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Tip: I strongly recommend that you choose a licensed Realtor®

Teaming Up with a Real Estate Agent March 2007 When first starting out, real estate investors often make the mistake of working without a real estate agent in order to save on commissions. Going agent-less is bad for two big reasons:

Increases exposure to risk. An experienced and knowledgeable real estate agent protects your interests both when you buy and when you sell.
Decreases profit potential. On average, a real estate agent can sell a house in half the time it takes an owner selling it herself, and in flipping, time is money.

In the following sections, we describe seven additional benefits that agents can assist you as an investor that go far beyond simply buying and selling a property. Show you the money As an investor, you probably need some investment capital to get started. A good agent is well connected and knows mortgage brokers in the area who can assist you in selecting the best financing options available. Generate leads The next best thing to money for an investor is a lead on a potentially profitable property. Great agents don't focus solely on MLS listings. They can steer you in the direction of foreclosure properties, REO (Real Estate Owned, bank-owned) properties, HUD (Housing and Urban Development) homes, and other fix-it-upper opportunities. Set realistic expectations If you're guilty of irrational exuberance, you may think that shack you're about to purchase is a gold mine, when it's really a money pit. Without squashing your dreams of success, a qualified agent can rein in your expectations by providing accurate estimates on the future sales price of the home and the cost of renovations. With a great agent working for you, you're more likely to be pleasantly surprised when your profit is greater than expected and less likely to be sorely disappointed by shattered expectations. Highlight the holding costs Holding costs (utility bills, property tax payments, and insurance premiums) can quickly chip away at your profits. An experienced house flipper may be able to buy, fix, and sell a property in a few weeks or a couple months, but most investors require three to six months to execute a flip. If you figure holding costs at about $100 a day, that's a total of $9,000 to $18,000 in holding costs over the course of the flip. An agent who's watching your back won't let you overlook those expenses. Steer you clear of trouble Investors, particularly over-eager beginners, tend to get in over their heads. An agent who's experienced working with investors is more likely to encourage you to take a slow, steady approach. The agent is genuinely concerned about your long-term success, understanding that the more successful you are, the more successful she is. Caution: Watch out for agents who try to sell you as many properties they can in order to rake in huge commissions. Such agents are not looking for a quick buck, not a long-term relationship. Suggest a plan B Sudden, unexpected shifts in the housing market can quickly derail a less experienced investor. In addition to providing you with an early warning, your agent can recommend strategies to survive in a slow market, such as the following:

Drop the asking price on a property that's not selling.
Lease the property until market conditions improve.
Sell your primary residence and move into the investment property.

Offer repair and renovation advice An experienced real estate agent can offer valuable advice to guide you in making savvy repair and renovation decisions. Specifically, your agent can assist you in the following ways:

Discourage you from making the common mistake of over-improving the property.
Focus your resources on the rooms that sell houses-kitchens and baths.
Look for value-add renovations, such as converting unused space into living space.
Recommend affordable, efficient, and reliable contractors.

Long-term agent-client relationships are pure gold for both the agent and the investor. Look for an agent who specializes in working with investors and is committed to building long-term, mutually beneficial relationships. Tip: I strongly recommend that you choose a licensed Realtor® rather than just any old agent, because Realtors® have considerably more training and are required to adhere to a very strict code of ethics. For more good reasons why you should hire a Realtor®, go to Realtor.com. And don't forget to check out our new website GetFlipping.com.

Ralph R. Roberts GRI CRS
"Official Spokesperson of Guthy-Renker Home"
Author of Flipping Houses For DUMMIES
30521 Schoenherr
Warren, MI 48088

Office: 586-751-0000
Fax: 586-582-1694
Lois Maljak: 810-533-3448

ralphroberts@ralphroberts.com

http://www.realtytracker.com/ Guthy Renker Home
http://www.aboutralph.com/ Speaking/Coaching
http://www.ralphroberts.com/ Real Estate Site
http://www.kolleenroberts.com/ Tribute
http://www.flippingfrenzy.com/ Mortgage Fraud Site
http://www.bignail.com/ Branding
http://www.macombcountyvoice.com/ Community
http://www.getflipping.com/ Flipping Houses Site

Posted by RALPH ROBERTS on 03/16/2007 05:54 AM

Comments (17)

licensed realtor sell, real estate, dummies, books, get flipping

17 Comments on Tip: I strongly recommend that you choose a licensed Realtor®

MAR

2007

Great investment advice Ralph. Thanks for posting on AR. There is a wealth of knowledge here and I'm drinking it all in. I dress up homes myself and the biggest mistake anyone can make if over-improve the property especially when the neighbours or neighbourhood does not compare.

