What Real Estate Investors look for in an agent...

By
Real Estate Services with EquityScout.com

5 Tips for RealtorsI've dealt with real estate agents with both my "homebuyer hat" on and my "real estate investor" hat on. Each brings with it a unique set of expectations. 

Real estate investors represent a special group of clients for agents.  As the field gets crowed both with agents (10,000 new Realtors® every year!) and technological innovations, finding a niche will be important for agents who want to thrive as the market evolves. 

Following are five things that I, as an investor, tend to value in an agent.  This is just my opinion, but it's informed by feedback from lots of other investors.

1)  Understand the risks of investing:  Some clients will need some help here.  Generally speaking, investors take two kinds of risks:  speculative risks and operational risks.  Speculative risk is high when an investment relies primarily on future property appreciation in order to be profitable.  Operational risks deal with all of the issues involved in maintaining a cashflow-positive property - vacancies, tenants, repairs, etc.  There are players who think they are investors, but actually they're speculators.  They might not know the difference - but you should. 

2)  Be the investor's eyes and ears:  My real estate agent is valuable to me because she has ways of finding things out.  She's plugged into the community and she's constantly talking to other brokers and agents.  She does this full time, I don't.  Once a property gets to MLS it's old news - I have to compete against all the other investors in my area.  But if I can get to something early - that's a tip that's valuable to me. 

3)  Understand the numbers:  If you're pitching an investment, or helping the investor to understand one that he's found himself, you should be able to answer the questions:  Should I expect this to be a positive cashflow investment?  How much will I be able to charge for rent?  Will that cover my expenses?  What sort of property appreciation will I need in order for this to yield a decent rate of return?  An investor who can't answer these questions (many cant!) is driving blind.  You can help. 

4)  Screen opportunities:  Know what your investor is looking for.  Bring her opportunities where the numbers work out.  Shelve the rest. 

5)  Know the neighborhoods.  This is an area where my agent helps me a lot.  Which areas are generating a lot of interest?  Which ones aren't?  Where are a lot of for-sale signs popping up?  You and your investor will come up with a strategy to decode this information; sometimes a preponderance of for-sale signs means opportunity, other times they signal trouble. 

The playing field is shifting out there; agents who evolve will stay ahead of the curve. 

http://www.equityscout.com/

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Anonymous #13
Anonymous
Sheila Meinecke
Excellent post Christopher! You have the right outlook, and I appreciate your sharing it.  I will pass your site info along to any investors I come accross.  It would be a very handy tool indeed.
December 11, 2006 02:09 PM
Rainer
41,868
John Klassen
M & T Bank

I have two agents that I look for investment properties with. I have told them exactly what I look for and tell them when they find it I will buy. I need a partner since real estate investing is not my full time gig. I greatly appreciate their expertise.

My agent, saves me time and money.

 

December 11, 2006 04:46 PM
Rainmaker
1,489,821
John Novak
Henderson, Las Vegas and Summerlin Real Estate
Keller Williams Realty The Marketplace

Thanks for posting an investor's perspective. I like gathering data and playing with spreadsheets. Combined with my love of the web and technology, I think that will help me build a decent investor clientele in 2007.

December 12, 2006 12:12 AM
Anonymous #16
Anonymous
Shirley

Most of the investors i've come into contact with just do not want to pay agents.  The last one was where his wife was the agnet that offered the house, owned by them both, and in the MLS listing she offered agents 3%. Then she turns you over to her husband, who is the investor owner who "knows the numbers that will work". Well through each round of negociating he negociated my commission down "to make the deal work" I informed him that when a Realtor offers 3% to co-op agents, that no one is to start to try to get my fee down. Thats is totally off limits.

The only time that any investor/agent relation worked for me was when the investor was buying by getting a loan and didn't mention my commission.    I have had some investors say "I will find the house and you don't have to anything and all I want is you to give me 50% if your commission. First to say that I didn't have to do anything......well each agent answers to The Local Real Estate Board and The Real Estate Commission and first to their Broker. There is a lot of liability at steak.

Well there are a lot of other stories good and bad, but mostly bad. It is never a good idea to dismiss someone, to say your not important enough to be paid your full commission, etc.

What do you think about all this.

Thank you,

Shirley

Atlanta, 

GA 

December 13, 2006 12:12 PM
Rainer
21,432
Christopher Smith
EquityScout.com

Shirley,

I don't necessarily think this is unreasonable, and in my opinion you should not take this as an insult or a dismissal of your skills/abilities.  

A buyer generally has a certain set of expectations from an agent which justify the agent getting 3% of the deal as a fee (assuming a 6% total split 50/50).  The agent needs to understand the needs of the buyer, screens lots of possibilities, narrows down the list, arranges the showings, spends his/her time/effort/gasoline visiting the homes, advises the buyer on the purchase, negotiates on the buyer's  behalf, takes the buyer through the closing process and in the end gets the keys into the buyer's hands.  Man, that's a lot of work, and this is why an agent's commission is well earned, in my book.

But...(there's always a "but" isn't there?)...some investors don't need all of this!  And if the buyer is an investor who doesn't need all of the services (time, effort, money, expertise) that one would normally expect from a buyer's agent it's not unreasonable that the investor would try to negotiate a modified fee.  

I don't think the investor is being obnoxious.  But that's just my two cents...

December 14, 2006 08:33 AM
Anonymous
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Rainer
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Christopher Smith

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