How do I know if a realtor has my best interest in mind?

Question

Hi guys! Fairly new investor here, interested in MFH buy and hold and interested in (but haven’t yet used) the BRRRR method going forward.

A little background - I currently own a 4plex in Waterbury, CT where I’ve lived in one unit and rented the other 3 for the last 14 months or so. Not the best area, but not so bad that I couldn’t tolerate living here, and cash flows beautifully. I’m hanging on to this one.

I’m relocating back to Tampa, Florida where I previously lived for about 9 years. I bought my first property outside of Tampa (new construction townhome, worst idea ever, I had no idea back then). I tried to sell this townhome when I first moved up north, and used a co-worker at the hospital I was working at who was completely horrible, was a realtor as a side hustle and had no idea about the market temp, and listed my townhome waaaay above where it should have been which resulted in it sitting on the market forever. I ended up paying to get out of the contract with him (ugh!) and using a new agent who seemed to be passionate, detail-oriented, organized, and all of that. He sold my place pretty quickly (for a loss, but only a slight loss and I was already out of state by then and just paying a mortgage on a vacant property that would not have made sense to keep as a rental).

I decided to work with him again now that I’m moving back down, but I want to buy another MFH this time and “house-hack” again, like I’m doing now. The market is still definitely a sellers market, though it’s a little confusing because I’ve seen some properties sitting for quite a while (though he told me that with investment properties you can’t really focus on ‘days on market’, which I’m not sure I understand). He went to check out a duplex for me (I’m trusting his judgment and as long as the big stuff checks out, I’m not super worried about seeing it myself since I’m still in CT, and this is an investment property not a forever home). I put in an offer at asking price but asking for 4% concession toward closing costs (this one was on the market about 52 days), and they ended up accepting a cash offer instead so I didn’t get it. No big deal.

First, he suggested that maybe we should start submitting offers just based on the pictures and use the inspection period to get out if necessary because by the time he gets to go see them it may be too late. Second, he said that offering below asking, even just in the form of concession, is likely to result in a lot of rejected offers, so if I don’t need the concession then just offer at asking (I don’t NEED the concession but I want to stay as liquid as possible so I can get into my next property sooner). I don’t think he’s wrong necessarily, but the thing is also that I’m not in a rush. I start my new job the first week of September, but I have friends that I’ll be staying with when I get there for as long as I need.

This will only be my third time buying a property, so I want to be realistic with my expectations - I’ve had friends tell me they feel it’s laziness for him to not go physically see the properties, but I also understand how fast things are flying off the market. Like I said, I’m not in a rush so I’m okay with having some offers turned down, but I don’t want to be a jerk and expect him to just spend all his time writing offers that he doesn’t feel have a shot at being accepted.

So....... how do I know if he has my best interests in mind or if he is trying to cut corners to make his life easier? I want to develop a good relationship with a local realtor because I plan on continuing to invest in MFH but being a rookie, I also don’t want to be taken advantage of.

Thanks in advance!

Russell Brazil · Answer

Unless you are an all cash, no contingency buyer, no agents going to go preview a bunch of properties for an out of state buyer who is making weak offers. 4% concession, also signals this is an FHA loan, which is one of the weakest loan products available....you need to be making aggressive offers to overcome being disadvantaged against cash buyers, which already happened to you, and against conventional loan buyers.

Erik W. · Answer

@Elizabeth Pare, hi and welcome to BP!

That's a great question: how do I know if someone who has a fiduciary responsibility to me is actually fulfilling it?  The same question is true of financial advisors and anyone who works on a commission, really.

I have several recommendations:

1) Find a person who has the heart of a teacher.  They should be able to lay out the facts for you and educate you, but ultimately the final decision is up to you.  If you ever feel pressured into doing something you don't feel good about, that's a sign someone doesn't care about you.

2) Ask for recommendations.  Find 3-5 people whom you trust who have had a positive experience with that person and will vouch for them.

3) Work with someone who has been in the business a full cycle and survived to tell the tale.  We haven't really had a downward cycle since 2008-2009, so anyone who has come into the market post 2010 has always been working in "boom" mode, and what worked then might not work next month or next year.  You want someone who knows what to do when there's blood in the street.

