Realtors.... Worthless or Priceless?

[AroundTheWorld]

Realtors.... Worthless :smx4r Priceless?

Working with realtors can be frustrating. It can seem like you are paying someone a lot of money to do… well… quite frankly – not a whole lot.

Most realtors, when trying to sell your house will: put your houses information on the MLS, put a sign in the yard, give you a cute little letter or video explaining how to dress your house for success, perhaps do an open house (which actually is aimed at getting the realtor more clients – not at selling your house) and put flyers in the box. Then they sit back and wait to see what the market is doing… Where are the buyers and who will bring one for the house?

Let’s face it… you can do most of that. So, why would you pay oogles and oogles of money to have someone else do it? Many people wouldn’t. This is why we see so many people going the FSBO (for sale by owner) route. It is hard to shell out that kind of cash just to get the typical realtor-client relationship.

But…. it doesn’t have to be that way. You can have an entirely different relationship with your realtor. You can have a relationship that MAKES YOU MONEY.

How?

By finding that realtor that does things differently. It is a hunt. It is frustrating at times. But it is not impossible. There are a few realtors out there that *could* redefine the word realtor. I have found a few that fit the bill – and they are accelerating my real estate investment activities.

Here is what I look for in a realtor.

Is he an investor? I want a realtor that actually understands how to evaluate a deal… and the best way to understand a deal is to do them yourself. Some people object to this idea… thinking that the realtor will keep all *good* deals to himself – and not ever pass along any to clients. Not so. The deal of a lifetime comes along once a week.

Does she come from a mentality of scarcity or abundance? I require an abundance mentality of all my team members…. not just my realtor. When someone believes that resources, deals, money, etc. are scarce - they will fight with you – rather than work with you.

Is he well connected in the community? Much of real estate investing is solving a problem and to solve a problem you need to know who will solve it. Does your realtor know the county sanitarian well? Does he know the contractor with the super duper machine that can scale the mountain in a single bound? If he doesn’t – does he know the person who knows the spiderman contractor?

Does she ask the right questions? I want her to know, my long term investment objectives, my area of comfort (do I invest only locally? regionally? nationally?), my method (fixer uppers, apartment buildings via value play, SFR’s, etc.), what stage am I in??? cashflow? capital gains?, my risk tolerance.

Is he building his business based on inventory (“sure – I can search the MLS for you…†) or is he building based on relationships ( “what are your objectives?â€) I want my realtor to understand my objectives first. The inventory is secondary.

A typical realtor can put you into a duplex at or slightly below market value. A priceless realtor can find out your true investment objectives and put you into the property that will get you there more quickly.

A typical realtor can (maybe) sell your house for you. A priceless realtor can move you from a negative cashflowing SFR portfolio to a larger cashflowing commercial property.

 

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[Russ H]

Big rep points on this one for you, Sonya.

I'll post our criteria for hiring a realtor as a team member later on in this thread.

-Russ H. (who has purchased ALL of his properties through Realtors and RE Brokers, even the ones where the seller came to us first!)

 

[AroundTheWorld]

bump for Russ

 

[Yankees338]

Great post. Just saw it now.

I'd love to hear your input, Russ.

For now, rep for you ATW.

 

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[S928]

A great Realtor = priceless. Sure, most of the leg work is simple in nature, but when time is an issue, the best way to handle a transfer is through a Realtor. Remember, it's in the Realtor's best interest to get all parties in agreeance, so rest assure a great Realtor will handle all the minor details and headaches. If time is limited, hiring a realtor is a no-brainer. In the end, someone will have to get paid, be it a Realtor or an attorney ...

 

[AroundTheWorld]

Let’s face it… you can do most of that. So, why would you pay oogles and oogles of money to have someone else do it? Many people wouldn’t. This is why we see so many people going the FSBO (for sale by owner) route. It is hard to shell out that kind of cash just to get the typical realtor-client relationship.

Lets look at this comment more deeply…

Why, exactly do people FSBO? I think it is because people have such a hard time paying for services they perceive they could do on their own. It is the

DO-IT-YOURSELF-DISEASE. :smxD:

It is all over the place.

• Why hire a realtor when you can FSBO?
• Why hire a general contractor when you can read “General Contracting for dummies”?
• Why hire an accountant when you can buy turbo-tax?
• Why hire the electrician or the plumber or the hot tub repair guy?
• Why hire the property manager?

