Finding and Working With Good Agents for Out of State Purchases (Part 1)

In this edition I am going to chat about how to locate and work with real estate agents. I am going to talk candidly about agents from an investor’s vantage…and I recognize that I run the risk of being a bit offensive to agents and brokers because of that. I’m certain to cross the line for many real estate agents, but I am dealing in matters of investor practicality. Investors and agents come from two different worlds, and they don’t necessarily agree with each other.

While I am a big fan of For Sale By Owner deals, there’s no doubt that the vast majority of real estate transactions take place through agents, so the agent angle is one you really must master.

Collectively, agents have made me about $250,000 over my last 4 deals – so, we’re not talking about small change. But, you are not going to access those kinds of deals if you simply try to grab properties & agents at random. If you just walk in the door and ask to speak to an agent you aren't going to succeed at much (except for perhaps getting frustrated!). It takes a certain amount of interpersonal skill, rapport, and instinct to pick an agent well.

Now, let me say that on whole, I really don’t have a lot of good to say about the real estate agent community. I’m not talking about specific agents, or even the industry as it wants to be. I’m talking about what I like to call the “nit whit factor” represented by the bulk of agents. I can say, with all sincerity, that some of the most repugnant and clueless people I’ve ever crossed paths with have been real estate agents. There’s just something in real estate sales that seems to attract a particularly poor crowd of people, and in many cases, people choose real estate for all the wrong reasons. I also think that certain factors within the real estate industry serve to propagate those problems.

Great agents are just that – fantastic professionals who are worth their weight in gold. The problem is, I think only about 1 out of 1,000 typical agents is any good, and only about 1 out of 100 solid agents is any good to an investor. Again, I am not trying to affront good, hardworking agents – it’s all the others that make up the bulk of the industry that I’m at odds with. It's almost comical how many agents just want to list a property, put it in the multiple listing service and wait for everyone else to do all the work...yet collect a commission check from that!

Buyer's Agents and Seller's Agents
Let’s begin by getting all you newcomers up to speed on the difference between a seller’s agent and a buyer’s agent. A seller’s agent works for the seller, and their duties and responsibilities are to the seller’s best interests. A buyer’s agent works for the buyer and their duty is to the buyer’s best interests. The problem is, when you call on a listing, by default you are dealing with a seller’s agent, and that leads to a lot of natural roadblocks and conflicts. Even when you have an agent who appears to be excitedly offering you listings and information, if you don’t have an agreement otherwise, seller’s agency is implied – so they are really still in the seller’s corner.

Unless you are fully comfortable with that arrangement, and representing yourself in negotiations, your best move is to get a buyer’s agent working for you, who can get you information on multiple listed properties, provide information on the comments in the MLS, etc.

But, buyer’s agency can have it’s problems as well. Do you remember what I said a moment ago about the real estate industry propagating certain problems? One of them is the notion of exclusive agency. That is, when you sign an agency agreement – buyer’s or seller’s, that person has an exclusive right to represent you. That works OK if you are a seller, because even though you only have one official agent, they are co-oping your listing to all the other agents through the multiple listing service. So, if your agent isn’t that productive you at least have all the agents seeing your property through the MLS.

With an exclusive buyer’s agent, however, if your agent isn’t productive, you are stuck. And, you’ll find that many agents want you to sign that agency agreement before they ever talk to you or supply leads. I've had agents on more than one occasion wanting me to sign an agency agreement before they ever even got to know me and my objectives!

The problem is, with exclusive agency even if YOU find the property, unless it was spelled out otherwise the agent would be entitled to a commission. So, if the agent doesn’t produce, and you end up scouring the area, they still expect to get a commission on the deal. In most cases, buyer’s agent commissions are paid by the seller and you don’t have to pay it, but if you were to find a for sale by owner (FSBO) deal, the seller might not be at all amenable to paying the commission, meaning you’d be stuck for the bill for a deal that this agent didn’t even find you!

I had this happen on one occasion in which an agent in Florida, who if I said did the most minimal work that would have been a compliment. It was a scenario in which I was doing all the looking, filtering and so forth. This agent wanted to sue me for a commission on a FSBO he didn’t even find! Fortunately, I did not have any kind of agreement in force with him, so there was no leg for him to stand on. But, it still illustrates what I am talking about - he did virtually no work for me in finding the deal, but he expected to get a piece of the pie just the same.

So, how do you avoid this? Sign agency agreements only for a single property at a time – one that you are transacting, and just deal with the realities of the implied seller’s agency until then. That is, until you find an agent you can trust and for whom you’d like to give exclusive business.

So, that leaves us with a strategic challenge. Do you call all over town to individual agents, talking to them about their listings, or do you engage just one agent and give them your exclusive attention? The answer is a bit of both.

Calling individual agents is more expedient in the beginning, and the perfect way to source agents. It takes time to find a good agent to work with, and you just aren’t going to have access to one when you first go into a marketplace. So, you start by calling agents on their particular listings, and as you chat with them about the property, you also take the time to interview them for your affairs. Your “interviewing” can take the form of candid questions, and subtle, stealthy interactions designed to gauge them as potential agents.

Certain agents will immediately disqualify themselves by being abrasive, discourteous (particularly when they hear you are an investor) or apparently inexperienced. A whole host of others will disqualify themselves by not doing what they will say they will do. I can’t tell you the number of times I’ve had lengthy, impressive conversations with agents who then never bother to send listings or call me back. Apparently many agents don't want to do the hard work and prefer to pursue the comfy process of dealing with the buyer who is sitting in their office with a check in their hand.

I even had a situation where, not realizing I had dealt with a particular agent previously, I even went through their "failure to follow-through" process twice….with the same agent! In other words, not only did they peter out the first time, when I mistakenly opened up a transaction with them a second time, they petered out again. You wouldn't have expected it from their conversation though.

A final round will disqualify themselves shortly down the road. Perhaps you’ll get an initial round or two of listings or a couple of phone calls, but then they move on to what they think are bigger fish to fry. We out of state investors look like a tough project, and many investors just choose to work the easy angles with local preapproved buyers waiting to go.

In my experiences you will probably contact between 25 and 50 agents in a given market in order to find from 1 to 3 agents who are really top-rate. So remember those statistics. It's a lot of hard work and communication on your part, but when you find that top-notch agent, they really are worth their weight in gold.

Next time I will discuss a series of criteria to look for when seeking and interviewing an agent.

Until then, keep seeking those investments, and live your real estate dreams!