How often do we hear real estate investors say “I’m looking for an investor friendly Realtor”? Most times it comes from newbies who just came out of their real estate classes and were told to build their Power Team. An investor-friendly agent is a great theory, but you start digging deeper, you realize that:
- Most Realtors don’t want to work with Investors
- Those that agree to work with you don’t know what you need, and you end up spinning your wheels trying to teach them everything you learned from your classes. It is especially hard when you do not have real-life investing experience
- Realtors do not want to do what you ask them to do
Why do we run into all these issues? I have asked a few industry professionals from both teams: agents and investors and identified four main reasons why Realtors do not want to work with investors.
1. LOW-BALL OFFERS
Most Realtors believe if you’re not making competitive offers, you are wasting their time which they don’t get paid for. While you must remember, Realtors don’t get paid until after the deal closes, you should consider, that they probably don’t realize that we aren’t just low-balling (I hope you aren’t), we are looking for the sellers that need our money because of some distress. And we have our expenses that were calculated before coming up with that number.
SOLUTION: You must educate your Realtor on why you are offering what you are offering. Give them your formula for calculating MAO (maximum allowable offer) for each deal and make sure these numbers are pretty conservative.
EVA LEAK MEDILEK, BAY AREA INVESTOR: I have to educate my agents on every deal. I finally shared, in great detail, the formula I use for my MAO (Maximum Allowable Offer)… Stay true to your word and try not to be such a pain in the ass when asking them for things. Socialize with them. Take them to lunch. Tell them your criteria… Work it out and be honorable.
LORNE CATALANO, LANCASTER NY INVESTOR: I HATE it when agents understate how cheap rehab work can be done or say you don’t need to paint or do carpeting. Trashy properties attract trashy tenants/buyers…
RUBEN PEREZ, PHOENIX AZ INVESTOR: Lowballing houses on the MLS has never been my thing. I think you can burn through realtors’ real fast that way. Better to understand your market and know where you can buy and how much you can pay.
2. TOO MUCH WORK FOR FREE!
Many Investors believe it’s OK to ask for all the COMPs, different data, see multiple properties and have Realtor work for them for free basically and then cut them out of the commission’s
SOLUTION: Value your Realtors’ time as you want others to appreciate yours. Know what kind of data you need upfront, and let your agent know your list, so they don’t feel like you are abusing them. Only see properties that you are sure about. And finally, make sure you let your agent make money any way he can: e.g. by listing your rehabs or referring sellers and buyers to them.
RUBEN PEREZ, PHOENIX AZ INVESTOR: As real estate entrepreneurs, we are always marketers, so I always refer homeowners to our agents who have a house that is simply a listing. We can’t get every house under contract, but the lead shouldn’t be thrown away. It’s a great lead for an agent who may be willing to list the house for a smaller commission since they did not even have to market for that house. It’s pretty much a free lead for them and a free listing. We don’t ask for anything in return…
3. IMPINGING ON MLS ACCESS
This is a HUGE issue! And you absolutely must understand never to start your conversation with a Realtor you want on your team from “Can you give me your MLS Access”! It is a no-no and will get you black-listed in that Realtor’s contact book. Some gurus teach that, but they fail to clarify that it’s only OK if you have established relationships with the agent and he knows you are trustworthy and can perform.
Before considering asking for MLS access, get familiar with what it took a Realtor to get the license and what it costs them to have that access and maintain their license. Here is an article that’ll give you an idea about Agent’s Expenses Most People Don’t Know About.
Also, even if you get access, doesn’t mean you will be able to use it. There were times when we taught our EXPERIENCED agents to pull the data they didn’t even know was available on MLS.
SOLUTIONS: First, learn to use information from other reputable sources. And second, develop relationships with an experienced and knowledgeable Agent to get a good advice and all the information you need. Also, make sure the professional you are choosing to work with understands how to get you all the information you need while you are winning their trust. And perhaps eventually you will have the opportunity to get the restricted access to their MLS.
TONY GUISTO, CHICAGO IL INVESTOR/ RE BROKER: I’d suggest that Investors get a license. That way you don’t have to worry if the offer you submitted is getting sent in a timely fashion or if the realtor decides to try and go after it on his own. And also, if an investor states to the realtor that they will list on the back end and hold up our word.
4. “I KNOW IT ALL” ATTITUDE
Many investors have this problem coming out of their Holiday Inn weekend courses and thinking since they just paid a big buck for some information, that information is 100% correct, works in all states is legal, ethical and moral. And way too many gurus temp to bad mouth Realtors, saying they don’t know what they are doing. So Investors taking classes from those people automatically take on their attitude. Not to mention “You will know more than most Realtors out there after my class” – I have actually been a student of gurus who say that! And while there are a lot of unprofessional Realtors, there are also those who don’t just love what they do but also know their business very well. They are knowledgeable about their market, they have great connections with other industry professionals you would need, they understand data and of course, there are those that are investors themselves and these are your best bet.
SOLUTION: Be teachable, but choose your Realtor wisely. Just because they go to your REIA, it doesn’t mean they’ll know what you need! Here is why You Shouldn’t Blindly Take Advice from a Realtor you met at your local REIA.
Another great solution is to find an agent who is also an investor, like the rehabber Lorne Catalano did:
To sum this up, I will say that the problem occurs in the core principle of communication, which is honesty. Mutual understanding and collaboration is something that has to be present. And of course if you want a great Realtor on your team, you must be great yourself:
Know your numbers
To finish, here are some great recommendations from my good friend and fellow real estate investor Tony Guisto, real estate investor and licenced real estate broker in Illinois with Village Realty Shoppe:
Tips for investors to work with a realtor:
If you are going to be working with a realtor, a few tips that I’d suggest is to be upfront and document everything with them. This way everyone knows what is expected and can be referred to if questions arise later. Plus someone that you are interviewing to work with you as your realtor can see what it is you expect and decide if they would want to work with you. Not every Realtor will be the right fit for every person. Some also work for a while until they don’t. Never just hire someone because they are a realtor, interview them and see if you are compatible it is similar to dating someone, plus you might not be compatible with them. If I am asked to sign an exclusive buyers’ agreement, I insist that the realtor signs an exclusive agreement only to work with me. Don’t be forced or feel that it is necessary to sign an exclusive agreement, in my experience that is a realtor who is either not comfortable or just somebody who will do bare minimum work and expect that they get paid. Do most of the tedious legwork to make it easier on the realtor, for example: write out contracts to be submitted, view houses on Google earth and try to get a feel for area/house before going out to see property. So, if it has something that you don’t like, you don’t waste realtors’ time looking at a non-deal.
Tips for Realtors working with investors:
Make sure expectations are clearly defined. Set boundaries: any e-mail after 8 in the evening will be answered by 8 in the morning. Be flexible: if a client wants to see house try to show him or get someone from the office to assist if conflict. Don’t assume because you have a license that you know more than someone else. Speak openly and be honest if you see issues before purchase not after when it is time to relist. Be open to suggestions on different ways to market a property. Offer up different ideas instead of only dropping the price to get a house sold.
This is a partnership and when working together, it can develop into a beautiful relationship where everyone makes money and is happy. However when one piece is not functioning properly, the entire movement will start to be inoperable and fail. Be open and honest with each other, so you do not let issues build up and completely destroy the relationship. If the relationship is not working and you need to make a change, let the person know quickly and why they are being relieved. It is not fun but will be the best interest of all parties in the long run.
Do you have anything to add? If you are an agent, who has an experience working with Investors (good or bad) feel free to share with us in the comments below.
If you are an Investor and have something to say, I’d love to hear from you!