If you’ve ever bought, sold, or leased real estate, you’ve probably asked yourself this question. When we spend thousands of dollars on a service, we want to be confident that we’re getting what we paid for, no matter what the service is. And in real estate, so much goes on behind the scenes that it can be difficult to gauge the value of the work being done.
The truth is that you might not need an agent. For instance, if a great deal is already staring you in the face, then you don’t need an agent to tell you to take it. If you are highly experienced in real estate procedures and marketing methods and confident in your own competence and resources, it’s possible that the best person to represent yourself is you. And if you’re just kicking tires or casually fishing for offers, you can do that easily enough on your own – you might even end up wasting someone’s time by involving an agent.
On the other hand, there are quite a few instances where forging ahead without a real estate agent can turn into an unwise and even dangerous course financially. A real estate agent will have several assets that can be put to work for you. So in true investment analysis fashion, take a stab at assigning a dollar value to each of the following four considerations. This will give you an idea of exactly what a good real estate agent will be worth to you.
1. Marketing Resources
An agent who throws up a sign and waits for phone calls is an agent that should be fired. The most effective tool for making a deal happen is knowing where to find the people who want the deal. A competent real estate agent will have access to powerful marketing networks that are paid services and/or only available to professionals in the industry. They will also be personally plugged into the local real estate market, fostering relationships with other brokers and maintaining a knowledge of what’s happening in the local and regional market. These resources are often the difference between a FSBO sign sitting in front of a property as mortgage payments pile up for another year and a quick sale to the motivated buyer from the next state for top dollar.
When you don’t live and breathe your local real estate market, trying to make an informed decision might feel more like grasping for straws in the dark. Relying on uninformed property values, budgets, and timelines can spell disaster. Accurate information from a competent real estate professional can protect you from wasted time and costly mistakes.
When my wife and I were negotiating to buy our second house, we knew we were going to get a great deal. We asked our agent to present a counter-offer at the lowest price we thought we could get away with. She told us we should try offering $3,000 less. We followed her advice and the offer was accepted. We had seen several houses and had a good feel for the local residential market, but she knew the market better than we did and she was a skilled negotiator. Our agent’s skill made us $3,000 in a day. The same principle holds true in any kind of real estate deal, whether residential or commercial.
Many successful investors and business owners swear by their real estate agent. These are people who are quite capable of finding a good investment on their own. But they recognize the value of the factors above as well as the value of another critical component: their own time. You may never get to see just how much time your agent spends working on your behalf, but it’s safe to assume that if you have a quality agent, it’s quite a bit – certainly more time than you probably want to spend if you’re already busy running a business. They’re gathering market info, creating brochures, making phone calls, sending emails, filing paperwork, attending showings, creating analyses, and tending to many other tasks, depending on the project. On a $100,000 sale, an agent might spend 40-60 hours on your and more for projects with a higher price tag. The time savings alone create a good deal of value for most real estate clients. A good agent also networks extensively with bankers, architects, contractors, attorneys, municipal officials, and other key players in real estate deals. In addition to the efficiency this brings you, these connections also produce leads and off-market deals.
If you’re buying or leasing space, hiring a good agent is almost always worthwhile because you might not have to pay anything. The listing broker already has a commission agreement in place and there’s a good chance your agent’s fee will be covered by these funds. If you’re selling or listing your property for lease, the contributions of a quality agent are certainly valuable and thinking through the four considerations listed above can give you an idea of exactly how valuable they are for your particular situation. It’s also a good idea to sit down with your agent before signing an agency agreement to determine a game plan. This will give you an idea of what your particular agent is able to offer and will also give you an indication of their character, which is perhaps the most important aspect of choosing an agent to represent you in the market. If you’ve made an informed decision and hired an agent with whom you feel confident, you’ll have the peace of mind of knowing that your investment is a good one.