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The Real Estate Agent: Whose Side Are They On?

Jun 11, 2008
Yes, I said it, is the real estate agent really on your side? We (my wife Julie and I) have worked with some outstanding agents, some good agents, some mediocre agents, and some agents that should NOT be agents. Like any industry or profession, there are people who are good at their job, and people who are not. Nobody is going to debate that with us, but what we will debate is whether you actually need a realtor when you're buying a property. It may seem like they only have their commission on their mind and not your best interests. And if you do need one, how do you actually get a good one?

Like a bathroom renovation, your taxes, your wedding and so many other things, you have the option to do the work yourself or pay someone else to do it for you. Doing it yourself is always more time and work, it can be a bigger hassle than you expected because of your lack of expertise and it can end up costing you more than you think it will. But, it can also ensure you know exactly what was done, get exactly what you want, and it can be a source of much self satisfaction when it's done.

At least half of the properties we bought were done so without the aid of a Buyers Agent. I did the research online using MLS or Realtylink or CLS, tabulated details in a spreadsheet over a period of time to help me spot opportunities and then, when I find what I think may be a good buy, I contact the listing agent for more information.

I'm not advocating you head out there and buy properties without a Buyers Agent, I've just found that when I venture into a geographic location where I haven't got an existing relationship with an agent, I do better research on properties because I know exactly what I want. Without that pre-existing relationship, when I've told a realtor what I want they either don't provide me with enough details on properties for evaluation or they'll put me on their automated e-mailing list and send me every 3 bdrm, 2 bth house in X area for X dollars or they'll limit the search too much to find the ones I want.

But, if the agent doesn't know you and doesn't have all of the details, it's difficult for a Buyers Agent to find the perfect property for you. And if they don't know you, many of them won't go through the effort and time to go through each and every property on a detailed basis to find the right property for you (because that is a lot of work for an agent to do for a potential client that could just be "kicking tires"). But before the real estate agents on our subscriber list get angry, let me note that some of our purchases have come with your help! In those cases, they were almost always agents we'd worked with before, that knew what we were looking for and knew we were serious shoppers. For the most part, I have found most of our properties completely on my own and have done very well (cashflow and appreciation) without help from an agent in the property selection phase of the process.

But, before you fire your agent, let me say that not everyone is up for the market research detail that I do (just ask my wife - sometimes she bans me from using MLS because I get so out of control), and we still prefer to use a Buyers Agent when we buy. Having an agent represent you is not just about finding a property. Remember all the other things an agent does for you:

* Provides you comparable sale information for properties in your area of interest;

* Books and takes you to appointments for viewing properties of interest and fields all calls from Sellers Agents;

* Handles all of the negotiation on your behalf when you put in an offer to purchase;

* Handles the paper work mess that follows the acceptance of a purchase offer;

* After the purchase the agent will usually keep in touch and provide you with updated market information for your area to help you identify new opportunities in the area and keep tabs on your property value.

* And having your own Buyers Agent removes the bias or collusion that could exist if only a Dual Agency Agreement is in place.

You don't want to grab just any agent though. No matter what, they still are on commission and only earn their commission when you buy a property. So, it's in their best interest for you to buy that house, whether it's really the best one for you or not.

Get a Great Realtor Working For You

It's IMPERATIVE that you work with an agent that has helped in the purchase of many investment properties, and even better, owns several properties him/herself! (Although Julie argues with me on this point - she says "If they invest in real estate themselves how do you know they are going to bring you the good deals they find? Why wouldn't they buy them for themselves?" - so the only thing she and I agree on here is that the agent MUST have experience working with investors).

As a residential mortgage broker I used to seek out agents that said on their website that they specialized in helping real estate investors. That was one of my specialties too so I thought we'd have a lot in common! Well - I can't tell you how many realtors I met that said their "specialty" was Investment properties yet they a) have never owned one, and b) don't even know what a GRM (Gross Rent Multiplier) or CAP rate is! So, if you do intend to start looking to purchase, go out and research your prospective real estate agent first and then ASK QUESTIONS:

* How much experience do you have working with investment properties?

* How many investment properties do you currently own?

* Can you provide some referrals from investment property purchasers you have worked with?

* How will you find good investment properties for me to evaluate?

* Besides sending me automatic emails that show general listings that may fit my desired property criteria, what else do you do to find that "perfect" match?

* What criteria would you use to pick an investment property for yourself?

Of course, you'll need to have a good sense of what you actually want before you contact the realtor. Your agent will only be as good as the information you provide him or her. If you tell your agent that you want a property that makes money each month that doesn't give them much to work with. Narrow down your area before you call them. And, as always, know your objectives! Do you intend to manage the property yourself? Do you care if it is a single family home or multi-family? How much money do you have to put in as a down payment? Are you willing to do renovations to improve the property? And, a good realtor should ask you these questions to help narrow down what you're looking for. If a prospective realtor doesn't ask you any questions, you might want to keep looking.
About the Author
In eight years, Dave and his wife Julie have built a multimillion-dollar real estate portfolio in their spare time with minimal cash resources. They publish a Free Monthly Newsletter to help other rookie real estate investors achieve their investment goals.
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