4) Don't be afraid to walk away from an agent.  You're not required to do business with someone who isn't willing to see it your way and do what you think is right.  Caveat to this: if you find yourself walking away from 20+ agents, maybe the problem is your business model, not theirs.  They like to get paid and eat too.  I knew one investor in my town who expected any agent he worked with to toss out 40+ low ball offers for him weekly.  The guy never bought anything unless he stole it.  Basically, he wanted the agent to be like a wholesaler working for him full time.  The agent finally dropped him as a client and only making a couple of meager paychecks on cheap houses.  Not worth the agent's time doing all the paperwork and follow up on a few $30,000 houses when legit Sellers were out there with listings for $300,000+ houses.

Ultimately, can you ever be 100% sure your fiduciary has only your best interested at heart?  Probably not.  I keep it simple: if I'm making a good profit and he is too, generally we work well together and trade favors.  Sometimes he make a bundle and I make a few bucks; other times I clean house and he basically makes enough for lunch.  It's a 2 way street.

I hope this helps.

Alexander Felice · Answer

No one in this world has your best interest in mind more than you, ever.

To ask him to do all this work is excessive, you're literally asking him to do more than you're willing to do (go to the properties). You're also being overly cautious, which is understandable but also inefficient use of time. if the market is competitive then speed is the key, he's trying to tell you to go fast and you're resisting, do you have his best interest in mind? relationships are a two way street.

consider that he can make the same money on easier clients, you need to create incentives for people to work hard for you, not just expect them to.

Steve Morris · Answer

I guess just being responsive is the litmus test.

There are some good ones, but to be fair their objective is to make money and if you send them on chases with $0 return, odds are you won't get a lot of attention.

Alexander Felice · Answer

You have due diligence as safety net, get the analysis as close as you can FAST and get something under contract, then you can do your due diligence without the time pressure. This makes sure no one is wasting their time on properties that you end up not getting a shot on. That should help the flow on both sides.

Account Closed · Answer

@Elizabeth Pare  This is exactly the type of question you *should* be asking. Unfortunately, in my opinion, there’s no answer you’d truly like.  You’re getting solid advice here on how to vet and choose members of your team.  Good luck.

Account Closed · Answer

@Elizabeth Pare The broker does not have your best interest in mind. The broker - by definition because they are human - will always think if themselves and their family first. You will always be behind those priorities.

Make sure YOU are comfortable. Make sure YOU have a process. Make sure YOU know what you need, want, etc.

Brokers serve an extremely valued purpose in this process. Don’t mistake their helpfulness and abilities for being on your side.  Only you and your family are on your side.

I encourage you to think about this from that perspective.

Joseph Gozlan · Answer

It's actually very simple. If they tell you "NO, Don't do it" more than they tell you "YES, You should do it".

A good agent will put your best interest in-front of their commission.

We teach that to our agents. Our mindset is that it's better to say no and keep working for that client until they find the right deal for them than to sell them just any deal. Yes, the first is more work and harder but the good taste the right deal will leave in that investor's mind will bring him back to us for more transactions in the future.

Edgar Rodriguez · Answer

It honestly has a lot to do with responsiveness, knowledge, and empathy. If an agent is always trying to keep you in a deal that does not make sense or convincing you a deal makes sense when it does not, that may be a red flag. I always make it my mission to never push people toward anything when they are purchasing or selling. I provide the pros and cons of the home, area, future problems along with my opinion. I will tell you what is a good or bad deal in my opinion and experience and reasons why.

After that, it is completely up to the client with how fast/slow they want to move or if they want to make a move at all. I have definitely lost some deals by not being super "salesman" but that has been more than leveled out in my opinion with the relationships I have with my people along with the peace of mind knowing I have not pushed people into a bad situation for a check.

Nick C. · Answer

The only way to be sure if your realtor has your best interests in mind is to get your license and become your own realtor. You're going to waste more time and money sifting through bad agents than if you just get licensed yourself.

How do I know if a realtor has my best interest in mind?

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