For anyone that has lived a period of their life in a money deprived situation – this DIYD (Do it yourself disease) has affixed itself to our hearts. After all, haven’t we learned the value of money? Learned not to waste? Learned to survive by doing it on our own?

Unfortunately DIYD has a dire consequence. :nonod: It wastes away our lives with activities that distract from our TRUE direction and mission. Every hour you spend in a DIY activity is an hour you are NOT spending on the path you have chosen for yourself.. (unless of course you have decided you mission in life is to be the DIY guru).

How do you cure yourself from DIYD?

Simple. You truly begin to understand that your time is actually more valuable then your money. You can always make the money again if it goes away. You can not do the day or the hour or the year over again.

Figuring out how to apply this cure… more difficult. The longer you have had DIYD the more ingrained it is in your life. Once you know the cure, it can still difficult to say no to the DIY..

:smx4: And now I must go. I’ve got a house to build, a house to sell, some properties to manage, some projects to develop and some books to keep. :smx4:

 

[andviv]

I think one the biggest reasons for the DIYD is about the nature of MOST of the providers of the services you mentioned:

* Why hire a realtor when you can FSBO? Because MOST realtors suck big time. It is tought to find a good one, and many people have never seen a good one, so they think it is something that anybody could do, and they are right, almost anybody can do a crappy job. The price/benefit ratio is really low in many many cases.
* Why hire a general contractor when you can read “General Contracting for dummies”? Same as above. Finding a good GC is finding gold. Ask a professional investor that deals with rehab's, s/he'll tell you.
* Why hire an accountant when you can buy turbo-tax? Many 'accountants' take your records and, in front of you, enter them in turbo tax, and charge you for that (I had this happening to me years ago, with a CPA refereb by a 'friend'... he charged me $50 for his 'services', so I pay him and ran away as fast as I could)
* Why hire the electrician or the plumber or the hot tub repair guy? Same idea... price/benefit ratio is too low
* Why hire the property manager? Who can't charge the rent, right?

I guess you get my point... which is why the term 'Realtor' is not that popular among investors.

For example, last weekend I went to the Raleigh, NC area to see some properties. The guy I went with had scheduled the appointment with a realtor to show us some properties and the area. During my conversation with her, she mentioned some great, awesome, incredible locations to invest. When I asked her in what she was investing in, she did not answer... as she does not invest. Based on the criteria mentioned in this post you wouldn't hire her as your agent, would you?

 

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[Russ H]

Great stuff.

Will be posting soon-- have not been able to section enough time to do this (it's a long response).

-Russ H.

 

[michael515]

I sold my home 3 years ago and we closed within 6 weeks of posting 1 classified ad and we made money. My point? I know marketing and did an FSBO. While I agree with not becoming a jack of all trades, I couldn't see shelling out 7% to someone who maybe doesn't know how to market. I find most, not all, realtors are following the herd and that herd is not doing much of anything productive.

I read a stat that the average RE agent makes like $18,000 a year. Yikes!!!

 

[CVentures1B12]

I am in the process of finding a Realtor to add to my power team. Just someone to do a bit of legwork for me because my plate is filling up very fast! So....BUMP! (For Russ)

 

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[AroundTheWorld]

Realtors and Communication​

When ever we are looking at a real estate deal, understanding the other person’s situation, goals, and plans for the future is important to me as I formulate my offer. Sometimes, it is hard to get these answers – particularly if there is a (or worse still… more than one) realtor involved.

It is imperative that my realtor understands my need for this information AND my motivation for having this information. It is not to get a leg up or squeeze every last penny out of the deal… it is to put together a true win-win situation. I can’t think win-win if I don’t know what the other party needs, wants, and is motivated by.

So, how can this be accomplished when is using a realtor? We often propose a face to face meeting over coffee…. yes, realtors welcome. This gives us a chance to BS face-to-face with all parties… let them know our intentions and motivations and ask there’s.

Now, as you can imagine, people are not always trusting to this process, and certainly not willing to show all their cards right away. But, they are often willing to answer a few basic questions… Would it be beneficial to you to owner carry? Is the timing of the close important to you? Are you expecting large tax implications from this transaction? Will you be investing in something else after you sell this?

This conversation can help us formulate a deal that will work for both of us.

Making a deal happen is about the people and relationships as much as it is about the inventory. Having a realtor that understands that and learns from you in this regard can soon stand in your place. This is a type of leverage…. find someone that can do it well for you – and free up your time for the next thing.

 

[Russ H]

I'm working around the clock right now (no joke-- this is my 10 min break) to get a full construction plan set done for our B&B (trying to get permits before Jan 1, when the codes change-- argh!!!).