Ralph,

Thanks for the post. Excellent suggestions for those selling and buying real estate. Let us hope there are fewer lessons learned the hard way.

Informative post. I wonder how many newbie flippers got burn in the last year. You are so right it is best to work with the agent who has a long term view of the relationship than with an agent who is just there for a quick buck.

Excellent post and thanks for sharing here. Honestly, why would anyone even consider taking the FSBO route in this type of market? Beats me.

Ralph,

The long term, is the way to go. I strive to strengthen the relationship, and show the investor the value of my expertise. It works! The more we know about our market, the better we can serve. Good post.

Ralph, What did you do crawl into my head and copy down most of the good stuff! You sound like me. Americans today look primarily at the short term score card and all too often fail to look towards the 3, 5 and 10 year term. A good agent who approaches business from the long term can and is opportunistic and will urge an investor to act but that recommnedation is more than likely based on well reasoned previous historical experiences. And it is made in light of the clients known long term goals. So looking towards those of us who work on longer based models is more secure for everyone... but hey I am a bit biased since that is how I tend to practice.

Great post and advice Ralph. (I have been working to learn more about the foreclosure market and the investment side as our market seems to have these opportunities right now.) I always appreciate your writings because of the knowledge you share in each of them.

Great advice. I work with different types of investors. Some just want to use me and others want a good long-term honest relationship. I really value the latter.

Great Advice Mr. "Walk Like a Giant, Sell Like a Mad Man". Right your book years ago and still reference it now and then and then just like today your are still giving great advice. I hope all new agents will buy your book and know that the same basic skills your wrote about years ago are still true today. You are a great inspiration to many people in the world Ralph and I am at the top of the list.

Good points Ralph. The smaller the profit margins on flips, the more temptation there will be for investors to try to avoid paying commission to an agent. We all try to cut costs to make a bargain work at one time or another in our lives - try to cut out the professional and do-it-ourselves. It makes me think of all the projects I start around the house...only to scramble and get the professional in the end.

Many folks are pennywise and pound foolish. I had a real estaet investor who was starting out with a home equity line of credit. He was buying and flipping and I sensed that they did not have a strong stomach for it. Hated the idea of a mortgaeg wanted to do it all cash (had no cash?) you know the deal.

Went for a home equity line with a prime minus two rate (good deal) but a four year ppp. Instead to a prime rate with no prepayment. They got in trouble and decided it was cheaper to move into the investment proeprty and sold their home. Opps $4500 prepayment penalty.

The difference in payments from the prime to the prime minus was $1800 over the two years they had the line out. This took $2700 out of their pockets.

I told them to save and stick to CD's.

Awesome post Ralph! I am in South Carolina so you are a little far away from me, but I learned about you through Kandra Hamric. She has been a great mentor and inspiration to me as a virtual assistant myself.

I enjoy your conference calls very much and I have referred some of my realtor clients to join in also as you always have great advice.

I am going to bookmark this post and email it to my agents. Many times they get the clients that want to "go it alone" and this is a great way to tell them that it is not always the best idea.

Thanks Ralph.

Nancy

Ralph:

I was an attendee at the Re/Max New England Meeting in Providence, RI that you spoke at. I thoroughly enjoyed your talk, and your ideas. You were very strongly recommending blogs as the next crucial part for our personal marketing. So, here I am taking the baby steps... and this community appears to be a good place to begin.

Thanks again for the encouraging speech...

Peter

Nicely said - thanks

MAR

2007

I'm ordering your book IMMEDIATELY. I have a listing below market, and the owner does not have available funds with which to improve it. It's low enough that a bit of paint and some inexpensive crown moulding might do the trick, but I'm guessing that your book will give me other ideas, too...talk about rolling up your sleeves- good thing that I enjoy painting...

Ralph, I'm buying your book for my husband. I'm finding bank repo's every day and can't get him to jump on any of them. Maybe your book will help educate. Thank you for the post.

Great advice to potential investors as to the value of a trained, licensed real estate professionls.

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