How To Buy A House Like A Real Estate Investor: Part 5 – Finding a Realtor

Sat, May 17, 2008

I believe ethical and trained real estate investors are great examples of creative entrepreneurs and understanding their mindset will help us all learn to be savvy business-minded individuals.

Realtors Are Salespeople

Realtors are not created equal and if you’re planning to use one to find your next house, take a moment and consider the following.

When choosing a Realtor to assist you in finding a home, never lose site of the fact that a Realtor is a salesperson.

Salesmen or salesperson are terms that make buyers nervous and are terms sellers love.

So if you’re a buyer and your Realtor is a salesperson, what is your Realtor selling?

They’re selling a house, just you are not the seller, you’re the buyer. True your Realtor’s commission is paid for by the seller, but keep in mind the higher price you pay for that house, the more money your Realtor assisting you in finding a home will make.

On the surface this looks great from the buyer’s perspective – you don’t have to pay anything for the use of a Realtor’s services. However, because of the way Realtors are paid, buyers need to be cautious and always question if their Realtor is truly working to get them the best possible deal they can.

There are approximately 1.2 million Realtors in the United States. Now I’m no math major – oh wait, I am! – but the probability of all 1.2 million Realtors having the good ethical standards I believe I have is somewhere around 0, and being that it’s a commission-paid field . . .

Everyone in this world is different, thus every salesperson is going to be different. A smart home buyer (and entrepreneur) will never lose site of this and always be on guard. This is the harsh reality of business.

Also, even if you believe your Realtor is a good ethical person, remember they have a duty to the seller as well – especially if they are showing you a house they have listed!

What I’m trying to say here is that there’s only one thing you know for sure:

You are the only one you can fully trust.

As a buyer, just remember the more money you spend, the more money your Realtor will make.

Also, the sooner you buy a house and the fewer houses you see, the less time they have to spend researching properties for you, driving you around town (more time), paying for gas, and can move on to making more money.

Finding A Realtor To Work With

Where To Find A Realtor

There are many ways to find Realtors: through friends, family, co-workers, advertisements, websites of the more well known companies like Century 21 or lesser known sites like HomeGain and ZipRealty, newspapers, etc.

Word of mouth is probably the most favorable as others can provide you with personal experience and feedback.

Find A Full Time Realtor

Look for Realtors who are “Realtors” full time. Many Realtors have second and third jobs and only work as a Realtor part time.

You want the expert who’s networking every day and researching properties often. In general, if you hire a part time Realtor, you’ll get part time work, a Realtor who isn’t well connected, and you’ll have to work with their schedule when viewing houses.

Interview A Few

This step is more important for sellers than buyers; however, if you take the time to interview a few different Realtors, what you’ll find is there are ones you naturally bond with. Maybe it’s that you’re close in age or you have something in common. What ever it is, this helps promote good communication.

Also, be up front with them. If you plan to look at 10 houses before you buy, tell them – this way you can weed out a few Realtors who are just hoping to make a quick buck.

Oh, and if a Realtor ever asks you to give them a deposit for their services, tell them have a nice day

Be Prepared

When meeting with a Realtor, it’s good to already have a pre-approval letter for financing. This shows the Realtor that you’re a serious buyer and not just toying with the idea of buying. Also, be prepared to answer their questions. Know what you’re looking for and where.

Working With Your Realtor

As an investor, you always have to look out for #1.

If you wish to buy a house like an investor, you have to think like an investor. There are many tools used in the trade of real estate investing and one of them is a Realtor.

Here’s one of the biggest mistakes you could ever make when working with a Realtor – telling them what your highest offer will be on a property.

First, here are a few things you should tell your Realtor:

the area you want to buy in
general price range
how many houses at a minimum you’d like to look at before placing an offer (this can be changed at any time)
if you plan to submit offers on multiple properties
the features you’re looking for in a house
if buying a fixer is an option

Also, let them know if there are any special requests you have, such as seller financing or furnishings included.

