Agents & Investors Are Not The Same
Agents & Investors Are Not The Same
By Hewlett Santos. 6 minute read.
When speaking to sellers, we often get asked “are you a Real Estate Agent?”
The answer is no.
To the untrained individual, the differences between a Real Estate Agent and a Real Estate Investor can be difficult to distinguish. After all, they both work professionally in the buying and selling of real estate. Both professionals make money from the sale of real estate. Both can help buyers and sellers achieve their goals. The differences, however, will be fundamental to understand how the professional can assist you wherever you are in your real estate journey. Here are some major differences between Real Estate Agents and Real Estate Investors.
Agents Represent Buyers and Sellers; Investors Represent Themselves.
Real Estate Agents are tasked with acting as a representative for a seller or buyer as their client. They must act in their client’s best interest at all times. They are in charge of marketing the seller’s property as the seller’s agent, or sourcing an appropriate property for their buyer client to purchase. They are experts in their market and they usually deal with multiple clients at a time. For this, they collect a commission.
Real Estate Investors are not acting as a representative for anyone; they only represent themselves. Investors are regular individuals who have enough resources to purchase real estate outside of their primary residence. Investors typically like to purchase investment properties either to add their rental portfolio, or to fix up and sell to another buyer (sometimes the next homeowner, sometimes another investor). Investors do not collect a commission upon the sale of the property, but instead they find creative ways to pull equity or create cash flow
Agents need to be licensed; Investors do not.
Real Estate Agents go through training at an institution and take multiple tests on many different aspects of real estate in order gain accreditation. They must pass the school’s test as well as the test of the state in which they plan on operating their business. They do this in order to represent people who will buy and sell property.
Investors buy and sell property, for which no license is required. Investors only represent themselves and therefore are not required to pass any tests. Any investor who hopes to have longevity in their career will however study and become an expert in their market. Their expertise is not in representation of buyers and sellers, but in buying and selling property.
Agents earn commissions; Investors earn returns.
Most believe that both types of real estate professional will earn a fee when a property is sold. There is truth in this, however the way that they earn their money is quite different. An agent’s commission is a fixed percentage of the final sales price of a property. This percentage is often non-negotiable and will fall between 3-6% of the sales price. Both buyer’s and seller’s agents are paid out of whatever the seller collects for the sale of their home. Both agents are hoping for the transaction to occur at the highest possible price in to make the highest commission possible.
An Investor makes money when they buy, not when they sell. What this means is, the investor will purchase the property either with some equity built into the deal, or with favorable terms that allow for positive cash flow. For this reason, Investors do not collect any fee out of the proceeds of the seller’s property. Additionally, if the terms of the deal support it, Investors will pay the transactional fees that are typically associated with the seller, including closing costs, title insurance, home inspection fees, etc.
Listing with an Agent takes time & money; selling to an Investor does not.
When preparing your property to compete in the marketplace, a seller’s listing agent may have some basic requirements of you and your home. In order to give you the best chance to sell for the max amount, your property will need to display max value. Your agent may require that you dump some money into the property in order to make it look better than the 25 other comparable properties that are also for sale. You can easily spend $10,000-$15,000 on your bathrooms, kitchen and exterior to give an agent the best shot of selling. Making these repairs or updates not only cost money, but also time. If you are in no rush to sell and are willing to shell out an additional $15,000 on top of holding costs, closing costs, realtor commissions and other fees, this will be your best option.
If you are looking for a speedier and more convenient sale, and would like to sell your property without having to dump thousands into it to make it “more desirable,” a Real Estate Investor will be your best bet. Investors like to purchase properties that they can put their own imprint on. They are in the business of spending their money and time to output some equity. Most investors will not require any repairs or remodeling of a homeowner. Additionally, most investors have access to cash already and will not make you wait the typical 6-8 weeks it takes for banks to approve a buyer on a conventional home loan. The overall process can be much more suitable for a home seller who seeks speed and convenience in a transaction.
Agents serve many; Investors do not.
Anyone who works within the general scope of real estate has one principal goal in mind: to make money. Agents make 3-6% on every closed deal, and a successful agent is closing multiple deals at a time. An agent will stretch themselves out in order to get the most number of transactions, tallying up as many 3-6% commission fees at any given time. Your typical agent may have 3-5 listings that they need to sell. Unless your house is listing at a way higher price than their other clients (your competition for the agent’s time), what’s to say that they will give your family and your needs all of their attention?
It is no secret: Investors make their money when they buy. It is not necessary for investors to split their time up between a multitude of transactions in order to maximize their income. A good investor can give their client all of their attention. A great investor will have it no other way.
Both Real Estate Agents and Investors partake in the business of transacting in real estate sales.
When an agent calls about your property for sale, they are looking to list it and receive a commission for their service. When an investor calls about your property for sale, they are looking to buy the property as an investment. Agents dedicate themselves to representing their buyer and seller clients, being experts in their respective markets, and facilitating a majority of real estate transactions. Investors position themselves in unique environments where they can bring value to the marketplace, create win-win situations, and help to rebuild neighborhoods in need. Both individuals are essential in the world of real estate, and depending on your unique situation, can be essential in helping solve your problem.
When you are considering selling your home, it’s crucial to take inventory of all your options, your goals, and your priorities.
If your home is marketable and able to compete with other properties for sale in your neighborhood, if you have no urgency to sell, and are flexible in the approach, listing with a realtor will probably be your best option. For the record, this applies to over 90% of the population of individuals selling their homes.
If a fast and convenient solution is what you require, and you are not interested in getting top dollar, letting it sit on the market, or fighting for the attention of any potential buyers, then working with a private Investor or Investment Group may be the best approach for your situation.
Though there are many more distinctions between how an Agent and an Investor will serve you in you particular circumstance, and hopefully this post will begin to demystify some of the fog surrounding these two professions. I urge you to use this as a springboard to conduct your own research.
Hewlett Buys Homes is a family-owned real estate investment group.
We are not realtors, although we respect their business and acknowledge the need for their service within the industry. If you or someone you know is looking to sell a property and are not sure what the best solution is for you, please do not hesitate to give us a call. We pride ourselves in being in a position to provide value to those who would greatly benefit from our service. We will help to guide you through all of your options and urge you to move forward with whatever you decide is the best choice — even if it is not working with us.
Contact us today by completing the form below or calling us today at (718) 865-3589. We are happy to offer our expertise.