In today’s world of online property listings visible to the public, do real estate investors still need to pay a Realtor to list and sell their properties?
Deni and Brian talk through the pros and cons of hiring a real estate agent, in the modern era of flat-fee FSBO listings.
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Brian Davis: Thank you, guys. Happy Tuesday. Brian Davis here from Spark Rental along with Deni Supplee.
Deni Supplee: Hi, everyone.
Brian Davis: And we are so glad you guys are joining us today. So last week, Deni spoke with Jen Smith from Modern Frugality about how to reach financial independence through frugality. Surprise, surprise. I was vacationing last week. I was in the Pantanal seeing wildlife with my wife and daughter, which was fun.
Deni Supplee: In a frugal way,
Brian Davis: Well, you know, we live a pretty frugal lifestyle. We live entirely on my wife’s income and benefits, which are not huge, by the way. The least income is not huge. The benefits are pretty nice. We get free housing. We live in a place where we don’t need a car, so we don’t, don’t own a car. It’s great. So today, Deni and I are talking about should investors bother to pay a Realtor when they go to sell a property, or should they list it for sale by the owner? Given all the tools that are available to real estate investors nowadays and homeowners for that matter, Zillow is and truly is, and Realtor.com, all of these tools and services, and you can pay a flat fee moss listing so it will be your property will be listed on the MLS. So are Realtors’ dinosaurs in today’s world, especially for investors you know, who are a little bit savvier about real estate now, Deni is a Realtor. So, you know, she’s an expert.
Brian Davis: Being a little bias here. But we’re going to dove in here because, we hear a lot of investors ask this question like, should I bother paying six percent, seven percent, sometimes even eight percent in Realtor commissions? And sometimes we’re talking about properties that are worth, two three four five six hundred thousand dollars. So, a seven percent Realtor’s commission on a $500000 property is a lot of money. So, with that being said, as you guys join us, let us know where you’re tuning in from, fire questions at us this is an interactive podcast and video broadcast, so this is not just us talking at, please jump in and get your feet wet with us. So, let’s start this off Deni by talking about what are the pros of using your Realtor? What are some of the advantages of paying a Realtor in today’s world?
Deni Supplee: Well, I think one of the top reasons is time. It saves you time from doing a lot of the different parts of a sale or purchase, or a rental. I’m older now, so time means a lot to me. I think that no matter how old you are, time is important
Brian Davis: And most valuable asset. Yes, it’s the only asset you have this, not renewable. You can always make more money. You can’t get more time.
Deni Supplee: Exactly. So that’s a big one. Their experience, they know how to market, place ads, hopefully, you know somebody that just knows the location. You’d be surprised at somebody who might live in a location but doesn’t know all the aspects of that, where a Realtor will know some of the nuances that may be somebody who just lives there or invests there may not.
Brian Davis: Yes, that neighborhood-level expertise can really be invaluable when you go to market a property and, just to expand on that for a minute. Sometimes Realtors do bring a level of marketing expertise, such as knowing how to shoot properties well with a professional camera, great like a professional-grade camera. They’ll come in; they’ll get the lighting exactly right. Then maybe they’ll even stage it. But they will take way better marketing photos than you probably will. Right. So just to give one really quick and concrete example of how that marketing expertise can come into play.
Deni Supplee: They also will be meeting prospects, so that’s again saving you time, you don’t have to go out and constantly show people and that’s time-consuming, answering questions and all of that. A big one, I think, is they take the emotion out of it because as much as we try not to a lot of us, when we’re selling our own, renting our own, or buying, we get very emotionally involved in it and very principled and that takes away from the bottom line, which is ideally what we’re all looking for here. So having a Realtor in the midst of a property manager or somebody who is helping you with this is going to take that emotional aspect out of this.
Brian Davis: Yes, emotions have no place in investments. Seriously, emotions are the enemy of investing, both on the buying side and on the selling side. Way too many, you know, fear and greed, right? That’s what everyone talks about in investing. And if you let fear or greed drive your investing decisions, you will underperform the market.
Deni Supplee: And renting, I think that’s one of the toughest parts when you’re renting out your property. You hear somebody’s story and you’re like, Oh?
Brian Davis: You’re talking about managing tenants?
Deni Supplee: Right! Or just finding a tenant for a property because Realtors can help do that. That can really be an issue. And like Brian was saying earlier, most real estate agents have a fairly good network of stagers and photographers, even maintenance contractors and things like that to get your house showable. Or even if you buy a flipper or a house that needs to be flipped, they have those kinds of resources in their network, that’s helpful to you. go ahead, were you going to say something?
