Step Guide to Finding an Investment-Savvy Real Estate Agent
Fully leverage agents & let them triple dip.
Investors can also get a lot more value out of agents if they fully leverage all they do. From time spent sourcing and negotiating to evaluating properties, coordinating closings, fielding calls, and spending on marketing, there can actually be a lot of value in working with an agent. That can sometimes replace what would be 2 or 3 in-house team members, along with the associated risks.
Then there may be further room for discounts on real estate commissions if you let the agent work all sides of the deal. This may include acquisition, resale, leasing, or lease options. In some cases, they may even have the cash or lender connection to help fund the deal. If they are getting paid 3 or 4 ways on each property, then you certainly deserve a discount on their commission rates.
Ultimately, there can be win-wins found with agents and investors working together. It’s about looking at the numbers, optimizing the relationship, and finding a profitable system for all sides.
Investors: Do you work with an agent to find deals? Why or why not?
Leave your comments and questions below!