Myths about Real Estate Agent & Investor Relationships
Perhaps one of the most beneficial partnerships in today’s Real Estate Market is one between Agents & Investors. With inventory being historically low, these partnerships could provide unique solutions to new home buyers & the rental market by bringing new life to existing properties. While the Agents are skilled in helping clients navigate the buying & selling process, the Investors are the experts in assessing deals & recognizing potential profits of these types of homes. When Agents & Investors bring their expertise together, they can provide value not only to each other but to the entire Real Estate Market as well. According to Zillow, there are some pretty common misconceptions about both sides of these types of partnerships, however. These Myths include:
Real estate agents want the easiest commission.
Real estate investors work agents to death with few actual deals.
Real estate investors only want agents to provide information; they’ll do their own contract deals.
Real estate agents do not understand the needs of the investor.
Although every industry has its inexperienced or misinformed professionals, a majority of the relationships are between the experts in their area. By establishing an understanding of the value each can provide, Agents & Investors can work together to become more profitable while providing solutions to the low housing inventory. Let’s take a look at the roles each provide to the Real Estate Market.
Real Estate Agent Roles
As we mentioned above, the Real Estate Agent primarily focuses on the relationships with the buyers & sellers of the home. This could include strategizing the sale/purchase, analyzing the market, discovering the goals of the buyer/seller, assisting with the legal paperwork, & managing the relationships between the buyers & the sellers. So how do Agents use their expertise to assist Real Estate Investors?
Here are 6 Tips for the Real Estate Agent:
1. Understand How Investors Value Property
Since Investors are looking for profitable properties for their fix & flips and rental homes, knowing how they value the property is very important. These financial calculations are different than traditional Real Estate transactions, especially when factoring in the rental market in different areas.
2. Know The Markets Your Investor Clients Are Interested In
Different markets offer different opportunities & different challenges. Knowing which market your Investor Clients are working in & the conditions in that area can assist Agents in building relationships with their Investors.
3. Become Efficient In Your Purchase Offer & Negotiation Process
In the current marketplace, there’s no doubt that speed is key in buying & selling a property. Having an efficient system for offers & negotiations is becoming increasingly important to Investors & Agents should consider using software technology to streamline/automate as much as possible.
4. Recognize The Value Of A Ready & Able Client
Typically, your Investor Clients are a lot more experienced in the market than your first-time home buyers. There’s a lot of value for the Agent to partner with someone who is ready & able to make a decision on whether to buy or sell as the emotional, financial, & educational challenges are typically not a factor.
5. Understand That Low Offers Are Part Of The Process
When working with Investor Clients, it’s important to remember that they are not falling in love with the home, rather they are falling in love with the financial benefits. It’s a natural occurrence for investors to push for the lowest costs possible at every step during the transaction.
6. Start The First Conversation Off Right
Being well versed in the current market conditions is the first step in building a successful partnership with an Investor. Agents should take the time to understand the methods used for determining property values, the technology used to be efficient in transactions, & an in-depth understanding of rental income calculations.
For more advice for working with a Real Estate Investor as an Agent, view the Zillow’s 6 Tips & Tricks Article Here.
Real Estate Investor Roles
While Agents focus on bringing in potential deals, Real Estate Investors are the experts in analyzing the financial outcomes of owning the property. How much is needed for repairs? What is the monthly cash flow? How do property taxes & shifting market demand impact the rental income? These are questions that help Investors determine if a property would be profitable to purchase, fix & flip the home, or turn into a rental property. So how does a Real Estate Investor partner with an Agent?
Here are 5 Tips for the Real Estate Investor:
1. Understand The Agent’s Bottom Line
Since Agents only get paid commission when there is a closing, keep in mind how often you use their expertise & services. As an Investor, having a partnership with an Agent can be highly valuable for everyone so bringing deals to a close is important to building the relationship.
2. Be Upfront About Your Requirements
Setting expectations for the partnership early on will also help to develop the relationship. Requiring assistance for every aspect of the transaction is a bigger commitment than simply bringing a potential deal to the table. Talk to your Agent about the property showings, legal paperwork, financial workflows, etc. to ensure all the bases are covered.
3. Prepare An Agent “Cheat Sheet”
Take some time to lay out your needs as an Investor, and think about what skills you need from the Agent(s) you work with. Put together the “Cheat Sheet” of how they can better serve you as their client. Doing so will help that Agent help you to become more profitable in your Investment Portfolio.
4. Be Clear About Your Offer & Sale Expectations
How much do you want the Agent to be involved during the offers & transactions phases? Do you want to consult them on the pricing & rental rates? Or do you simply want them to do the paperwork & pass the offers? Discussing this with your Agents can help you craft a more valuable deal & may even help with cost reductions for the Investor.
5. Be Honest About Your Partnerships
It’s pretty common for Investors to work with multiple Agents, especially when the particular market requires more niche relationships. There are many reasons to use multiple Agents including better prices point for certain home types, residential vs. commercial Agents, or maybe even having multiple markets you’re operating in. Letting them know that you have multiple relationships is a good practice for building trust & communication without going into too many details.
Advantages to Home Buyers & Sellers
There are plenty of advantages of having Agents & Investors work together to improve the housing market. By combining their expertise, the Agents & Investors can work together to provide unique solutions for properties that may have gone overlooked. With historically low inventory & a very high demand in the market (Q1 2022 Twin Cities Market Update), finding opportunities to utilize the homes already built can make a large impact on the market. When Agents & Investors build relationships & partnerships, they can leverage their combined expertise to be more efficient & cost-effective, ultimately passing on these solutions to future home buyers & renters.
For a more in-depth analysis of the market, please reach out to Schedule a Call with a brief overview of your needs (Investor/Agent, Buying/Selling, etc.).
Agent & Investor Partnerships Sources:
Zillow.com: Real Estate Agents and Investors: A Win-Win Relationship
Zillow.com: Agent Tips & Advice: Working with Real Estate Investors
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