Brian Davis: No, I mean, so yes, they do bring a network, including things like home inspectors, contractors, property managers, perhaps photographers, and stagers. Some Realtors, they themselves are quite experienced photographers and stagers, so you won’t even need to pay someone separate. But yes, I think a lot of this comes down to what you’ve mentioned several times that Deni is saving time, delegating your tasks to other people, especially people who are subject matter experts like Realtors. There’s a real value there. So, then the question then becomes, is the trade-off worth it, right? You know, is, is the money that I’m paying this person worth the amount of time that they are saving me and potentially the higher sales price that they can earn me in selling this property. And keep in mind that Realtors get paid by the seller, both the buyer’s agent and the listing agent, the seller’s agent, both get paid by the seller. So as a buyer, it really doesn’t cost you anything to use a Realtor. We’re really just talking about on the selling side, should you shell out the money for a listing agent and you will still have to pay the buyer’s agent in many cases? That’s something that you’ll typically have to negotiate with the buyer’s agent.
Deni Supplee: Although lot of inexperienced buyers are going to want a buyer’s agent just because a lot of them don’t know the process. I like what Christina said. I think for an out-of-state investor. Real estate agents are super helpful and that is so true on so many levels.
Brian Davis: No question. Yes, you need a local expert, you know, both a market expert and you just need local boots on the ground when you own properties long distance. Someone needs to be able to walk through the property and take pictures of it and, inspect the damage and all of these sorts of things that you can’t do yourself if you are not there physically, right?
Deni Supplee: And you know, I recently had a listing, and I was walking through it, and they had a kid’s room and the kid’s room looked pretty good, but it was just full of clutter and it made it look smaller. They were working on all these other areas and painting and everything else, but they were neglecting to see that. So, a Realtor sometimes can have an eye because when you’re looking at so many homes!
Brian Davis: Fresh eyes,
Deni Supplee: Right,
Brian Davis: you won’t necessarily notice when you’re too close to it.
Deni Supplee: No, not at all. For Negotiation, Realtors definitely have that experience, they’re doing it all the time. They know little tricks of the trade, so that’s helpful as well.
Brian Davis: And the paperwork in general, I mean, you know, drawing up sales contracts, although I guess that that’s more done by the buyer’s agent rather than the listing agent, right? Deni drawing up the contract.
Deni Supplee: It is, but it also as a selling agent, you also need to keep track of the timelines. You know, you want to make sure that their mortgage commitment, if that’s a factor, is in on time, the appraisals and on time, the inspections and on time. And if you miss one of those dates it can put the contract as null.
Brian Davis: Because time is of the essence with real estate contracts, right?
Deni Supplee: Right. Big time.
Brian Davis: And seller’s agents also review the legal contract and will know what to look for, buried in all that legalese. You know, I mean, real estate contracts tend to be, you know, 50, 60, 70 pages long by the time you add in all of the addenda and disclosures. It’s really easy for laypeople to miss some of those like buried things in the contract, buried clauses that actually have a really big impact on your ability to sell on time. There may be contingencies buried in there that let the buyer escape the contracts without losing their earnest money deposit, which obviously costs you that money. A Realtor can help spot those things for you. Darren Stewart says found that there is a 20/80 rule with Realtors that 20 percent of Realtors are good to great, and the rest are just there for the commission. I have had similar experiences in that. Yes. Some Realtors are really sharp, and they know their market inside and out. They have great networks of experts, but there are a lot of part-time Realtors. Not to use a stereotype, but there’s a lot of like the part-time mom Realtors that, think that they can, oh, you know, I’ll just do it on my own schedule. And, you know, but that’s not it’s not how you get to be good at any field. I mean, the best Realtors are out there hustling all day, every day and really know what they’re doing in that market and are doing dozens of deals all the time. Christina says there is a boom of wholesalers, but the issue with them is that there are no rules for them whereas real estate agents, they follow ethical procedures and rules and laws. Yes, so Realtors can keep real estate deals ordered, especially if you end up working with a wholesaler or people who are in the industry and trying to just move fast and loose on a deal. Realtors can provide some guardrails there on those deals and make sure that everything stays above board and, you know, within your or with your interests in mind. So.
Deni Supplee: Which is good because things like Brian said, those contracts are ridiculous. I mean, they’re really long. And most people just don’t really read them, they go right through them. And there’s a lot of written in things like in Pennsylvania at the very end is where everybody writes in everything. And by the time you’re going to that part, a lot of people don’t even really look at that and those are the important parts. These are things that Realtors can help you with. It’s worth a lot more money oftentimes than you think.
Brian Davis: Well, so before we jump into some of the advantages of going for sale by owner, are there any other advantages to using your Realtor that you want to make sure that people are aware of before they, you know, go Realtor-free?