Why You Shouldn’t Show Your Poker Hand To Your Realtor

Here’s why you should never tell your Realtor everything (again, remember not all Realtors work the same, but you have to protect yourself).

Realtors talk with one another in an effort to get a house sold.

When you submit an offer, you give the offer to your Realtor who in turn gives it to the seller’s Realtor (at which time they talk). The listing agent then gives their client the offer you submitted. Remember, the listing agent is the seller’s Realtor and is looking out for their client’s best interest. Their goal is to sell the house and get the most possible for it.

With that in mind, if you told your Realtor before you submitted a lower offer how much you’re willing to go up in price, it’s possible your Realtor will tell the listing agent (the seller’s Realtor) how much their client (you) are willing to go up.

And if you think the listing agent would keep this information from their client then think again.

Now the seller has the edge, not you. Don’t, I repeat, don’t give your Realtor your highest offer price, even if they ask.

We’ll talk more on offers in an upcoming post.

On a final note, don’t forget Realtors work off commission and commissions are negotiable.

It never hurts to ask your Realtor to contribute a percentage of their commission toward your buyer’s closing costs. With so much competition out there, your offer might just get accepted (mine did). ZipRealty offers 20% of their commission back to the buyer’s closing costs as a standard.

So there you go, a basic guide on how to find and work with a Realtor from an investor’s perspective. Just keep in mind every situation and person is different. These are just guides and nothing is set in stone.

5 Responses to “How To Buy A House Like A Real Estate Investor: Part 5 – Finding a Realtor”

Barbara Swafford Says:
May 19th, 2008 at 12:44 am

Hi John,

Such an informative post.

As you know, I was a Realtor . My fiduciary duty was always to the seller (whether it was my listing or not), as they are the ones paying the commission. It’s a fine line Realtors walk, as most want to find a great home for their buyer, however, the seller is the one who is paying the commission.

One way of finding is good Realtor is to also look at the ads in the newspaper or telephone book. If a Realtor is listed in the top percentile, or advertises honors they’ve received, there is a valid reason for that. They’re probably good at what they do.

I don’t know if they have them where you live John, but we also have “buyer’s agents”. The buyer pays the Realtor to find a home. Most are advertised as such, and probably have some type of special license and contract.

Also, if someone is really not in a position to buy, it’s completely unethical to pretend they are, and waste a Realtor’s time.

And, in closing, a Realtor almost always is splitting the commission with others. In most cases, the selling Realtor is only seeing one fourth of the total commission. (It gets split between the listing and selling offices, and the listing and selling agents).

Barbara Swafford’s last blog post..Can We Ever Know Too Much About SEO

John Hoff Says:
May 19th, 2008 at 8:55 am

Hi Barbara -

The first draft of this post talked about “buyer’s agents” and then I realized my post was getting way too long. I often want to tell people everything which isn’t always best. In this case, I decided to stick with the essentials of finding and working with a Realtor the way 95% of people do.

However, since you brought it up, yes we have buyer’s agents here in Vegas. In case people don’t know, a buyer’s agent is a Realtor buyers hire to find them a home. The idea is, the buyer’s agent will work in your best interest as a buyer and not be in conflict with you and the seller.

I have 2 problems with using buyer agents, though.

1. Many of them still represent both buyers and sellers – thus equaling a normal Realtor. I know this because one of my Realtors I interviewed asked me if they had a problem with this (because she was both). Lesson: you never really know.

2. The only way to insure the buyer’s agent is only working in your best interest is to pay them a fee. The problem is, many times this fee negates a great deal the buyer’s agent gets you on the house. It’s easier to just go with a normal Realtor.

The only way I can see you can truly trust that a Realtor is working to get you the best possible deal on a house is if the two of you have formed an investing business and the Realtor will make a profit from investing. Or maybe if they are a family member or really close friend.

John Hoff Says:
May 19th, 2008 at 9:12 am

Hello again Barbara – made this a separate comment because I didn’t want my last one to be too long.