So I will post my story on this eventually-- promise!

Sorry it's taking me so bloody long to get to it. :smx4:

-Russ H.

 

[AroundTheWorld]

Another Factor to Consider when Picking Your Realtor...

Does Your Realtor Understand the Market?​

This seems like a pretty obvious one - but unfortunately it needs to be said...

Have you noticed that the people in the industry (most realtors) seem to be the LAST ONES to understand or admit the change in the market??? Here are 2 real life examples that have occured to us or someone we know in the last week.

#1) We put in an offer on a property. Listed price $199,000. We offered $170,000. Realtor hummed and hawed about presenting the lowball offer. The Bank countered at $195,000. It is Bank Owned. We said no thanks.

We waited.
They reduced price to $189,000.
We waited
They reduced again to $165,000 and called us up. Hmm. Guess they should have accepted our offer!!

This realtor should have acknowledged realistically the market we are in!

#2) Someone we know found a property for sale and called their realtor with a lowball offer. The realtor responded with... "Oh, that is too low. I can't present that!"

Again... WHAT??? Are you kidding me? Have you looked around?

So.... a worthless realtor is one that still ACTS AS IF they did 2 years ago.
A priceless realtor is one that understands that investors are now bargain hunting and lowballs are okay and that this market will take MORE THAN A YEAR to turn around.

 

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[Russ H]

A licensed realtor is required--by LAW-- to present any and all offers.

Most of them don't understand this, which is really cool.

Just take their names, and pertinent info, and file a complaint w/the board of realtors.

AND-- get yourself a real realtor in the meantime.

-Russ H.

We lost our realtor (amazing woman) a few months ago to cancer. We were actually in the middle of a deal w/her.

He husband passed away last week from a broken heart. All of us saw it coming.

I can post my story now. I didn't feel right about it knowing this was going to happen-- had to wait.

 

[AroundTheWorld]

A licensed realtor is required--by LAW-- to present any and all offers.

Most of them don't understand this, which is really cool.

Just take their names, and pertinent info, and file a complaint w/the board of realtors.

AND-- get yourself a real realtor in the meantime.

Exactly!! This kind of conduct is amazing to me! ...

and sorry to hear about your realtor.

 

[AroundTheWorld]

Case in point - - The people in the profession are the last to admit what is occurring.

This is from: Realtors: Home Prices to Post Another Decline in 08

The Realtors, in its monthly economic and sales outlook, is forecasting a 1.2% drop in prices of existing homes sold this year. A month ago it was still forecasting that prices would be flat this year and that a home market rebound in the last half of 2008 would make up for declines in the first half of the year.

Bold is my emphasis.

Find a realtor that is not in denial!!!

 

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[tbsells]

ATW,
I'm a realtor. I've been following this thread with some interest. The worst part of my job is dealing with realtors. There is so much wrong with the profession. I have been very successful by doing the exact opposite of everyone else in the profession. For me its a relationship business, not a transaction business. For those of us who truly work for the client the business is good and plentiful. Many times in my career I've told people "don't buy it." After the initial shock wears off, people appreciate it when they understand the logic behind it. One of the silver linings in this down real estate market is that realtors and mortgage brokers are leaving the business in droves. If think the business would be far more professional, and the public much better served if about 30% left the business. I better be careful, the NAR police will be after me. I think that a good realtor can and will make the client money. The problem is the good ones are hard to find.

 

[Russ H]

tbsells-

Giving a buyer advice (like "don't buy this") may not be in their best interest.

They may see something in the property that you do not.

When I was signing the papers on a house back in '98, my realtor (not the one mentioned above) said, "Is it OK for me to hate this house?"

Surprised, I said, "Sure, you're not the one buying it!"

She went on to tell me how overpriced the property was, being on the railroad tracks and next to the hwy. The fact that I was actually buying it for *less* than the previous owners, and *they* had also bought it for less than the previous owners didn't seem to register w/her.

It was in a GREAT part of the Napa Valley (just south of the town of St Helena).

But it had been on the market for close to a year-- with no nibbles.

Clearly, most realtors-- and buyers-- thought it was not a good buy.

2/3 of an acre with a crappy house on it.

Bought May/June of 1998 for $169,000.

Sold April 2005 for $730,000 (672,000 after realtors commissions).

Yeah, I put a little bit into it (about $160,000).

Still, not a bad ROI (had a HELOC for the improvements, so I was $35K into it out of pocket).