Deni Supplee: Well, we pretty much touched all the bases. Sometimes you have a team that’s something else that is good to keep in mind. I work in a team and it’s very good because now you don’t just have one person, you have a whole slew of people helping you and you’re not going to get that on just with one person.
Brian Davis: So, right, so if your lead Realtor is not available, for example, for showings or to handle incoming contract offers, you know there is someone else on the team that will step in and do the showings or preview the offers and so forth. One other point about Realtors is that good Realtors In any given market, especially Realtors who work heavily with investors. They often have an entire network of local investors that they can put deals out there, too. And often you’ll have offers within a couple of hours of even running the idea past a Realtor. You may not even have to list it on the market. You just contact the Realtor who is active, working in that market and working with investors, and they’ll say, You know, I work with the perfect person for this. Let me make two phone calls and I bet we’ll have a buyer. They’ll call up their investors say, Look, I’ve got this exact kind of deal that you love. What are your thoughts on it? And boom, you can have your sale done just like that. That network is just incredibly valuable. All right, so Deni, what are some of the advantages of for sale by owner?
Deni Supplee: Well, I mean, obviously the top one would be your you’re going to save a whole lot of money. I mean, Realtors fees also are negotiable, and a lot of people don’t realize that. But they are on average is six to seven percent, but often I’ve gone five percent and some people will do it even for less. So, you have to ask, you have to negotiate that. You also have to keep in mind, you’re going to get what you pay for, so you don’t want to have somebody popping in there for a really cheap and then figure, Oh, well, I don’t have to do that much work because they really got me down on the price, but it’s a lot of money. So, on a two hundred and fifty thousand home, you’re looking at twelve thousand five hundred on up in your savings there. Weigh out your time and that amount of money, to see if it is worth it. And the aggravation factor, I always say you’ve got to add in an aggravation factor because dealing with buyers and all the mortgage companies and appraisers are aggravating.
Brian Davis: You have to take care of all those tasks that the Realtor will be doing for you. Staying on top of all the moving parts in the deal, making sure that the buyer is on top of things which they often aren’t, and you know, they need to be babysat contacting the lenders, was the appraisal done? I mean, all of these things such as was the home inspection done. I mean, you have to babysit these deals if you’re not going to pay someone else to do it for you. Not to mention all the things like showing properties and getting all the, you know, professional photos taken, and the listings are professionally written. All of these things that are Realtor can do for you. And Christina made a good point that they can help you negotiate. Keep things objective, right? So, all right back to advantages of for sale by owner.
Deni Supplee: You have a better hands-on of what’s going on because sometimes you let it go, you give it to the Realtor and sometimes you know they can get busy, so they don’t keep us in contact. Where when you’re doing your own thing, you know exactly what’s going on and when it’s going on. And this is definitely, obviously a big one. You can sell them or rent them for less money. Now, with that being said and the kind of market we’re in now. Sometimes having a Realtor can help because you’re getting a whole network of people who are looking for that type of home and hence, we have the bidding wars. I think it’s less apt to have a bidding war when you’re selling it on your own. Or at least with enough people that will spark up the price.
Brian Davis: So, you’re saying when you list the property for sale by owner, you have more wiggle room on price since you are saving money on the Realtor. Right, You have more wiggle room because your net walk away price. So, an in a buyer’s market, which can be very advantageous. In a seller’s market like we’re in right now. it’s less of a factor, like you said. But you know, also to your point, in a seller’s market, a Realtor can help set you up for a bidding war. Right? I mean, they know exactly how to respond to different potential buyers who show a little bit of interest but haven’t actually made an offer to spark a bidding war that you, as an investor or as a, you know, a homeowner seller that you probably don’t know the right way is to kind of poke and prod and nudge these potential buyers to get multiple offers on the table and then leverage all those offers against each other to create a bidding war. There is a little bit of finesse there and that that finesse comes with experience, right?
Deni Supplee: Absolutely. And you can list your property, see, we have Realtor.com and Zillow and the Facebook Marketplace, I mean, about all over the place that you can list your property. and you can pay. It’s like ninety-nine dollars you can pay to list on the MLS.
Brian Davis: Is it that cheap? Ninety-nine bucks?
Deni Supplee: Yep, Ninety-five. Ninety-nine. That’s pretty cheap. Yes, it used to be a lot more, but I guess things are changing out there.
Brian Davis: Disruptive technology. All right. So, the bottom line should people hire a Realtor in today’s world, it should. Investors should experience real estate investors, hire a Realtor in today’s world to sell their investment properties.
Deni Supplee: Well, I think you’re asking me, and I’m a Realtor, So I am going to say, hire a Realtor. It’s like when you go to court without a lawyer,
Brian Davis: Small claims court. Yeah, But a huge class-action lawsuit? No!
