In my last post, I started to address how real estate agents can best be of service to investors. The operative term for investors, and in turn, the agents working with them, is to BUY RIGHT. The term by itself means little. I have my perception of what it means to me. The definition from the perspective of a buy and resell (Flip type) investor is going to be different than with a buy and hold, landlord type investor.
First, buying right for a buy and resell investor includes all the factors requisite for the investor to go through the steps of owning and profiting on a short term real estate transaction. These factors include locating, closing the purchase, carrying, potentially fixing, marketing, selling and closing the sale on the investment property. All of these steps must be factored in before the investor commits to a property.
Each of these factors has a cost to the investor. If an agent can minimize or eliminate some of these costs, they are providing value to the investor that can turn into additional business for the agent.
So, where best can a real estate agent help an investor to offset costs and in turn, provide value to the investor. First, the agent can identify qualified candidates for the investor to buy. I spend many thousands of dollars monthly marketing to locate suitable properties to invest in. If an agent were to locate property for me, I would either spend less or buy more properties. Both positive outcomes.
Realistically, however, rarely will an agent present me with a suitable property. Very few agents realize the true costs involved and, therefore, underestimate the real spread between what I can pay and what I will ultimately sell the house for. If an agent spends the time to learn how to calculate the proper spread for their investor, they can make themselves indispensable.
Locating properties is typically easier for agents than for most investors, even with the necessary parameters factored in. There are short sales, REO’s, highly motivated sellers, even houses listed as “Cash Buyers Only” rundown, non-mortgageable properties, all listed daily on the local Multiple Listing Service. An Investor-oriented agent is focused like a laser beam on being the first to identify and move on these properties for their clients. They will properly screen these properties and present real candidates to their investors. They will also continue to aggressively pursue the best opportunities until either they buy it or someone else buys it. If they aren’t aggressive enough, someone else will be. Listing agents with a hot commodity can be difficult to work with. The opposing agents need to know that the investors agent is a knowledgeable professional that knows the rules and can’t be intimidated. Eventually, it is possible for a relationship to develop whereby the investor trusts the agent to act on their behalf without making contact with them. The agent helping the investor to buy right. A true symbiotic relationship.
The second area where the agent can add value to the investor is at the time of sale. Performing a proper market analysis and avoiding overly optimistic pricing can save an investor months of marketing time and carrying costs. Honesty, by far, is the best policy. If you mislead your investor about pricing because that is what you think they want to hear, that is short-sighted, unprofessional and ultimately going to cost your investor money and possibly you a relationship. Be sure not to forget to make sure that the buyer you recommend is truly qualified to close the sale. Keep in mind, a strong buyer is much safer and better than a buyer with a higher offer with questionable terms (downpayment, income verification, credit etc.). A fast sale is music to the ears of an investor and if you can deliver that fast sale, even at a slightly lower price, you add value to the investor. Trust me when I tell you there is no better way to proving your worth than a quick, competently handled sale.
In the next post, I will address the buy and hold investor and the requisite different skills necessary to successfully work with them.