A few days ago I wrote a post about inefficiencies in the real estate industry, and how most investors who sell a home using a Realtor will end up overpaying if they pay a five or six percent commission.

I wrote a similar post over at ActiveRain, a real estate network populated primarily by Realtors. A fairly interesting dialogue ensued, but overall I felt about as welcome as Don Imus at a rap concert.

But no surprise there; ours isn’t an industry that embraces change. But some of the comments did illustrate the fact that working with Realtors is an important topic for real estate investors, and it’s one that’s worth spending a few minutes considering.

Just to set the record straight: I’m a fan of Realtors. The good ones are part financial analyst, part industry specialist, with a healthy dollop of psychologist in the mix. There are a couple of Realtors out there in blogland who write particularly good copy for real estate investors – particularly Jeff Brown and Chris Lengquist (Jeff might be a little in-your-face for sensitive readers; make sure you bring your sense of humor).

But, ironically, having these guys around can be a little dangerous – especially for new investors. Is it because they give bad advice. No – they give great advice – and that’s just the point. It’s a fair bet that the Realtor that gave you that magnet advertisement that’s stuck to your refrigerator right now is billing himself as an investment specialist too; but the chances are slim to none that he has the experience or background that Jeff and Chris have. Don’t be fooled; your chances of finding a Jeff or a Chris in the real world: slim to none.

So: what’s an investor to do? Well you gotta know what to expect, so here’s four things that I think you should keep in mind…

• Realtors help you get deals done. The vast majority of investors – yours truly included – are part time investors. You invest in real estate to diversify your investments, earn a superior rate of return, and secure your future – but you have a day job too. There will be times that if you try to do everything yourself you either won’t get the deal done, or you won’t run all of the traps and end up making a mistake. Here’s my analogy: I can put a tile floor in myself – but this is work that I tend to outsource. Getting help will assist you in making things happen. Hire one when you need to.
• Realtors won’t bring you deals. In my experience you’ll never get a Realtor to bring you a good deal. That’s just not the way it works. A Realtor with the ability to spot a good deal will take it for herself when one comes along. So by definition if a Realtor hands you an opportunity it means either a) she doesn’t know a good deal when she sees one or b) she does know a good deal when she sees one and this one ain’t. But hey, in her view a commission is a commission. Word to the wise: expect to find your own deals.
• A Realtor is unlikely to be able to give you good investing advice. But you should expect him to give you competent advice on buying and selling a house. I use a Realtor at times, and she doesn’t really know much about investing. And that’s ok with me; I’m not paying her to give me investing advice. I read some writers insist that investors should only work with Realtors who own real estate investments themselves, but that advice strikes me as a bit wrongheaded; you shouldn’t be depending on the person who’s going to bag a commission from your purchase/sale to give you advice on whether or not said purchase/sale is a good investment.
• Loyalty, loyalty, loyalty. Ours is a business of relationships, and creating a symbiotic, mutually beneficial relationship is one of the best investments that you can make. Your average homebuyer buys a home and sticks around a while. Your average investor buys a home, then buys another one, then buys another one. Create a relationship with your Realtor and show him that you value his services and it won’t take him long to figure out that you’ll be coming back – and there’s no way to get a service provider’s undivided attention than being a repeat customer.

The four points above apply to everyone. Here’s another couple for those of you with a few deals under your belt.

• Take charge of the negotiation. You should be in the driver’s seat, not your Realtor. Call your own shots, drive the negotiation tactics, set your own pricing strategy. Your Realtor should be there to advise and execute, not to decide.
• Cut costs when you sell. That means FSBO, flat fee, or deep discount. In the past I’ve argued that the buyer bears part of the sales commission via an increased sales price, but when you’re the seller there’s no doubt that this hits you in the pocketbook. Once you’re confident about handling the deal yourself an extra 6% in your pocket at closing is no small deal.