By James Knull
As an investor, you want an investor-focused real estate agent who understands the vision for your business and what you require of a property. The agent should be a resource you can trust; someone who can offer advice and guidance over and above simply helping you find the right deal.
Following are my suggestions for the essential skills your agent must have in order to help you move your business forward during the six key stages involved in making a successful real estate investment.
Stage 1: Property Search
An exceptional agent should be laser-focused on your ideal target property. With your direction and guidance, the agent will take the time to learn precisely what properties best fit your portfolio before beginning their search. A generalist agent will likely set up an automated computer search that sends you every listing in a broad range of search criteria—this isn’t the level of engagement you want. While some investors are interested in seeing every single deal on the market, most value time efficiency and only want to see quality deals that the agent has vetted. When your agent calls you about a deal, you want to know that certain criteria have been met by your agent and that your time will be well spent considering the investment.
Key tip: Hot deals don’t last long, and exceptional agents send the best deals to their “A-list” clients. To maintain your spot on that list, ensure you are ready write offers and make decisions promptly. The “A” in A-list stands for clients who take action!
Stage 2: Property Assessment
When you’re viewing and assessing a property, you want to discuss it with your agent using investor’s language. An agent who can do this will stand out from the rest. He or she will point out things that matter to the investor and the tenants, investigating the state of the mechanical components (e.g., HVAC) of a property and steering you away from properties that have any serious mechanical defects. The agent will know market rents off the top of their head and be able to give you an accurate estimate of how much a renovation to the property should cost. Together, you and the agent will have created a due diligence checklist and the agent will be able to advise you of any pitfalls a property may have.
Key tip: You should leave a viewing satisfied that your agent has fully answered your questions. This provides a measure of confidence to take the next step.
Stage 3: Making an Offer
It is not in an investor’s best interest to coach an agent to chase the lowest price for a property and, therefore, submit a low offer. This is a misguided approach to getting a deal. The best agents know this and have a talent for reading the market and reading the seller, and then crafting an offer that has the potential to lead to a good and fair deal. Your agent should be a skilled negotiator who can look at what is required to achieve the outcomes you want. You will want your agent to talk to you about the best approach. I will say it again that the heavy-handed approach of a lowball offer is less likely to succeed than a well-crafted, precise offer that includes terms the seller wants and needs. You don’t want to use a baseball bat when you need a scalpel!
Your agent should always have your best interests in mind and ensure the clauses of the offer minimize your risk exposure while getting you the best possible deal. A house flipper may be comfortable with an unconditional offer; this usually results in the lowest possible price. However, a client who plans to have a turnkey property will want a very thorough inspection to ensure all of the features of the property are in good working order.
Key tip: Discuss different negotiation tactics with your agent while drafting the offer.
Stage 4: Completing Due Diligence
As touched on above, conducting due diligence is a joint effort between you and your agent. Your agent will coordinate due diligence tasks and walk you through the results. There are two major areas of due diligence: financing and inspection.
Fulfilling a financing condition will rely on the timely flow of information between your agent and your mortgage broker. The mortgage broker is under a tight timeline, but your agent knows this and therefore is well-prepared and will send only correct and up-to-date documentation.
Key tip: Sometimes mortgage brokers wait to do an appraisal at the last minute. Make sure an appraisal gets booked as soon as possible to ensure financing gets approved.
Inspection conditions are crucial to ensuring the long-term viability of your acquisition. Even though you have a certified inspector on your team, and one you can trust, your agent should be aware of the outcomes of an inspection and be able to coordinate a follow-up inspection if necessary. For example, if the inspector sees a foundation issue and recommends that an engineer be brought in, your agent should be able to coordinate this activity. Interpreting an inspection is a critical part of your agent’s value in the process of making your purchase. Your agent should advise you on what items are a concern in the inspection report and whether renegotiating the price is needed if there is a major issue with the property.
Key tip: Due diligence requirements are much more involved with multi-family properties. Familiarize yourself with all the different elements.
Stage 5: The Closing
The space in between a condition waiver and getting the keys requires attention and organization from your agent and the brokerage. Paperwork needs to be accurate for the lawyers. If there are clauses demanding action as part of the contract, your agent needs to ensure they are satisfactorily carried out. For example, if the seller is required to complete some sort of work prior to key release, your agent will follow up and communicate the status of the work. On the closing date, your agent will ensure that the property is in proper condition and that you will get the keys at the appointed time.
Key tip: Stay on top of your closing by listing key events in your calendar.
Stage 6: Post-Closing
This is where the best of the best of agents will show their true colours. A mediocre agent will complete the transaction and disappear. The exceptional agent will continue to be a source of knowledge and experience for you to draw upon as you work with your rental property. Furthermore, if there are any post-closing issues with the property, a dedicated agent can be relied upon to assist you.
Key tip: Don’t be shy. If you have a question, reach out to your agent.
Once you’ve made your acquisition, review these six stages and measure your real estate agent’s performance against the skills I’ve highlighted. Your next property counts on having a trustworthy and productive relationship with a skilled agent. Further, your friends and colleagues will be counting on your advice and referral. The entire investing process will be fun and exciting with the right agent guiding your path!