One of the first things I learned about real estate investing is having a business plan. In a previous article, I wrote about narrowing down on niches and strategies. Today, I’m sharing another component of the business plan—building your team. More specifically, this post is on finding a real estate agent (your realtor).
Your Working Relationship with a Real Estate Agent
Having a real estate agent who goes above and beyond to represent and advocate for you can greatly affect your investing experience. This is especially true if you are doing out-of-state investing (as it is the case for my husband and I). You should expect much more from your realtor than just getting you set up on auto searches, providing you comparisons and signing the necessary documents. If you aren’t familiar with the landlord/tenant laws in the area you’re looking to invest in, turn to your realtor for insights and resources. If your realtor happens to live in the same area or neighborhood you are doing your searches, ask them questions about growth (e.g., jobs in the area and area amenities), ease of commute and rental potentials. In other words, turn to them as your resource guide.
Recently, I signed a document with a realtor on working with real estate agents. This document detailed the various services, duties and responsibilities real estate agents can provide and have with potential buyers. According to the document, the buyer’s agent must (1) promote your best interests, (2) be loyal to you, (3) follow your lawful instructions, (4) help you learn more about the property, (5) provide you with all material facts that could influence your decisions, (6) use reasonable skill, care and diligence, (7) arrange financing and (8) account for all monies they handle for you.
I consider those details the minimum your representing buyer’s agent should do for you. For this person to qualify as someone I feel great bringing my business to, he/she would need to step up the game and provide me additional resources (even when I don’t remember/don’t know to ask). My buyer’s agent should look out for my best interests. This means thinking outside of the box and examining my unique situation and anticipating my unique needs (e.g., “My client is out-of-state. She’s probably not that familiar with the tenant/landlord laws in this county. What can I do for her?”). In other words, you want a realtor who is proactive and not just responsive.
This agent should also have a network of trusted colleagues who he/she can refer you helping you take care of other transaction and real estate needs. These colleagues (such as contractors, inspectors, broker/lender) might eventually become part of your real estate team.
Our Limited Experiences
Although my husband and I have experiences having a bought and sold a house and a condo, our combined experiences working with realtors is very limited. My mother-in-law is a realtor and both of us had relied too heavily on her to close the deals for us from start to finish. In retrospect, my husband and I could’ve been much more proactive learners (both as buyers and sellers) in the process. We weren’t aware of the rules or formulas available. Knowing what we know now, there is so much to learn about real estate investing and how to do it right (bringing in profits and building wealth).
Our Agents
In the past three weeks, my husband and I have worked with three realtors. We started with only one, but were not happy with him. Even with our limited knowledge of real estate agents, this man seemed lacking in experiences. When the second one came along, we thought he was the one. He sounded very knowledgeable and appeared to be excited having the opportunity working with us. However, he was slow at getting back to us after the initial conversation. The third one came along, and my husband and I were hopeful again. She sounded very helpful over the phone. I also liked that she communicated with me through text messages. However, after a few correspondences, it became clear to us that she was not that organized. For instance, on a few occasions I’ve made two requests over text messaging (the same conversation), and she would respond to only one of my requests. Each time I heard back from her, I felt the need to remind her of the other part. In general, all three seemed to only feed us information when we ask.
I’m ready to look for a 4th agent, however, my husband doesn’t think this would be the right action to take. He respects other people’s time too much (in my opinion). I, on the other hand, view this whole transaction with a business mindset. We have a plan set out to accomplish and we are ready to make an offer when the right property and price come along. I don’t like sitting around waiting for things to happen. When someone is not excited about getting my potential business, I have the right to bring my money to another person.
How to Go About Finding a Real Estate Agent
The steps outlined below are customized to meet my standards and needs (such as out-of-state investing), but most should be applicable to many of your needs, too.
Step 1: As soon you get on the phone with an agent, ask if he/she has experiences working with real estate investors. Real estate investors have a certain set of criteria we are looking for. Your working relationship with the agent would flow much better when you both speak the same language. This is especially important for new investors who are just starting out. The more experiences and expertise an agent can bring to you (as a real estate investor), the more confident you’ll feel moving forward with this person.
