Apr
30

Most Realtors Are Worthless To Real Estate Investors

Filed Under Real Estate Investing 

Many of you know that during the 80’s and 90’s I was a licensed real estate agent and broker who owned a national franchise office. But most real estate agents and investors are surprised when I tell them that once I “saw the light” as a real estate investor, I surrendered my broker’s license because I no longer wanted to work for tips when I could make “real money” as an investor.

Many real estate investors ask:

Should a real estate investor work with Realtors?

Answer: NO!

There are 3 main reasons to avoid using a Realtor if you want to become a profitable real estate investor.

  1. Realtors cannot get you a deal dramatically below market value. Realtors list properties near the top price range for that particular market. In addition, once a property is listed, it is available to every investor in the market, and competition for the property will drive up the price. This is not where you go looking for a good deal.
  2. Realtors poison your dreams. Successful real estate investors know how to buy property significantly below market value. Most Realtors are completely ignorant of how we function as investors. Realtors are not trained or experienced in finding properties at wholesale prices. An inexperienced real estate investor could be at a disadvantage by listening to a Realtor’s advice and perspective. I can see the so-called “professional” Realtor laughing at them for trying to find wholesale deals, and then telling them they know of a “real deal” where they can get a $100,000 house for a steal…only $95,000! To the inexperienced investor, this Realtor “help” can be career-ending.
  3. Investors are better at selling houses. Realtors like to base the sales price on the average price of homes in the area. By comparison, experienced real estate investors understand that if homes in the area are selling for $250,000, and they have just rehabbed a similar home, it is worth more than $250,000 because their house is much nicer than the comparable sales. Plus,most Realtors base sales prices on MLS sales that do not factor in properties sold by owner/investor. They could be missing the highest comparable sales available and cost you tens of thousands in lost profits!

The 3 reasons above illustrate why I am against real estate investors using Realtors to help them buy property… and that’s coming from a former real estate broker!

However, as with most rules, there are exceptions. Let me explain and define the times when I do think using a Realtor is the good business decision.

When should an investor use a Realtor?

  1. In a SOFT real estate market. When markets are extremely soft a great Realtor can save large amounts of time combing through MLS looking for the best deals.

  2. In a HOT real estate market. A credible Realtor and MLS listing can help create and manage multiple offers. A real estate investor may earn a high net profit even after paying the broker/agent commissions.

    Example: I had just completed rehabbing a house in a lower income area that base on comparable sales had a top value of $125,000. The market was hot and buyers were in a feeding frenzy. Given the upward neighborhood price movement and quantity of buyers, we listed the property at $135,000. We soon had offers coming in from $135,000 to $151,000! And this is for a house worth only $125,000!

  3. The other time to use a Realtor is any time they bring you a great deal. Realtors do occasionally find or hear about incredible property deals.

I understand this article may not be well received by Realtors, but then again, I’m known for telling people what they need to hear, not what they want to hear!

If you have a Realtor or broker’s license and want to start real estate investing, be sure to check all of the state’s disclosure and licensing laws. While there are ways to use the license to your advantage, you should realize having a license can kill your marketing when you follow all of the disclosure laws (i.e. - putting “Realtor” or “agent” on an ‘I Buy Houses CASH’ ad will kill your response rate).

Happy Investing!

Author: Gerald Romine

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