Having worked in the Mortgage Industry for over a decade and also being an avid property investor myself for the same period, there is one thing I have noticed about Real Estate Agents: many people do not have a good perception of them. When you start talking to people about property investment and you mention real estate agents, it’s often met with a rolling of the eyes, or a knowing arched eyebrow. Why is this? What is the common perception of real estate agents? Is it an image of ‘con artists’? Are they thought of as ‘sleazy sales people’? Are they considered to be untrustworthy? Perhaps this is the case. We all know that there are some great agents out there and we may also have experienced working with some agents who could have left a sour taste in the mouth. I think that agents are just misunderstood. Whether they are good or bad at what they do, they can be useful; you just need to know how to work with them.
Get the most out of your Real Estate Agent.
Getting the most out of a real estate agent, whether you are a property vendor or a property buyer, starts by understanding one thing: An agent never works 100% for their seller, they never work 100% for their buyer, they only ever work 100% for themselves. You need to understand what motivates a real estate agent. What’s more importantly, learn to work with a real estate agent, look at things from their perspective first, and this way you will know how to deal with them. This way you could get the most out of them.
Don’t work against them, work with them.
For example, if you are a buyer and you are looking to buy a property for investment purposes; the tendency most people have it to work against the agent when it comes to price. People sometimes think they have to play it tough and ruthless with the agent to get the price they want for the property. Instead, you could approach the transaction differently:
- ask many questions of the agent first.
- Find out what the asking price is.
- Ask the agent what they believe the property is worth and why they think it is worth a certain amount.
- Ask the agent to give examples of recent sales of similar properties to back up their price request.
- Ask the agent why the vendor is selling and try and get a feel of the strength of the relationship the agent has with the vendors.
Be interested in them.
Be interested in the agent. Ask him about his experience in the area and in the industry. Make the agent your focus, before the property is your focus. Agents are people and people love when others take a professional interest in them. Once you have answers to your questions, you can then start laying some of your cards on the table.
Give the impression you are a professional.
Give the agent the impression you are a professional property investor. This way the agent will start thinking along the lines that he could have a longer lasting professional relationship with you; he will be able to see the business potential moving forward. Let the agent know you are looking for an investment and should you decide to buy the property you will need an agent to manage the property (this could be extra income for him).
Know your stuff first!
Research the property of interest, the local area, and the most recent sales of properties in the area, well beforehand. Talk about the area with the agent, demonstrate to him that you know the area well. Tell the agent what you think the property is worth and back this up with the recent similar sales that you know of. Show the agent that you are knowledgeable. They will see that you are someone to be taken seriously and you know your stuff.
What about if you are the Vendor?
What if you are the vendor? What could you do to make sure the agent does his best by you and the property? First off, you must also do your research. Make sure you are personally aware of all the recent sales of similar properties in the area. When the agent gives you a quote on the sale of your property, ask him why he thinks it would be that amount and what evidence he has to back up his claim. Real estate agents are known to sometimes give slightly exaggerated estimations to vendors to lock in their business.
As a vendor, whilst always hopeful, you need to be realistic about your price estimations or you could be setting yourself up for disappointment and you would be a prime target for a real estate agent who uses exaggerated prices to get your business; this could turn out to be a waste of time and money for you.
Some agents will give you the truth, they may estimate, a lower price than what you hope to get, once again ask them to evidence their estimations. You need to be realistic about what is going on in the property market of your area if you want to sell. Some vendors hold out for a higher price, but this tactic could actually cost them more money (by the way of interest costs, marketing costs, rates notices etc), so be careful of this.
My recent experience
Recently I decided to put one of my properties on the market. I researched a few different agents, and asked them of their opinions on the selling price of the property. As expected I got a range of prices. This particular property of mine is interstate, so I am not necessarily local to the area. On my estimations I could see that the property could have a price range of anywhere between $430K- $470K. I kept my estimations to myself and spoke to the agents.
I was given quotes from 4 different agents:
- 2 agents estimated a price up to $420K (obviously a bit disappointing for me),
- another estimated $440K,
- and the last estimated $485K.
Obviously I was intrigued and a bit excited by the agent with the highest estimate.
Let’s call the agent with the high estimate “Steven”. After speaking with Steven further, he told me that he suggests we put the property on the market for $485K as another apartment (same size etc) in the same block sold 4 months ago for $470K. He also mentioned that the other apartment sold in a warmer time of the market but the market has slowed since then. So I questioned his tactics of pricing the property at $485K. This just did not make sense to me, putting the price up (even if I would like that) in a slower market, with no precedence of other sales at that price?! I could be stuck with an over-priced property that just does not sell because the agent was trying to seduce me into working with him. What’s worse, I could run the risk of being on the market for some time and then needing to drop the price, this does not give a good impression to buyers.
It could cost me more to hold on to the property if it does not sell. So this is where I needed to show the agent my understanding of the market. I told him I wanted to put the property on the market for $470K as there is a precedent of sales at that range. I told him that I liked how he had found this range of sales evidence (where the other agents had not). But I also showed him that I was knowledgeable of property market movements and it does not make sense to price a property higher in a slow market. The agent made the mistake of assuming I wanted a higher price, when realistically I wanted a swift easy sale.
Be best buddies!
If you plan on being a property investor, even as a property vendor, you should really make the real estate agents your best friend. Real estate agents have easy access to information that is vital to the success of your property transactions. They are actively influencing the local property market, so it helps to be friends with a person in that kind of disposition. If you understand what motivates an agent, it’s easier to work with them and get the most out of them. Always ask yourself “what’s in it for them?” If you think about first what agents could get out of a deal, you could use this to your advantage. Constantly think of ways to incentivise agents to work with you in getting the results you want.
Trust an agent’s expertise, but always ask them to back up their claims. Get them to prove their expertise to you. Work with them and not against them.