Why Agents Should Work With Investors
Some real estate agents just do not get it! Especially those who work in a relatively active market.
I read a USA Today article about the dismal numbers agents deal with to make a living. The numbers I am talking about are income, broker splits, hours spent driving around finicky buyers, and marketing dollars spent on listings which go stale.
According to the article agents average income is dismal during the firsts two years. In my opinion their numbers are painful even for the experienced who hang around for 16 years or more.
Check this out. The article quoted these numbers from the National Association of Realtors (NAR).
Average annual income during first two years is $15,300 (before taxes and expenses). Income for 3 -5 years, $44,200. Even the grizzled veterans who stick with it for 16 years or more average $76,200. And believe me they earn every dime with constant hard work, no time off and crazy hours.
And these numbers are getting worse all the way around!!
Just think, by contrast the average profit of a new wholesaler is as much as the annual income of the agent with 2 years in the saddle. And, I might add, with a fraction of the work. But, that is another story. Do not get me started.
The agents I meet who get it, by IT, I mean they understand where the real money is in this business. I usually meet these renegade agents at a real estate investment seminar.
Just last week I met an agent who works in the Northern VA market just outside DC. Now, this guy gets it! His business model is to work with fast action cash paying investors.
This agent is extremely rare in his market. He has figured out how it is better to string a few fast closing deals together without the usual hassles of a retail deal. He works in the wholesale side of the business.
He has dedicated himself to locating properties at wholesale prices. He analyzes them quickly, makes a brief call to one or two of his HOT buyers who jump into action. In less than a month the agent is in and out of the deal, with check in hand. Do that a few times, the commissions add up quickly.
Sure, there are a few REO (REO= Bank owned) agents doing similar tactics. Mostly in markets where things are slow. However, when the real estate retail market is hot most agents forget about investor buyers.
Even though sales have slowed here in my DC market, most agents still do not get it. Here is an actual example:
Agent lists a junker house at $750K, which has an ARV (retail value) of $850k. He is told by Joe the handyman the house needs $50k to fix. The agent is holding out for a sucker.....er, eh I mean a retail buyer who will pay top dollar. As a result the house sits. It sits for a year, and the agent still does not get it.
The agent wastes everyone's time. Usually he is driven by greed and ignorance. What a combination.
Now lets look at how a savvy agent might look at the same situation. She does her homework; ARV is $850k with 60 days to sell. She contacts a licensed reputable contractor, who actually does renovations. Fix up is $150k, she advises the sellers of the numbers. She is in charge of the situation.
She explains to them that to get a quick sale, she could contact her investor/developer clients who can purchase in less than 30 days. But, the price must be reduced to the low $500s a realistic number. You will be in and out with your money in hand with no hassles, she tells them. She will even refuse to work with them if they are uncooperative.
In the second scenario everyone wins. The sellers are rid of a time and money sucking junker house. The investors have a project the paid a fair price for. And this smart agent is in and out with commission check in hand. Ok, the check is smaller, but she is done four such deals like this while the first type of agent sits on a stale listing for a year or more only to eventually bring his price down to the $500k range.
Another thing the smart agent understands by working with investors is having a solution for those seller crises which have a short fuse. If there are just days left before an auction, most agents walk away. If the seller owes more on the property than it is worth the agent walks away. Same with liens, structural damages, legal damages etc.
As an investor it is up to you to show the agents in your area why they need to work with you. Show them how working with you will benefit their business. This will be easier if you are in a slow or declining market. The challenge is if you are investing in an active market. Agents will not get it.
The NAR has predicted the continued dropping of agent incomes this year. Many, 25% of agents, were licensed over the last five years, during the boom years. These agents are most vulnerable to the changes. Gone are the easy deals where you stick your sign in the yard, sit back and wait for competing offers.
Many of these new agents are bailing out of the business with tails tucked. So, while you go about your daily business of locating and selling properties, add a few agents to your team. Work only with the ones who get it.
Here is another tip to grab the agent's attention. Offer to give them leads for listings. That's right. As you market and talk to sellers you will realize many do not have urgent situations and would be better off listing with an agent.
In turn your new agent contact will gladly pull comps for you and work with you on various deals.
Remember, agents need us whether they realize it or not.
Take Action!
