All real estate agents are not created equal. In fact, a vast majority of them provide no value, I repeat, no value in a transaction. Real estate buyers suffer from the false belief that they get a free ride since the seller pays both real estate agents in the transactions. This could not be further from the truth.

In truth, the real estate system stacks the deck against the buyer. Think about two key points:

1. Both agents compensation is based on the selling price. The higher the price the seller achieves, the higher the compensation to BOTH agents.  

2. If a seller did not have to pay an agent 6%, they would be able to lower the price by some amount up to 6% and still come out ahead. Both the buyer and the seller would be better off.

    

Considering the incentive alignment, buyers should naturally be on their guard when dealing with real estate agents. Every buyer and seller should interview at least three real estate agents. If the agents get uncomfortable with this in anyway, they should not even be considered. Great agents know their greatness and can prove it.  For a list of potential interview questions see the download section of the site.

Buyers should consider working with a buyers’ agent. These agents only work with buyers and tend to be more familiar with buyers issues and negotiations from a buyer perspective. Although these agents still receive their compensation from the seller, the additional experience working with buyers can be helpful.

Real estate agents should also be chosen based on their past experience with INVESTORS. Even when buying single family homes, a real estate agent, who is familiar with investors needs, will be able to answer questions about market rents, comparable rental properties, tenant/landlord laws, etc. better than agents that work with primary home buyers. Additionally, these agents should be able to source investment properties much better than other agents.

Novice investors should take their time with this process. The interviewing process should be a great time to learn about the market, the neighborhood and any other quirky real estate news happening around town. The agent should be chosen based on experience, knowledge of the market and personal fit.   

Lastly, be upfront with the agents. Let them know exactly what the process entails. If you plan on interviewing three agents and then buying a single family property in the $150,000 to $200,000 that can rent for $1,000, let them know the plan. Importantly, do what you say you will do and get back to them right away. If you choose one agent, let the other two agents know that they were not chosen and why. This professional courtesy keeps the lines of communication open and provides avenues for future deal sourcing.