Can Real Estate Agents Really Help Investors Find Buyers and Sellers?

Real estate agents obviously find buyers and sellers all the time, after all, that’s the only way they make a living. But can they help real estate investors who have a different mindset about buying and selling? Surprisingly, the answer is not a simple “Yes” because a better answer is actually “Possibly”.

Let’s first look at the differences between real estate investors and real estate agents: state-licensed professionals who must but don’t always maintain high ethical standards, take continuing education courses, are or should be trained in sales, spend money to advertise, and maintain an office; but in the final analysis they have no direct money invested in the properties they sell. They benefit more by getting the highest possible price for a property for which they receive a higher commission. They earn a modest living in most cases if the market helps them.

Inverters, on the other hand, have some similarities but not many. Investors only need a driver’s license to do business, they must maintain high ethical standards but not always, take continuing education courses because they want to, they are generally not trained in sales as they are buyers, they have overheads, but they don’t have to maintain an office and ultimately bear the risk and burden of owning property for profit. Investors must pay the lowest possible price for a property in order to make a profit, they are not guaranteed a commission like a real estate agent gets on a sale. The only guarantee for an investor is a learning experience, good, bad or ugly. Investors can make a lot of money even in the worst market conditions.

Having set the stage for the differences between investors and real estate agents, let’s look at specific examples of properties where investors are typically involved:

1. Bank Owned (REO) Properties: Banks want a real estate agent to list these properties and handle the resulting investor inquiries and offers. Agents have a field day with new listings while investors who are rehabbers or first timers swarm to get these deals and bid against themselves in a maddened frenzy. WARNING: If you use a buyer’s agent to make offers on REOs, it is very unlikely that you will get the offers. Simply put, the listing agent will not split the seller’s commission. This may offend buyers’ agents, “but even stipulating that you won’t get the buyer’s commission on the seller’s side doesn’t work most of the time.” Do yourself and your investor clients a favor and don’t bid for them. Have the investor pay you a buyer’s commission on the HUD-1 Statement. I suggest you only tell the closing agent after the seller (Bank Asset Manager) has signed a contract. Also, the latest MLS listing price becomes a glass ceiling for the investor if they want to sell it wholesale, so don’t think you can get it listed again unless you make substantial repairs.

2. What about a property listed on the MLS in general? If you’ve been listed on the MLS for more than five days, you become “price tainted” as the days on market (“DOM”) get larger and larger. Ultimately, it’s only for a retail buyer to buy it with conventional financing, not what your investor has in mind unless they bought it substantially lower. If the property has a price reduction it can be a buying opportunity, if the seller is really motivated. However, as always, any real estate agent can also view this update and engage with a retail buyer. As a real estate agent, you’re better off becoming an investor or partnering with an investor to make more money on deals that are “pocket listings” or direct sales contracts with motivated sellers. I personally think pocket listings are unethical because the seller could probably get a higher price on the open market and in some states they are a third degree felony for both the buyer and the realtor.

3. As for real estate agents looking for buyers for investors’ properties, there’s no question that the MLS is the place for many retail buyers to find their dream home. As investors selling wholesale properties, the benefit of the MLS is exposure to other investors looking for bargains. These are usually newbies who believe what a real estate agent has told them about finding deals there. The frustration for the real estate agent arises when the investor doesn’t think it’s a deal and doesn’t buy it. Worse still is when it is not a deal and the investor buys it only to know how much money can be lost on a single deal. If it’s such a deal, “Why don’t real estate agents buy them?” Basically because they don’t have the money (they aren’t successful enough or don’t understand doing “no money” deals) or they won’t. assume market risk: both are opposite to the thinking of investors.

You may have had the idea that I am against real estate agents, but that is not true at all. Some of my best friends are real estate agents because they are also investors. It is best for any investor to spend some time before engaging with a real estate agent so that both parties understand how they will operate and what is expected of both parties. If the real estate agent “gets it” he won’t want to look for listed properties for the investor, if the investor “gets it” he will realize that the real estate agent doesn’t have any special skills that he doesn’t have and that the real estate agent is at a disadvantage because of his license. .

These comments and analyzes represent my opinions only and are based solely on 34 years of investment experience and working with hundreds of realtors®. In general, real estate agents are hard-working but disrespected people because their commissions are fully disclosed to the buyer/seller. Few other industries have this burden to answer with the salespeople question of “What am I paying for?” Realtors® have the ability to become great investors, but the few that do typically abandon their licenses due to unrealistic legal restrictions. This is not a reflection of the opinions of other investors.