A real estate investment sometimes succeeds or fails because of the margins. Sometimes the rate of interest charged on the loan to purchase a real estate property can make all the difference. It can be the difference between a profitable transaction and a losing deal. Certainly occupancy rates make all the difference in apartment complexes. Sometimes just one more vacancy can push cash flow into the red. Given these realities, it is sometimes tempting to eliminate a real estate agent from the transaction.
After all, real estate agents get a slice of the pie. They work on commissions based on the sale price of a real estate property, so cutting them out of a deal could potentially mean buying the property at a lower price. Although the commissions are not large enough to make or break any deal, every successful real estate investor knows not to waste money. So, it is reasonable to ask if there are good reasons to work through a real estate agent when buying or selling property. It turns out the answer is “yes”.
Real Estate Agents Can Network With Other Professionals
Real estate agents are in the real estate business, but they are not alone. The real estate industry includes appraisers, lenders, inspectors and regulators, in addition to a variety of other occupations. A real estate agent is involved with all these other occupations on a regular basis. Agents can make effective recommendations or introductions if necessary. They may have also encountered service providers who are not good at their jobs and should be avoided.
The real value of this knowledge is that real estate agents all work in a given locality. This means the other professionals they know all work in that same place. This means that the real estate investor can tap into a wealth of local knowledge for a real estate project. Many times it’s more helpful and faster than searching the Internet or other resources. After all, like politics all real estate is local.
In addition, a real estate agent will want to keep good relations even after a sale has closed. Calling a real estate agent for a referral on a handyman long after the transaction has closed will probably be a welcomed call. Real estate agents understand that real estate investors will be involved in more transactions and so offer the potential for greater income. As a result they will be willing to spend more time and energy on the relationship.
Real Estate Agents Are Determined to Make the Sale
As was mentioned, real estate agents are paid commissions based on the sale of the property. This means that if the property does not sell, they do not get paid. As a result, real estate agents are often highly motivated to help overcome last minute problems that might otherwise prevent a deal from closing. Again, as part of an established network they are sometimes able to bring the right people to the situation to make it happen.
Being paid when a deal closes also makes them interested in moving the transaction forward. Real estate is a long list of details, any one of which can derail a sale. Real estate agents act as effective managers, following up on appraisals and other details. Although they might be technically working for the seller, a real estate investor buying a property they represent may find the real estate agent to be acting as their personal assistant. This can leverage the real estate investor’s time.
Perhaps the simplest way to illustrate the reason many real estate investors want to work with real estate agents is the difference between price and value. Although real estate agents add to the price of a transaction, they add more to the value of the relationship. And a real estate investor who does not appreciate someone who can add value is probably in the wrong business.