Step 2: Next, try to get a feel from the agent if he/she is also a real estate investor (you can also ask directly). You probably don’t want to be competing offers with an agent who is also an investor. I’ve spoken with an agent who told me about this upfront (he was a real estate investor) and he referred me to a colleague. He didn’t want to potentially engage in any conflict of interests with his clients. Find an agent who is not interested in real estate investing in the next month or two, depending on how ready you are to buy.
Step 3: Let the agent know exactly what kind of properties you are interested in (including price range) and what kind of investment returns you are looking to get. Some realtors prefer not to work (aren’t as excited) with potential investors whose expected returns might be (unrealistically) too high to aim for. From the start, let the agent know what he/she might be getting into. It would be terrible to waste each other’s time.
Step 4: Once you get the feel that the agent is open to a working relationship, proceed to specifically ask him/her if they have the time to work with you. In my case, I would let the agent know that I’m from out-of-state and that I might have more requests and unique needs than their typical clients. This is also a good time to find out if they have experiences working with out-of-state investors. If so, what was the general process like? What is the distance they are willing to travel to survey a property and take pictures and videos for you? What’s the best way to get hold of them? The idea here is to get a feel of the kinds of responsibilities (or duties) this person is committed to being your agent.
Step 5: Prior to ending this initial phone conversation, find out how this agent is expected to be compensated. Traditionally, the seller pays for the buyer agent’s fees (usually 3% of the closing cost of the property), however, don’t make assumptions. This is especially true when you are dealing with an agent doing work in an area or state you’ve not purchased properties before. Know what you are getting into before the working relationship get started.
Step 6: Shortly after the phone conversation ended, ask yourself the following questions: (1) How long did it take for this agent to set up auto search(es) for me? (2) How frequently does this agent follow up with me (I prefer at least couple times a day. This would give me hints that the agent wants my business and is eager to work with me.)? (3) What is the response time? (4) How detailed are the responses tailored to my specific requests? And (5) Is this agent proactive looking out for my best interests (e.g., calling up sellers’ agents for me, sending me useful resources and documents relating to being a landlord and the general area(s) I’m doing my searches).
Step 7: Once you’ve narrowed your search down to three or fewer, take those properties to the agent and find out what’s the next step. Does the agent offer to go survey the properties for you and take pictures and videos (if you are out-of-state)? Is the agent flexible as to when he/she can take you to tour the property? Does this person offer to do cost analysis on the property for you? Do you get the feel that the agent is working very hard to provide you with as much information you need so you can do calculations and possibly make a purchase decision?
As stated earlier, the steps outlined above are somewhat specific. You might feel like the agent is harassing you if he/she tries to communicate more than once a day. This really depends on what stage you are at when you started your property searches. As previously mentioned, at this point I’m ready to make offers. Thus, when I see a good deal coming through, I want to be seeing a lot of actions on my agent’s part. If you’re just testing out the water, this strategy might not be for you.
I suggest you pick up the phone and talk to two or three agents. As long you have done the real estate investing education and have a pretty good idea of why you want to invest in a particular area, be confident you will get a good feel if the agent is a great match for you or not. And if you encounter a mediocre one the first or second or third time (as I did), you will learn a lot through the process. Take your time and don’t hurry to sign any contracts with an agent until you feel really comfortable with this person.
When I made my first phone call to an agent, nobody instructed me on how to talk to an agent or what to pay attention to during the conversation. I probably sounded like a newbie investor and misused certain words/phrases. I didn’t have a chance to read books or blogs on how to find a realtor. Mostly, I just put on my investor hat and asked myself many questions. I’m detailed and cautious by nature and this has worked in my favor so far. I’m also proactive and I don’t feel timid about asking the agent lots of questions.
Don’t be afraid of making mistakes. Use this opportunity to learn as much as you can about the process. Don’t measure yourself against experienced real estate investors. These investors probably have a lot of connections, knowledge and leverage they rely on to make deals happen, but most of them weren’t always this way. They build up their expertise, teams and networking circle over time. And we can, too. Once you are open to taking those first steps, allow yourself to make mistakes and learn along the way. Build your own skillset to become a successful real estate investor. Just make sure you do what you set out to do. And while you’re at it, do this at your own pace!
Readers, what do you think? If you have experiences having worked with a real estate agent, I’d love to hear from you.
If you’ve questions, feel free to ask on the comment section.