The working relationship between agents and real estate investors has never reached its full potential. Often times, realtors fail to acknowledge the benefits of working with investors and investors avoid agents to bypass their commission fees.
Most realtors refrain from working with investors because they are focused on short term results. They value medium to high ticket transactions over the potentially lower ticket ones that investors are interested in.
These two types of real estate professionals tend to neglect how beneficial it can be to work with one another. For agents, servicing full time investors can be incredibly profitable in the long run. For investors, real estate agents present many value-added propositions to their ongoing business. Understanding how to find an investor friendly real estate agent can be a key piece of the puzzle.
Despite dealing in traditionally undesirable properties, investors are still valuable clients. If real estate agents remain open minded about working with them, they can capitalize on their long term worth.
All good agents strive to build relationships with clients to encourage repeat business. They use promotional materials to remain top of mind for previous clients, waiting for their next move. But, since the majority of homeowners only buy or sell once or twice in a lifetime, these marketing tactics may be hitting a dead end.
Traditional home sales undoubtedly generate larger commissions than investment property sales. However, these commissions tend to be earned less frequently. After a homeowner’s initial real estate transaction, their potential dollar value diminishes. Agent’s, typically, cannot count on recurring business from them.
Agents seeking repeat business from the same client should consider working with investors. Investors depend on a steady flow of deals to support themselves financially and need the help of a realtor more often than the traditional home buyer or seller. In fact, successful investors often do one or two deals per month, ensuring regular business for the agent involved. Fix and flips are the perfect example where agents can partner up for a mutually beneficial transaction.
Agents who work with investors can expect a more consistent and predictable flow of business. The long term client value of an investor is extremely promising. Rather than working to establish relationships with large amounts of clients with infrequent upside, real estate agents can foster relationships with a handful of investors and count on them for frequent transactions.
Lightning fast deals
It’s easier for investors to commit to a fix and flip property that they may only own for six months than it is for a future homeowner to commit to a house that will be theirs for a lifetime.
Some agents get stuck working with a client for months or even years looking for the “perfect home”. Those who aren’t time pressed to buy or sell tend to nitpick specific details of homes; all the while taking up an agent’s time and resources. Since investors rely on real estate to make a living, they are always serious buyers. Rather than casually shopping the market like many homeowners – they are ready to buy.
Investors don’t have time on their side. The success of their business depends on speed. Investors must move quickly to beat out competitors and capitalize on hot markets. They must also sell quickly to minimize holding costs. Experienced investors flip multiple houses simultaneously and can turnaround a project in just 9 months (that’s the average for one of our borrowers); for them, the faster the better.
Agents who work with investors can reap the benefits of speedy transactions and earn quick commissions. With the right collection of investor clientele, they can expect to do 5 to 6 deals per month, earning separate commissions on each one!
An investor occupies two different roles during an investment. In the first leg of a project, they are buyers searching the market for properties. In the latter half, they are sellers listing rehabbed properties on the market.
When an agent provides exceptional service to the investor on the buying end, they will often be trusted to handle the sale as well. This means that the agent is entitled to two separate commissions. They receive a buyer’s agent commission on the way in and a seller’s agent commission on the way out.
Investors are typically plugged into the local real estate community. They often attend meetups, events, and conferences to network with other investors and real estate professionals. This networking provides a window of opportunity for agents to earn referral business.
Since investors are social people, they are sure to spread the word about a trustworthy and helpful agent. Sometimes, agents will receive indirect referral business from an existing client.
If an agent suggests a property that doesn’t meet their client’s needs, it still may work for another investor. Each investor has a different comfort zone and different margins to hit. A property may be desirable for one investor and undesirable for another. Investors know this and will often recommend properties that they can’t use to other investors who can use them; all in hopes that they return the favor in the future.
When an investor passes on a property and suggests it to someone else, the agent in charge earns a new client in the process. This process is repeatable at scale, so long as the agent continues to find quality investment properties that can be circulated throughout the investment community. Just like real estate agents having a relationship with a mortgage broker, it can work the same with an investor. It’s all about building confidence in one another.
Traditional home buyers make purchasing decisions based on emotions and aesthetics. They want a home that looks and feels right. These qualifications are subjective and tough for an agent to grasp, making it difficult to suggest the right properties.
Investors base decisions on numbers. Their criteria in searching for an investment property is specific and well defined. If they can’t find properties at a steep discount with value-added potential, they move on.
Working with a client whose criteria is predictable makes it easier for the agent. When they understand an investor’s target numbers, realtors can more efficiently suggest listings for that client. There is less back and forth passing on properties as both parties are on the same page.
Also, since investors understand real estate, they more adeptly handle all of the minutiae involved in the transaction. Investors understand the documentation and what’s expected of them, which means they typically move quicker and don’t need as much help throughout the process.
This is all to say that working with an investor can make an agent’s job much easier. He or she can spend less time explaining paperwork and showing the wrong properties, and spend more time productively building their business.
Investors have high demands and need agents willing to keep up with their fast paced business. If an agent is up to the task, he or she stands to open up new business channels that will continue to develop and flourish into larger opportunities in the future.
Additional Real Estate Resources Worth Reading
- Real Estate investment strategies – What are some of the best investment strategies.
- What is a dual agent in real estate – Learn why dual agency does not benefit buyers and sellers.
- Home selling myths to avoid – What are the top home selling myths you need to avoid.
Use these additional resources to make smart decisions when buying or selling a home.
Bio: Eric Krattenstein is the Chief Marketing Officer and Head Of Sales for Asset Based Lending, a private commercial lending firm that finances fix and flip investments for thousands of real estate investors each year. Prior to joining Asset Based Lending, Eric led a boutique marketing agency.