Recently I was looking for a new tenant for a single family home that was going to be vacant in about a month’s time. The house is in the back of a quiet cul-de-sac, so I spoke to a neighbor a couple of houses over on a busy corner and paid her $20 bucks to put a “For Rent” sign with my phone number in her front yard.
It’s a popular area so I got lots of calls. Some of them, of course, were from Realtors who wanted to help me lease the house. I like developing relationships with Realtors (as I’ll explain below) so I agreed to meet one. She rolled up on Saturday afternoon in a massive shiny SUV with a magnetized sign featuring a large glossy portrait of her smiling face.
She took a look at the place, declared that she thought she could help me, and explained that the charge would be one month’s rent plus a $150 listing fee. And free of charge she offered me lots of advice, like check the applicant’s credit and make sure the property is clean before you show it and call the applicant’s references before signing a contract.
She called me the following Tuesday to see if I was ready to list the property with her, but by then I already had it leased out myself. This particular unit rented for $1,250/month, so I saved myself a total of $1,400. Well, $1,380, including the $20 bucks I gave the neighbor to allow me to put the sign up.
Realtors can offer a lot of value to investors…
…it’s just that your needs are different than the needs of standard consumers.
| What the standard consumer wants |
What you, the investor, need |
| Service: The Realtor guides the homebuyer through a scary and unfamiliar process. Helps them to make a tough, life changing decision. This is personalized, time consuming attention. |
Service: You’re an investor. You don’t need reassurance and you don’t need to be chauffeured around town in comfort; you need someone who can open the front door when you want to see a property, and make sure the paperwork happens right and on time. |
| Advice: The average homebuyer does not buy/sell a house frequently, and therefore will not have a good checklist of things to consider. A Realtor will help the consumer prioritize, organize, and make a good decision. This requires a lot of personal attention. |
Advice: It’s probable that you have a lot more experience transacting real estate deals than the average consumer. You don’t need generic pointers. What you do need is the straight dope about what’s happening now in the market.
If you’re like the majority of investors you’re a part-timer. Realtors are full timers, and may have better info than you on what the city’s planning for that proposed light rail station or the next school zone redistricting than you do.
When your Realtor has a tip, you want him to take a moment to give you call.
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| Buying: The average homebuyer is looking her dream home, and many look to a Realtor to help her find it. |
Buying: There are exceptions, but my experience is that Realtors don’t bring many deals. And anything a Realtor points out on MLS you could have found yourself. |
| Selling: Selling your home is an emotional process. A Realtor will help the customer make objective decisions. And if she’s good she won’t be shy about telling the seller that the “artistic” color scheme he's using in the bedroom is going to scare off potential buyers. Working with sellers takes patience, people skills, and time. |
Selling: Selling an investment is an economic decision. Get it clean. Use neutral colors. Price it consistent with the market. And it’s easier to show once the tenant is out. You already know this stuff. What you really need is simply for someone to get your joint onto MLS so people can find it. |
| Negotiations: When it comes to negotiating a purchase or a sale, one of the Realtor’s main jobs is to save the client from his own temper/ego/impatience. The Realtor is the buffer, sets the strategy, paces the negotiation and gets the client to closing. |
Negotiations: Any investor worth is salt will be a better-than-average negotiator. And if you’re a better-than-average negotiator, then the more intermediaries and middlemen are in the way the more difficult it will be for you to execute a strategy. This is something you should want to do yourself. |
Bottom line: your needs, as an investor, are different than Joe Homebuyer’s needs.
There are three ways that Realtors will tend to react to this:
- Offer the same package of “value” that they offer to the general consumer and insist that you pay what the general consumer pays. You’ll get the “my services are worth it” angle from these Realtors. But that’s like arguing that a circular saw is worth fifty bucks: it might be worth that and more, but if the job calls for a drill then you’re paying for the wrong tool. Verdict: wrong answer.
- Offer you the “investor services” that fit the value drivers on the right hand side of the table above, but insist that you pay the same rate that they charge for the suite of services on the left. This is an “entitlement” mentality; the agent feels that his fee isn’t for service rendered, it’s for having his expertise supporting your deal. If you’re an investor this isn’t reasoning that you should accept. You should pay for the time and effort that agent puts into the deal; if you’re doing much of the heavy lifting then you shouldn’t pay the same as the next guy who buys a property once every other decade and needs his hand held through the entire transaction. Verdict: wrong answer.
- Offer you the “investor services” that fit the value drivers on the right hand side of the table above, and charge you appropriately. This…by process of elimination…is the “right answer.”
So, what does “charge you appropriately” mean? You’re the negotiator and so is your Realtor – sit down and work it out!