35K invested, $343,000 return ($672K-$169K-$160K = $343K)

=980% ROI in 7 years.

I felt like calling the original realtor when I sold it, and saying, "Do you still hate this house? It's still next to the hwy and the railroad tracks, so it must not be worth much, eh?" :smx4:

-Russ H.

 

[andviv]

I do believe that professionals should provide their professional opinion. That's why you are paying them a commission, isn't it?

That's why it's so important to find a real professional, one that will give you his/her professional opinion instead of telling you what you want to hear, in order to close the transaction and get the commission sooner.

And in the end, the final decision is yours. In Russ' case, his Realtor's advice was what she thought was the right decision, and the need to get a commission wasn't the driver. Russ knew/thought something the realtor didn't, so probably Russ was dealing with a realtor that specializes in buying primary residences for her clients when the 'right' realtor for this transaction was one that understood what Russ will be doing.

I've been in similar situations. I contact an agent and ask him/her to give me listings for properties that have been on the market for more than 6 months and in some specific areas where the rents are more than xyz amount, and what do I get? a listing of all the properties that this agent's brokerage firm has to offer. So, I know right away this is not the agent for me.

 

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[tbsells]

Russ,
Congratulations!

I do offer my opinion to clients on real estate matters. Of course, their decisions are just that........theirs. I have a fiduciary obligation to represent the clients interests. While it is always in my best interest to be paid a commission, it is not always in the clients best interest to make the purchase that will result in the paycheck for me. I keep their needs ahead of my own. It works....its probably been 12 years since I've made a cold call, sat an open house, or driven people over half the country looking at houses. Yet, the business keeps growing. Repeat business and referrals from past customers/clients make up almost all of my business at this point.

The switch from a transaction based mentality to a relationship based mentality is a powerful one. It gives you the freedom to give good advice based on the clients needs, wants, desires and goals. That is alot different than selling based upon your need to eat or make a car payment. I made some successful investments in my early 20's that allowed me to focus on serving the client instead of my self. My Dad taught me to focus on service, not on money. He said if you provide the service and fulfill the clients needs the money will come, and it has.

I do speak my opinion rather boldly on real estate matters. I am almost always representing clients less knowledgeable and experienced than I. In the past 18 years I have sold approximately 1100 homes. I've bought and sold about fifty of my own, developed a subdivision, built (general contracted) about 20 homes and appraised several hundred. I'm known as an expert in the area. If I don't speak my mind, frankly I think I'm doing the client a disservice. My knowledge and experience are probably why they want to work with me. And, as we saw posted last week on here the courts are starting to look at holding agents responsible when their clients purchases don't turn out well.

I tend to work with the same people over and over again. We have a level of comfort. If I think the property is a dog, I'll tell them. If I think they are paying to much, I'll tell them. They can still buy it, of course. I just ask that they remember what I said. I really think that if more realtors handled their business they way I do we would be thought of as professional instead of cussed at.

If your interested I would be happy to give my opinion of whats wrong with the business. Its rather lengthy and I don't know if anyone cares.

 

[Russ H]

tbsells-

By all means, do give your thoughts.

This is the perfect thread to do just that!

-Russ H.

 

[AroundTheWorld]

You wrote:

The switch from a transaction based mentality to a relationship based mentality is a powerful one. It gives you the freedom to give good advice based on the clients needs, wants, desires and goals.

and

I've bought and sold about fifty of my own, developed a subdivision, built (general contracted) about 20 homes and appraised several hundred. I'm known as an expert in the area.

++ This is awesome. These are two key points to being a priceless realtor. No wonder you are getting repeat business.

Are you an exchangor?

 

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[tbsells]

ATW,
Thanks for the rep. I'm not an exchangor. I'm not familiar with the term. Can you fill me in?
Thanks

 

[andviv]

about exchangors...
http://www.nce1031.net/
http://www.infoville.com/

It is great to count with your expertise here in the forum.

And yes, definitively, please do post about the profession. My take on this is, there are just too many looking for a part time job/second income and this profession has a low entry barrier.

 

[Jorge]

The switch from a transaction based mentality to a relationship based mentality is a powerful one. It gives you the freedom to give good advice based on the clients needs, wants, desires and goals.

Great words! rep++

I'm reading a book for Argentinian's realtors and basically it says exactly the same. It urges every realtor to make a change in the way the approach the business.

My uncle is a well known realtor in Buenos Aires also. And I can definitely say that he has made the same as you did. Now he almost makes no advertising because his client's are always referring more people.