Ken Williams
http://www.thewholesalewizard.com/
Some real estate agents just do not get it! Especially those who work in a relatively active market.
I read a USA Today article about the dismal numbers agents deal with to make a living. The numbers I am talking about are income, broker splits, hours spent driving around finicky buyers, and marketing dollars spent on listings which go stale.
According to the article agents average income is dismal during the firsts two years. In my opinion their numbers are painful even for the experienced who hang around for 16 years or more.
Check this out. The article quoted these numbers from the National Association of Realtors (NAR).
Average annual income during first two years is $15,300 (before taxes and expenses). Income for 3 -5 years, $44,200. Even the grizzled veterans who stick with it for 16 years or more average $76,200. And believe me they earn every dime with constant hard work, no time off and crazy hours.
And these numbers are getting worse all the way around!!
Just think, by contrast the average profit of a new wholesaler is as much as the annual income of the agent with 2 years in the saddle. And, I might add, with a fraction of the work. But, that is another story. Do not get me started.
The agents I meet who get it, by IT, I mean they understand where the real money is in this business. I usually meet these renegade agents at a real estate investment seminar.
Just last week I met an agent who works in the Northern VA market just outside DC. Now, this guy gets it! His business model is to work with fast action cash paying investors.
This agent is extremely rare in his market. He has figured out how it is better to string a few fast closing deals together without the usual hassles of a retail deal. He works in the wholesale side of the business.
He has dedicated himself to locating properties at wholesale prices. He analyzes them quickly, makes a brief call to one or two of his HOT buyers who jump into action. In less than a month the agent is in and out of the deal, with check in hand. Do that a few times, the commissions add up quickly.
Sure, there are a few REO (REO= Bank owned) agents doing similar tactics. Mostly in markets where things are slow. However, when the real estate retail market is hot most agents forget about investor buyers.
Even though sales have slowed here in my DC market, most agents still do not get it. Here is an actual example:
Agent lists a junker house at $750K, which has an ARV (retail value) of $850k. He is told by Joe the handyman the house needs $50k to fix. The agent is holding out for a sucker.....er, eh I mean a retail buyer who will pay top dollar. As a result the house sits. It sits for a year, and the agent still does not get it.
The agent wastes everyone's time. Usually he is driven by greed and ignorance. What a combination.
Now lets look at how a savvy agent might look at the same situation. She does her homework; ARV is $850k with 60 days to sell. She contacts a licensed reputable contractor, who actually does renovations. Fix up is $150k, she advises the sellers of the numbers. She is in charge of the situation.
She explains to them that to get a quick sale, she could contact her investor/developer clients who can purchase in less than 30 days. But, the price must be reduced to the low $500s a realistic number. You will be in and out with your money in hand with no hassles, she tells them. She will even refuse to work with them if they are uncooperative.
In the second scenario everyone wins. The sellers are rid of a time and money sucking junker house. The investors have a project the paid a fair price for. And this smart agent is in and out with commission check in hand. Ok, the check is smaller, but she is done four such deals like this while the first type of agent sits on a stale listing for a year or more only to eventually bring his price down to the $500k range.
Another thing the smart agent understands by working with investors is having a solution for those seller crises which have a short fuse. If there are just days left before an auction, most agents walk away. If the seller owes more on the property than it is worth the agent walks away. Same with liens, structural damages, legal damages etc.
As an investor it is up to you to show the agents in your area why they need to work with you. Show them how working with you will benefit their business. This will be easier if you are in a slow or declining market. The challenge is if you are investing in an active market. Agents will not get it.
The NAR has predicted the continued dropping of agent incomes this year. Many, 25% of agents, were licensed over the last five years, during the boom years. These agents are most vulnerable to the changes. Gone are the easy deals where you stick your sign in the yard, sit back and wait for competing offers.
Many of these new agents are bailing out of the business with tails tucked. So, while you go about your daily business of locating and selling properties, add a few agents to your team. Work only with the ones who get it.
Here is another tip to grab the agent's attention. Offer to give them leads for listings. That's right. As you market and talk to sellers you will realize many do not have urgent situations and would be better off listing with an agent.
In turn your new agent contact will gladly pull comps for you and work with you on various deals.
Remember, agents need us whether they realize it or not.
Take Action!
Ken Williams
http://www.thewholesalewizard.com/
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