With the wealth of information available on the internet, many beginner real estate investors ask, ‘Why do I need a real estate agent to invest in the housing market?’ Some people figure that they can easily sell or buy property on their own without representation. While buying a house without a realtor could result in a good deal, it could also end up in a mess due to inexperience.
In case you are wondering ‘Do I need a real estate agent?’ for buying an investment property, here are some of the pros of working with a real estate agent:
1. Neighborhood Knowledge
An experienced local agent possesses intimate knowledge of the neighborhood and knows how to find investment properties. They can provide information about the demographics, safety, amenities and housing market trends in the area. In addition, they can help identify For Sale By Owner (FSBO) properties that are not listed. This saves the beginner real estate investor lots of time and energy.
Related: How to Find an Investor Friendly Real Estate Agent
2. Education and Experience
If you hire a professional real estate agent, you don’t have to know all the details about buying property. Agents that are trained and experienced in the field guide their clients on the ins and outs of investing in real estate. In addition, they are familiar with real estate investment tools and rental property analysis. This helps investors make good choices and avoid pitfalls along the way.
3. Avoidance of Paperwork
Another reason why you need a real estate agent is that real estate transactions often involve a lot of paperwork, which can be overwhelming to any beginner or even an experienced investor. One small mistake could cost you thousands of dollars or even result in a lawsuit. The good news is that a buyer’s agent will help handle all the paperwork while paying attention to the fine print. This minimizes the risk of errors and omissions during the transaction.
4. Negotiation Skills
Many people, including the experienced real estate investor, don’t possess the negotiation skills for closing a real estate deal. Real estate agents can help in negotiating an offer on behalf of their clients, thus enhancing the chances of getting a favorable price for the property investment. However, before hiring anyone, get some references from former clients that can vouch for the agent’s ability to cut a good deal.
Related: Top Negotiation Tips When Buying an Investment Property
5. Professional Networking
One of the reasons to use a realtor is because they are connected to other professionals in the real estate industry that you will need when purchasing a property. These include attorneys, valuers, property managers, loan officers, and sales agents. An agent can, therefore, provide a list of vendors they have worked with that have a reputation for competitive pricing, competency, and efficiency. This makes it easy for property investors to make wise decisions along the way.
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So, ‘Should I use a real estate agent when buying a property?’ Absolutely! However, here are some of the downsides:
1. Commissions
Hiring a professional, full-service real estate agent can be very costly. Some agents demand up to 7% of the total sale price of the investment property. For example, if the home is worth $250,000, you might have to pay the agent a whopping $17,500. Investors can lower this commission by opting to work with a discount broker. However, this will mean losing some of the benefits that a full-service agent provides.
2. Binding Contract
When dealing with a buyer’s agent, you might be expected to sign a contract that officially designates the agent as your representative. Some contracts allow the agent to demand a commission on the real estate property you eventually purchase, even if they did not help in finding it. If you come across such a clause, make sure it is removed before signing the agreement. It would be wiser to have a contract that is valid only for a specific period.
3. Being Just One in a Crowd
Ideally, the best real estate agent should be available to walk with you every step of the way in the property buying journey. However, if the agent is busy working with other clients, you might not get as much attention as you need. This could result in the frustration of deadlines missed, calls not being returned, and ultimately deals falling through.
4. Personality Clashes
Buying a real estate investment can be a very emotional and drawn-out process. Having a real estate agent who does not understand you and exactly what you are searching for is a recipe for disaster. Therefore, besides education and experience, you need to evaluate the personality of an agent. How do they treat their clients? Are they patient enough to listen and answer questions? First impressions are often an indicator of what to expect ahead. If you don’t click with an agent the first time, move on and find someone else.
5. Having Another ‘Middle Man’
If the prospective seller is also represented by a real estate agent, it means that the deal will have to be negotiated by two intermediaries. If the middlemen haggle and fail to agree, the deal might take longer than expected. A long negotiation period could mean additional costs for the property buyer.
Related: Real Estate Investing 101: 7 Unexpected Costs When Buying a Home
6. Being at the Mercy of Another’s Priorities
Every property buyer has his or her own priorities, goals, and timelines. Hiring a real estate agent means bringing on board someone that might not have the same priorities as yours. If you want to buy an investment property quickly, an agent that doesn’t have the same sense of urgency can drag you back. On the other hand, an agent can also pressurize you to make an investment before you are even ready.
Conclusion
Hiring the right real estate agent could make the difference between striking a great deal and having a bad experience. Unfortunately, many investors who ask ‘Do I need a real estate agent to purchase property?’ only realize they chose the wrong agent when already in the middle of the buying process. This is why you shouldn’t make a decision solely based on their pitch to you. Be sure to do your homework and learn as much as you can about the agent. There are numerous resources online that you can use to find agents with a credible reputation. This will save you a lot of time and money in your real estate investment journey.
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