Deni Supplee: No! You I think in a seller’s market, you definitely want to have a Realtor. I think there’s a lot of benefits to it, Look, one of the things we’re all trying to do is passive, right? We’re trying to invest as passively as possible and like Brian had said earlier, in order to do that, you want to assemble your network so that you can do that. Otherwise, you’re going to be going home at the end of the night because you just dealt with, the purchaser of your property and they just decided they didn’t want it. So now I don’t know what I’m going to do and the whole nine yards, and it’s just a pain in the butt. So, I personally like somebody else to handle it for me.
Brian Davis: Yes, there’s definitely something to be said for delegating to an expert in any subject matter saves you time. Now that being said, you can for certain properties, you can get away with listing it yourself. For example, I have a rental property that I’m in the process of listing and it’s under a $100000 property. If I were local, I would not pay a Realtor to do that for me. I’m not local. I’m in Brazil, So I am paying a Realtor to take care of it for me. But if I were local, I would just do that myself. It’s like we said earlier, there’s that lawyer analogy, right? Like if you are sued, do you need a lawyer? Or if you go to court, you need a lawyer? Small claims court No. You really don’t need a lawyer. A major lawsuit. You do need a lawyer, right? Some of it is just contextual as well. Tara says someone in the Facebook group mentioned a real estate auctioneer. Do you guys have any info on that? And they asked, why? Why should we not use an auctioneer? I will speak briefly about that. And then Deni, I’m curious to hear your thoughts. So, auction real estate auctions are very hit or miss.
Brian Davis: I mean, I’ve seen properties go for a very strong price at auctions, a price that you would be very happy to have gotten from a Realtor. I’ve also seen properties go for a fraction of their real value at auction. Just depends on who shows up that day and who bids. And you know, I’ve been to auctions where, you know, there were a series of very, very similar properties that were all sold off independently. And the first one went really low because everyone was a little nervous about bidding or, you know, people were just feeling it out, feeling out the auction. So, the first one went for a really low price. And then all the rest of them went for pretty strong prices. You know, as people felt more comfortable with the process at that particular auction, then these were all very similar properties. So, the first person got a really good deal at that auction and that seller got a really bad deal and the rest of the sellers came out fine. So, it’s just hit or miss. And if you put, you can put a reserve price when you auction off a property, but it attracts fewer buyers. So again, trade-offs, so Deni. What are your thoughts on auctions?
Deni Supplee: I think that as somebody who’s newly getting involved in that kind of transaction, you need some type of support because an auction is a whole different world, pretty much. And the auctioneer doesn’t really take the place of a Realtor per say. It’s more of the process wouldn’t you say, Brian.
Brian Davis: Well, they do. The auctioneer does market it for you. But in today’s world, they typically listed on the MLS as well, you know, leading up to the auction to build anticipation and to, you know, get some audience attention on it. I’ve never sold a property at auction. I have bought properties at auction. I’m not as familiar with the auctioning process on the seller side as I am on the buyer side. Yeah, I’ve bought properties at auction but never sold them at auction, so I can’t speak firsthand to the process of selling a property at auction.
Deni Supplee: Yeah, I have to say that I have not had too much to do with the auction process. I am looking at a property right now that’s got a lot of land that’s going for auction. So, looking into it, but yes, I don’t know a whole lot either, but it’s something maybe to explore. So that’s a good topic.
Brian Davis: Yes. So, Deni, any last thoughts about hiring a Realtor versus not hiring a Realtor before we call this episode complete?
Deni Supplee: I think the biggest thing here is if you’re a beginner. In this whole thing, in the process that I would have a professional, so I would hire a Realtor, if you’re somebody who’s been around the block a couple of times, you feel like you can do it yourself. You have the time, you have to weigh it out and decide, should I, or shouldn’t I? There’s also, I’m pretty sure they do it in all states. Pennsylvania has what’s called a transactional Realtor agent, and that’s somebody who will just facilitate the sale for you. So, you don’t pay as high. It’s usually a flat fee or one percent or two percent compared to the larger amount, so that might be another option to seek out.
Brian Davis: Ok, that’s a good tip. I actually never heard of that before. Maybe it’s just a Pennsylvania thing. Maybe it’s not. I don’t know. So, you guys up? We would really appreciate it if you left us some positive reviews, both on our Facebook page or on sites like Site Jabber and for the podcast itself on platforms like iTunes, Stitcher or wherever you listen to your podcasts. On that note, we’re going to wrap things up today. We will see you next Tuesday at 2:00 p.m. Eastern, 11:00 a.m. Pacific. And as always, stay in touch with us. Let us know what you want to hear about this podcast is about you guys. It’s not about us. So let us know what you want to hear about, and we’ll see you next Tuesday.
Deni Supplee: Have a great day. Bye now.