Wanted to comment on what you said about the following:

One way of finding is good Realtor is to also look at the ads in the newspaper or telephone book. If a Realtor is listed in the top percentile, or advertises honors they’ve received, there is a valid reason for that. They’re probably good at what they do.

This is a double edged sword here. If a Realtor is “top of his or her class,” so to speak, you might find they aren’t so great at helping the little guy looking for an inexpensive house (or selling one). This is something I’m going to talk about during the “Selling Your House” series of posts and finding a Realtor – and of course is something I’ve had to deal with.

Many times the Realtor who has all those honors will be put on bigger projects to make their brokerage more $$ and the buyer or seller will get one of the rookies from that Brokerage.

If, however, you do succeed in getting the “hot shot” Realtor to work for you, you might find that you’re a little lower on their priority list.

It makes sense, right? If they have 4 buyers looking to buy million dollar homes and then here you come along and tell them you’re looking to spend $180k, who’s phone call are they going to take first? Who’s going to get priority?

If by chance you hook a “hot shot” Realtor, ask them what the median house price they usually find for buyers (or sell). If they tell you they sell a lot of homes significantly higher than what you’re looking for, you may have a problem.

The same logic holds true for Realtors doing primarily short sales. If you interview a Realtor and they tell you they primarily do short sales but would be happy to take you on, move on; their heart isn’t in it for you.

Many Realtors *go where the money is* and invest the bulk of their time there.

Barbara Swafford Says:
May 21st, 2008 at 12:24 am

Hi John,

Re: Buyer’s’ Agents. I agree, it seems there would be a conflict of interests, unless the seller was not going to be paying a commission.

Re: “Top Realtors”. The reason I brought this up was I knew of an instance where a large development was for sale and listed with an inexperienced Realtor. It wasn’t selling ( I think it was listed too high). Anyway, that contract ended and an experienced Realtor took over (she had a “team”), and within a short period of time every lot in the development was sold. With her aggressiveness, experience, reputation and contacts, she had the clout to do what the newbie (?) couldn’t.

Your other examples can also ring true. When I sold real estate I “specialized” in first time home buyers. I had a lot of empathy for them and enjoyed holding their hand all the way through the buying process. It was always exciting when they got the key to their first home.

I do agree, you need to “connect” with your Realtor. It’s like any business, if you don’t feel they are looking out for your best interests, it’s time to move on.

Barbara Swafford’s last blog post..Social Meth – One Taste – You’re Hooked

Carolyne L Says:
September 18th, 2009 at 2:17 pm

http://www.carolyne.com/costs_usa.html

Perhaps this link would be helpful in explaining the situation to your readers. There is also a link within the article to “Commissions.”

Thanks. Carolyne
http://www.Carolyne.com (see articles)

Barbara Swafford Says:
May 19th, 2008 at 12:44 am
Hi John,

Such an informative post.

As you know, I was a Realtor . My fiduciary duty was always to the seller (whether it was my listing or not), as they are the ones paying the commission. It’s a fine line Realtors walk, as most want to find a great home for their buyer, however, the seller is the one who is paying the commission.

One way of finding is good Realtor is to also look at the ads in the newspaper or telephone book. If a Realtor is listed in the top percentile, or advertises honors they’ve received, there is a valid reason for that. They’re probably good at what they do.

I don’t know if they have them where you live John, but we also have “buyer’s agents”. The buyer pays the Realtor to find a home. Most are advertised as such, and probably have some type of special license and contract.

Also, if someone is really not in a position to buy, it’s completely unethical to pretend they are, and waste a Realtor’s time.

And, in closing, a Realtor almost always is splitting the commission with others. In most cases, the selling Realtor is only seeing one fourth of the total commission. (It gets split between the listing and selling offices, and the listing and selling agents).

Barbara Swafford’s last blog post..Can We Ever Know Too Much About SEO
John Hoff Says:
May 19th, 2008 at 8:55 am
Hi Barbara -

The first draft of this post talked about “buyer’s agents” and then I realized my post was getting way too long. I often want to tell people everything which isn’t always best. In this case, I decided to stick with the essentials of finding and working with a Realtor the way 95% of people do.

