What do you look for in a Real Estate Agent?

[Dru Hill]

As we are in a curious time in the market and with all sorts of litigation floating around the industry, I have a question for investors. How can Real Estate Agents like myself bring you value? What is important to you in our working relationship? How can I help You?!

[Leo R.]

@Dru Hill I've worked with some highly experienced agents (and I've also encountered plenty of agents who had no clue what they were doing).

My primary agent is in the top 1% of volume and expertise, and he's made himself into a key part of my operation over the years, so I'm happy to keep bringing him business. 

So, what makes an agent great?

An investor friendly agent is an agent with investing experience--but what does that mean? ("investing experience" could mean experience with house hacking, flipping, STRs, syndication, or any of the other many investment strategies). An agent may be a total rockstar when it comes to BRRR'ing, but they may know nothing about STRs. So, you probably want an agent who has experience with the investment strategies you plan to pursue.

Aside from investing experience, a really great agent can do two things really well that most agents can't (or won't) do: 1) they facilitate an extremely strong due diligence process, and 2) they see opportunities that other agents and buyers miss.

I'll give you a real example of each:

First, an example of an agent going all-in on due diligence, which saved me a ton of cash and headache, and ultimately secured the agent millions of dollars' worth of future business. 

Years ago, when I was a completely inexperienced aspiring investor, looking for my first property, I found my "dream house". I was ready to buy that place on the spot. However, while I was succumbing to shiny object syndrome (admiring the fancy new kitchen, new hardware, and beautifully tiled bathrooms), my agent was crawling around in the basement crawlspaces, collecting cobwebs, and looking at the plumbing. The basement had some un-finished spaces, but most of the basement had just been beautifully re-finished with a mother in law apartment (which I was going to rent out).

I tell my agent to write the offer, and he says "OK, but before we make an offer, you need to understand that the entire house has galvanized steel plumbing, which will fail. It may fail in 5 years, or it may fail in two weeks, but it will fail in the relatively near future. When that plumbing fails, you will need to demolish much of that brand new basement MIL apartment to replace the plumbing. It will cost you approximately $50k to demolish that fancy new finish work in the basement, re-plumb the house, and then re-finish the basement again. Are you prepared to take that on?" (the answer was no, and although I was incredibly disappointed, we walked). Point being: my agent began the due diligence process the moment we walked into the property. He did not wait for the inspection to begin the due diligence process. ...and it saved me $50k (which could have bankrupted me at the time) and a massive headache.

A NON-investor friendly agent (or an agent looking to make a quick commission) would have said "yes, this house is SO CUTE! LET'S BUY IT!", and I would have ended up with a serious problem.

That's the value of an agent who goes hard in the paint on due diligence.

Importantly, this agent's willingness to walk away from a commission in order to protect me showed me that he was trustworthy and would put my interests above his own. At that time, this agent did not know me at all (we had spoken twice). He was a top-grossing agent, but I was just a kid with virtually no money and no experience. He had zero reason to expect that I would ever buy another property with him. His willingness to sacrifice for me proved that he was the real deal--which is why I went back to him again and again over the years as I bought more properties. 

As the years passed and we did more deals, I learned that this agent understood how to inspect properties more thoroughly than many home inspectors! Fast forward to today, and that agent is a key player on my team--I never buy or sell a property without him. He has saved me hundreds of thousands of dollars over the years because of his thorough due diligence, and we've transacted millions of dollars' worth of real estate.

Now, an example of an agent thinking creatively and seeing a value-add opportunity that everyone else missed: There was a house that had been on the market for a long time, and the reason was obvious: it was only a 2 br 1 ba house, and the floorplan was very, very weird...however, my agent spotted that the listing had unusually large Sq footage, so we went to check it out...10 minutes after walking into the house, my agent says "we can turn this loser into a winner". Specifically, some non-load bearing walls could easily be removed, some new walls framed, and with about $40k, the house would be transformed from an un-appealing 2/1 that would lose $300/mo as a rental into a very appealing 4/2 that would cashflow about $500/mo (including the debt service for the rehab)... We bought the place and executed the plan--not only did it become a solid cashflower, the property value also increased by about $125k. A grand slam.

It's critical to understand that the agent who recommended this rehab knew about building code, construction techniques, and the costs associated. For instance, he identified the load bearing walls when we walked the property, he understood where the existing plumbing was, and where new plumbing would need to go, he assessed where HVAC ducts were, and where new ducts would need to be routed, he understood the changes that would need to occur to the electrical system, etc., etc., and he understood the costs of all of those issues.

Plenty of people (agents included) can come up with pie-in-the-sky ideas of how to change and improve a house, but few have a real understanding of what that work entails, what challenges will need to be overcome, and how long it will all take and what it will all cost. ...how did this agent know all this info? Because he had personally rehabbed many of his own properties--and had done that work himself, and also via GCs!

We'd all love to buy turn-key, A-grade, cashflowing and appreciating properties, but those properties are almost non-existent. Because we have an extremely challenging market (high prices, increasing rates, limited supply), being able to envision and execute value-add strategies that everyone else misses is often the only way to make a property succeed--so, having an agent who understands value-add strategies is a huge advantage!

To sum this up, a rockstar agent understands how to save their client money (and headache) by going above and beyond with an extremely thorough due diligence process, and they understand how to make their client money by finding value-add opportunities that everyone else misses.Note that many (perhaps most) agents don't do either of these things. Most agents think to themselves "inspecting the property is the property inspector's job" or "figuring out the rehab budget is the GC's job"...I don't work with those agents.

Agents with this type of expertise are worth their weight in gold to an investor--especially when the investor is relatively new and inexperienced. This is true in most areas of life--we are most in need of an experienced coach when we're learning something new (particularly if what we're trying to learn is a high-stakes process like RE investing). The less experienced the investor is, the more experienced their team needs to be!

Even though I'm no longer an inexperienced investor, I still work with my buyer's agent--because the money he helps me save and make is far more than his commission (an ROI that most other agents can't or won't produce).

Good luck out there!