I think this switch can be made in almost any kind of business, benefiting everyone involved. I want to hear more of what you think.

Cheers!

 

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[tbsells]

My take on this is, there are just too many looking for a part time job/second income and this profession has a low entry barrier.

Great call Andviv! These 2 points are 90% of the problem. I could type for an hour and not say much more.

Case in point: I got my real estate license about 2 weeks after high school graduation. The total investment of my time was 30 classroom hours and a 3 hour test. I did not begin working at that time because I spent the next 4 years earning a BSBA, but I had the license at 18 years old. My girlfriend at the time (now my wife) went to beauty school to get a cosmetology license. Her time commitment was 1800 classroom hours and an 8 hour test. I helped her study, and believe me her test was much harder than mine. Think about that: In 30 classroom hours you can go from being fired at McD's to helping guide someone through the biggest financial transaction they will ever make. But, If you want to give that same person a haircut it takes about a year and a half of school.

As Andviv said the barriers to entry are way to low.

 

[AroundTheWorld]

What is an Exchangor?​

An exchangor - by definition - is a real estate agent that helps people trade or exchange properties rather then sell properties. It sounds pretty basic, but it actually goes much deeper then that.

An exchangor is a real estate agent that practices many of the values I have mentioned previously...

The business is relationship based. In fact, many established exchangors will not take on new clients. They recognize that they have a duty to the client base and will not stretch themselves too thin.

They are investors themselves. Most exchangors I know are investors as well. They walk the talk and truly know the game.

They are connected. There are regular local, regional, and national meetings. It is a big "deal" clearing house.... new deal presented every 4 minutes. These guys really get to know each other, do deals with each other, and have developed a huge nationwide network. Want to get into a JV? They have the contacts. Want some hard money? They can find it. Want to lend your money on a deal? They can present it. Have a problem? They can present it in a "brainstorming" session and get the brainpower of the room focused on that problem for a few minutes. I have seen it first hand and it is pretty darn amazing.

They are creative as all get out. They really know how to look at the desired result (more then simply 'sell the house') and connect the steps to get there. Exchangors use something called "formulas." Formulas are basic methods that can be applied to a generic situation. Here is an excellent resource for some formulas.

This is my current favorite formula. Say you have 4 to 10 SFR and you are ready to make the transition to commercial or multi-family. They are worth 2,000,000 and you have 1,000,000 in debt. You can "walk-the-debt" by going up. Exchange into a 4,000,000 property. Deliver your houses to the apartment owner as a down payment. There is 2,000,000. Now, you need to borrow 2,000,000 plus an additional 1,000,000 to pay the debt on your house.

If you are able to deliver those houses free and clear to the other party in the transaction, it is more appealing to them - and makes the transaction more likely to occur. Why? A free and clear house is a "crankable" asset. The new owner can "crank" cash out.

An exchangor can get to know you - - - your current situation, your goal, your risk tolerance level, etc. Then they can hook you into the network and apply the best formula for your circumstance.

If you are looking at hiring a realtor - I definitely recommend going with an exchangor. It can excellerate your REI career in ways you can't even yet imagine.... I find myself in awe a few times a year at the ideas that come from exchangors. If you ARE a realtor, I also definitely recommend becoming an exchangor.... especially in today's market. When cash dries up - properties can still move and people can still reach their goals through exchanging.

 

[andviv]

Glad you posted this today.
I am in the middle of a transaction very similar to the one that you just described in this example.
On my own I'd have never come up with this strategy, but my advisors understand the value of exchanges and now I got a new way of doing deals.

 

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[PEERless]

Here is an excellent resource for some formulas.

Hell yeah!

 

[AroundTheWorld]

Hell yeah!

Couple your basic knowledge of these formulas with an exchangor as a part of your REI team - - - and you can accomplish goals and solve problems in "no" time.

In my experience, it isn't just enough to know that these creative ideas exist. You have to work with people that actually know how to sell the ideas, find other willing parties and properties.

Exchangors know how to effectively "counsel" their clients.... teach them some of these creative formulas, show them how they can get from point A to point B in a few steps (you may need to trade through a few properties before you get into the "ultimate" property), and connect with other exchangors (who also have counseled clients that understand the advantages of exchanging)

One of my favorite things about working with exchangors is the synergy they create. We have gone to a national exchangor meeting twice a year for the last couple of years..... the brain power in that room coupled with an honest willingness to work together and form win-win situations is amazing.