However, since you brought it up, yes we have buyer’s agents here in Vegas. In case people don’t know, a buyer’s agent is a Realtor buyers hire to find them a home. The idea is, the buyer’s agent will work in your best interest as a buyer and not be in conflict with you and the seller.

I have 2 problems with using buyer agents, though.

1. Many of them still represent both buyers and sellers – thus equaling a normal Realtor. I know this because one of my Realtors I interviewed asked me if they had a problem with this (because she was both). Lesson: you never really know.

2. The only way to insure the buyer’s agent is only working in your best interest is to pay them a fee. The problem is, many times this fee negates a great deal the buyer’s agent gets you on the house. It’s easier to just go with a normal Realtor.

The only way I can see you can truly trust that a Realtor is working to get you the best possible deal on a house is if the two of you have formed an investing business and the Realtor will make a profit from investing. Or maybe if they are a family member or really close friend.
John Hoff Says:
May 19th, 2008 at 9:12 am
Hello again Barbara – made this a separate comment because I didn’t want my last one to be too long.

Wanted to comment on what you said about the following:

One way of finding is good Realtor is to also look at the ads in the newspaper or telephone book. If a Realtor is listed in the top percentile, or advertises honors they’ve received, there is a valid reason for that. They’re probably good at what they do.

This is a double edged sword here. If a Realtor is “top of his or her class,” so to speak, you might find they aren’t so great at helping the little guy looking for an inexpensive house (or selling one). This is something I’m going to talk about during the “Selling Your House” series of posts and finding a Realtor – and of course is something I’ve had to deal with.

Many times the Realtor who has all those honors will be put on bigger projects to make their brokerage more $$ and the buyer or seller will get one of the rookies from that Brokerage.

If, however, you do succeed in getting the “hot shot” Realtor to work for you, you might find that you’re a little lower on their priority list.

It makes sense, right? If they have 4 buyers looking to buy million dollar homes and then here you come along and tell them you’re looking to spend $180k, who’s phone call are they going to take first? Who’s going to get priority?

If by chance you hook a “hot shot” Realtor, ask them what the median house price they usually find for buyers (or sell). If they tell you they sell a lot of homes significantly higher than what you’re looking for, you may have a problem.

The same logic holds true for Realtors doing primarily short sales. If you interview a Realtor and they tell you they primarily do short sales but would be happy to take you on, move on; their heart isn’t in it for you.

Many Realtors *go where the money is* and invest the bulk of their time there.
Barbara Swafford Says:
May 21st, 2008 at 12:24 am
Hi John,

Re: Buyer’s’ Agents. I agree, it seems there would be a conflict of interests, unless the seller was not going to be paying a commission.

Re: “Top Realtors”. The reason I brought this up was I knew of an instance where a large development was for sale and listed with an inexperienced Realtor. It wasn’t selling ( I think it was listed too high). Anyway, that contract ended and an experienced Realtor took over (she had a “team”), and within a short period of time every lot in the development was sold. With her aggressiveness, experience, reputation and contacts, she had the clout to do what the newbie (?) couldn’t.

Your other examples can also ring true. When I sold real estate I “specialized” in first time home buyers. I had a lot of empathy for them and enjoyed holding their hand all the way through the buying process. It was always exciting when they got the key to their first home.

I do agree, you need to “connect” with your Realtor. It’s like any business, if you don’t feel they are looking out for your best interests, it’s time to move on.

Barbara Swafford’s last blog post..Social Meth – One Taste – You’re Hooked
Carolyne L Says:
September 18th, 2009 at 2:17 pm
http://www.carolyne.com/costs_usa.html

Perhaps this link would be helpful in explaining the situation to your readers. There is also a link within the article to “Commissions.”

Thanks. Carolyne
http://www.Carolyne.com (see articles)