Real Estate Agents Are Your Allies

Transcript:

A topic that I run into occasionally enough times that it’s important enough to make a video about is why a buyer, especially an out of state buyer, would not retain the services of a licensed real estate agent in order to buy property. It is not uncommon, especially when we sell property, we list it for sale, that we have out of state investors reach out and tell us they want to put a bid on the property.

Now, keep in mind when we list a property, we represent the seller. That’s our job. Those are our clients. Everyone else is a customer. They come through the door. The example we tell over here is when you go to Walmart, the Walmart return department, Walmart is their client. That is who they work for. That’s who they’re responsible to get their paycheck from. The customer is who’s returning the Christmas decorations in January that you’re refusing the refund. You treat your customer ethically and fairly and legally. However, your obligation is to make Walmart money. It is not to allow the decoration to be returned in January.

So, when we list property and we have a nice owner reach out, we answer questions for them. We treat them professionally as a customer. However, our job is to take any information they’ve given us. I just had a massive windfall at work. My stock options came through and I have a million dollars to spend in town. I looked at this property that you’re selling and I’ve looked at 12 like it and this one’s by far the best. Great pricing. I’m absolutely excited to buy this house.

Well, you’d better believe when it comes time for them to give us a 95% of asking price offer that we go back to our clients, the ones that we work for, and we say, “Hey, I think you’re going to be able to tell them that the asking price is firm, that there’s no negotiation that’s going to happen on this because they already told me they’re super excited to do the property. They need to close a whole bunch of real estate within the calendar year and that they think that the price that you’re asking is completely fair.” That’s the relationship that occurs there.

So the question is why would those folks that call us that want to make a bid unsupported? Why would they not secure the services of a real estate professional? Now, fact or option one is they have not met real estate professionals who know the business, especially focused in the city of Toledo. It is reasonably common to find real estate agents that are paying for leads, Zillow leads, and when you chat with them, they’re in another town. They’re two, three hours away from the city of Toledo. They can’t go to the property and actually show you things. They don’t know the streets. They don’t know the blocks. They don’t know the zip codes. They don’t know the neighborhoods. Those would be unqualified realtors. It’s totally understandable if those folks put a bad taste in your mouth.

The same with agents who are biased by the reality that they’re trying to get out of their cashier job, their sales job. They’re trying to use real estate to pay rent. And therefore, they’re going to be much more excited to help you buy any property than to help you buy the right investment property is going to perform for the long term.

Additionally, if you live locally, for example, if you’re a member of my real estate investment association and you already are hands-on, knowledgeable, you know everything about the property, then it would make sense for why you represent yourself.

The other factor to keep in mind is that the listing agent will have to find the time to show you inside the property. And if you simply found a real estate agent and you had a relationship with an individual to have them advise you, they would be able to look at this address, show it to you and then look at other properties on the market. It is going to be much harder for the listing agent to show you that address, and then show you other properties you might consider as well because they have a vested interest in getting you to buy the property that they’re listing.

The last would be complex deals. We just finished a video on foreclosures, on sheriff sales, and the last is on wholesale deals. It is important to recognize that in sheriff sales and wholesale deals specifically, you’re not going to have commission paid by the seller. Okay? Those deals typically you’re going to come out of pocket if you have an agent represent you and they’re also very difficult to transact successfully in the sheriff sale. You can’t walk the property before you actually gavel and own the thing. You may have to evict the current residents, whomever they may be, squatters or the homeowner.

And then on the wholesale deal, you blatantly have unlicensed real estate sellers who are not using state of Ohio forms and they’re not bound to any ethical standards. And so don’t be surprised when you have a problem with a wholesale deal because you didn’t use a real estate agent, right? You would have to have paid that individual out of pocket. Therefore, you went it alone. You bought a wholesale deal by yourself and you know, the deal went sour. When you report that to Division of Real Estate, one of their comments to you is going to be to recommend you stay within the confines of proper licensed real estate action which has a code of ethics and standard documents that are vetted by attorneys.

Why save the commission is a standing question. When we list a property, there is a budget for the sellers to pay commission. The listing documents detail the commission for the listing agent. And then when we prepare a document for purchase, we itemize the commission. We are requiring the seller to pay or the buyer. There’s options there, but traditionally we detail how much money the seller is going to be committing to pay if you end up accepting today’s deal.

So the significance on the commission is it’s built into the contract already. The important understanding is if you don’t have a licensed agent representing you, then the seller, while they won’t have additional charges on that buyer’s contract, there’s always a minimum commission amount that the listing agreement has. And the listing agreement isn’t going to get cheaper for the seller because the buyer is not using a real estate agent. Very commonly the price will not go uniquely low because you are not using a real estate agent.

It is important to recognize the term of dual agency. Dual agency is where, and you’ll find it is not allowed in brokerages commonly, but that would be where I list a property for an investor. I represent the investor. I’ve got all my ducks in a row and then someone wants to buy that property and I agree to represent them as well. Then I’m supposed to be able to negotiate for the buyer and negotiate for the seller without undercutting or disrespecting or infringing on either side. It’s very difficult and it’s also litigious. It’s very easy to complain about and drag people into court and therefore dual agency is not permitted.

You can face, and mind you that is a brokerage by brokerage policy, but the vast majority of brokerages do not allow it. What is incredibly common is where you have I would be the listing agent and if you wanted to buy and you needed to be represented by another agent, we get you another agent within the brokerage. We get you another agent. We have a relationship with that we’ve vetting that we know that they can help you come up with quality investment, you know, investment properties. We would want that person to represent you for the buying and we would represent the selling and then we put a wall between them, right? That person doesn’t get to stand in the room while I speak to my seller and then I’m not standing in the room while they’re representing their buyer.

But that is the breakdown on the commission there. There truly isn’t a tangible savings that is going to occur by not having a real estate agent assist you to buy in a standard listing agreement for the vast majority of what we do. Auctions included.

Now, let’s go through what you never ever ever want to do, and that would be the reality that my time, five minutes of my time, comes with using LaPlante Real Estate as your property management company. The same with my property managers, both of which are licensed agents. You are always welcome to text my phone, schedule a time to speak with me, and throw me an address. I don’t care that it’s a wholesale deal and that I’m not getting a commission in the conversation.

What I don’t want you to do is to ring us up after you have purchased the property. And God forbid we know the address. There is a set of property addresses that come through the market on a very regular basis. As you go back through these properties on our online property auditors page, you will see that they are regularly transacting every 12 to 18 months and that the prices are about the same. If you interact with one of these addresses, you’re unfortunate enough, I will be able to tell you what its condition is and I will be able to tell you what your inspection report found because we previously managed the property and we thanked our lucky stars when we got on the back side of it.

You don’t want to ignore your property management company to the extent that you announce that you’ve now bought an asset and we’re like, “Well, I’m sorry you did that. I can tell you everything about the address and I can tell you the problems you’re going to be experiencing in the future.” So, keep up the communication. It is far more important to us that we discuss your purchase and that we make sure that we have found, you know, any of the issues and the loopholes ahead of time.

What would be preferred all the way around is that you engage us to advise you to evaluate real estate and buy real estate. That’s the whole reason we have a series of videos on how to evaluate deals and lock those suckers down and get them added to your portfolio. We want to do it in a successful cadence and we want to do it in a timely fashion that is respectful of our time but also ensuring that we’re answering your questions and that we’re successfully scaling between our other owners as well as yourself.

That said, as always, thank you for your interest and your investments in Toledo, Ohio. And we truly appreciate your respect and loyalty to LaPlante Real Estate. Thank you.