A strong relationship with a knowledgeable and reliable real estate agent can be a vital asset for any real estate investor. Unfortunately, finding the right agent to work with isn’t as easy as it should be.
The industry is flush with inexperienced agents due to a very low barrier of entry and identifying the true professionals from the newbies can be tricky. Not to mention, many agents don’t even know how to calculate a cap rate or an ROI.
So how do you go about finding an agent you trust?
GATHER AN APPLICANT POOL
If your company had a job opening, you would interview multiple candidates and pick the best one. But for some reason, that’s not the way many people approach hiring a real estate agent. It’s no wonder you hear about agent horror stories; imagine if you hired the first friendly person from Craigslist who answered your ad looking for a financial planner.
Start by compiling a list of agents whom you feel might be a good fit. Here are a few strategies for casting the net:
Scour the web. Considering you are currently reading advice about finding your real estate agent on the internet, you may have already known this one. Well done! The web is a great place to find out loads of information about local agents if you know how and where to look.
- Look through listings on any of the large home search sites and make note of the listing agent (usually at the bottom under “listing provided by”). If an agent has multiple listings that have well done staging, photography, pricing, and descriptions in your target market, that person belongs on your list.
- Check their presence on social media, reviews on sites like Yelp and Zillow, and their own websites.
- Make sure not to fall for promoted agents on the home search sites. Many sites sell the opportunity to be a featured agent in a given zip codes to agents, and it shouldn’t be mistaken as an endorsement.
Visit open houses. This is a great, informal way to get some immediate facetime with an agent. It allows you to see their ability to market a property, which will be helpful to know since you will most likely want the same agent to sell your investment when you are finished. A few things to consider:
- How prepared is the agent? An investor-friendly agent is one who isn’t afraid of a little (or a lot!) of hard work. Did the agent put out enough open house signs, come with beautiful marketing flyers, provide refreshments, turn all of the lights on, etc?
- Do you get a good vibe? Of course this is a little judgemental and completely subjective, but you are about to spend many hours working with your agent and must trust them. Go with your gut.
- Is this agent the listing agent? Don’t assume the agent holding the open house is the person whose name is on the sign out front. In fact, many brand new agents are encouraged to host open houses as a way to find their first few clients. Experience level will be covered more below.
Ask friends and family. Go deeper than simply looking for the name of an agent they know because everyone is quick to throw out a random friend who happens to have their real estate license. Ask for the agent they personally used. Find out what they loved about the agent and ask about the things you would value, such as how fast the agent scheduled showings or responded to text messages.
Attend Investor Networking Events. Joining a networking group will be beneficial to any real estate investor. It’s easy to find these groups on meetup.com, Facebook, and LinkedIn. Simply being in a few the virtual groups is fantastic but going the extra step to attend a event will solidify any networking connections which will come in handy when you need an emergency tradesman reference. Find a mentor and get referrals for agents. Plus many investor-focused real estate agents themselves frequent these functions.
NARROWING THE FIELD
Now that you have a large handful of agents who seem promising, the interview process begins.
Speed of response. Foreclosures rates were down 27.3% and the market has rebounded. Gone are the days of investors swimming in potential opportunities so now investors must move quickly and need an agent who does the same. Try this test: reach out to every agent on your list and tell them you are thinking about buying a house and need an agent. Don’t mention that you are an investor or give them any other indication of how lucrative this relationship could potentially be. Wait to see how long they take to return your call. If it’s more than a day later, cross them off the list.
Experienced. The goal is to find an agent who has done a lot of deals similar to the ones you will be looking for. For rentals, consider someone who also owns a few rentals and won’t miss a beat when you ask about potential rents, vacancy levels, or cap rates. For flips, make sure the agent sells a lot of homes similar to your end product.
Having an experienced agent brings endless benefits to the table. They are in touch with the subtleties of the market that a beginner may not know. (For example, a veteran agent in Redondo Beach once told me that comparing 2-on-one lot and 3-on-one lot townhomes were like apples to oranges.) An experienced agent has loads of connections within your town and is often privy to information about off-market properties. They may even help you get your offers accepted over others’. Plus, top producing agents aren’t living commission-to-commission and won’t be emotionally or financially attached to any one deal.
Test drive the agent. Ask the agent to send you some information on a specific house and then schedule a showing with them. This will allow you to see what information they think is valuable and if it is simply the MLS data, that agent may be a bad fit. You want an agent who sends the MLS data plus, if it is a prospective flip, a few comps for the house after the renovation, and a few preferred contractors for quotes. If it’s an income property, look for the agent who sent you some information about what rent you can expect, if the current tenants are staying in the units, and any regulations about renting if it is a part of an HOA.
References. Ask for a few past clients you can call, preferably other investors. You would do it if you were hiring a nanny or an assistant so why feel weird about doing it with the person negotiating huge amounts of money on your behalf?
MAINTAINING A STRONG RELATIONSHIP
Investor-agent relationships can be gold for both sides. The agent gains a consistent source of business and the investor gains a partner who proactively invests time in finding investment leads.
Once you’ve narrowed down the list and hired the agent you feel confident in, focus on building the relationship.
Take it slow. Just as investors encounter numerous unprofessional real estate agents, agents deal with big-talking amateur investors who give them the run around. Don’t come into the relationship promising 10 deals per year and trying to use those hypothetical deals as incentive for the agent to lower their commissions on house #1. It may scare a great agent away. Take it one deal at a time.
Be loyal. Unless your operation is big enough to need multiple agents, don’t use more than one. Working with investors takes a lot more time and energy than working with normal home buyers. It isn’t fair or ethical to expect agents to be working for you if you don’t plan to use them for your next deal. They aren’t volunteers. Unfortunately, many investors do this so agents have learned not to waste too much time in one client especially if they get the impression they aren’t the only agent. Tell the agent that you aren’t working with anyone else and even consider signing a buyer-broker agreement. It will give them the green light to start spending many hours helping you without fear of no compensation.
Take these tips and venture out into the scary world of talking to real estate agents. Happy interviewing! Make sure to check back and tell us which strategies worked best for you.