In my humble opinion, realtors are underpaid for all the work and effort they put into selling a home or catering to unreasonable buyers. The most successful ones simply focus on getting listings and let other realtors do the grunt work of showing and selling their listings. To me the workhorse of the industry is the realtor who hits the streets showing properties and doing all the work required to sell a property to his buyer and making sure his buyer closes on the property. Ironically, he then has to split the meager commission two or more ways. It just isn't fair.
One of my most successful mentoring students said to me "Realtors really have it pretty easy – they get a guaranteed 6% and don't do anything for it or have any risk." This shows a total lack of understanding of what they are faced with in each deal. Seldom do they get 6%, he / she has the same work as an investor to find a buyer / seller by marketing and selling the property, and he often has to get through the closing by struggling with the buyer and the seller just to get paid.
In addition, they have to jump through hundreds of legal hoops that are self-imposed by their brokers, franchisers, and even the states where they work. They are even required to disclose that they are realtors in any transaction which they do themselves because they are held to some unrealistic higher standard.
As investors we don't even need a driver's license to legally do business. In most cases we can buy and sell properties without using any of our own money and make many times the profit that a realtor makes as a commission. One frustrated realtor called me because he found a triplex for a client who bought it for $ 100K (and then sold it for $ 215K shortly thereafter). The realtor did get two commissions but only about $ 6,000 after his split with his broker. The investor did a minor rehab and after closing costs took out a net profit of approximately $ 83,000. This was his first time seeing this, so it is no wonder that so many realtors want to be investors!
One statement I hear from realtors is, "I have been told that what you do is illegal." Simple answer – we wouldn't do it if it was illegal, immoral or unethical. As with rogues in any profession, there are investors who don't abide by this philosophy. Unfortunately there will always be people like this and you should make sure you know who you are dealing with.
Realtors tend to view investors as arrogant, narrow minded, wannabe attorneys, control freaks, liars, etc. Investors tend to view realtors as arrogant, narrow minded, wannabe attorneys, control freaks, liars, etc. So who's right? At one time or another both sides can certainly make a case for their opinion.
As investors we do not want to be driven around looking at tons of properties, we only want to see ones that we can buy and sell for a profit, preferably quickly. As realtors you should not send us tons of listings hoping that we will see some listed property that is a great deal. The great deals on the MLS go to those watching the MLS minute by minute. We do not want to pay full price, or nearly retail value, no matter how good the deal appears. We want to get the greatest deal in the history of that neighborhood so we know we are going to make a profit when we sell it. We are not personally insulting you by offering a ridiculous price – it's just the way we do business, and believe what you might, it does work.
We may seem like a pain to deal with most of the time. We can be but so can realtors because both sides want to control all aspects of the transaction. I think we, as investors, are worth your effort to work with so you can sort out the wheat from the chaff, just as we should do with realtors who are investor friendly and understand what we need. There is money out there for everyone and we are not in competition with you despite what you may think.
Your fiduciary duty is to get the highest possible price for your seller, and you get a higher commission for doing that – although it isn't enough in my mind. We must have the lowest possible price because we need to make money as we have a market risk when we buy a property – we have what is called skin in the game, realtors do not.
Realtors have the opportunity to legally make commissions or fees well in excess of the six percent they are normally paid. They can do this by better understanding partnering strategies with investors, creative commission structures, and other methods of controlling the closing process.
I suggest we bury the hatchet and start looking at ways we can help each other. If you find it unbearable working with us, or we with you, nothing will change, and we will both move forward doing exactly what we are doing now. But answer this question, "Are you satisfied with your income in the past year?" If not, make it happen by changing your attitude about investors or realtors – just deal with the friendly, savvy, and cooperative investors and / or realtors and leave the rest behind.