Buying Real Estate? Use a Buyers Agent.

I work with a lot of buyers and investors. There is a common misconception I find amoung new Buyers/investors and some seasoned ones, that I would like to address. Buying real estate without the use of a Buyers Agent does not mean you will receive a discount on the home. And here is why:

A seller enters into a Listing Agreement with a Broker to sell their property. A price is set and a sales commission is also set. The sales commission will be paid no matter who sells the house. If the Listing Broker sells the house, 100% of the sales commission is paid to the listing broker. If a Buyers Agent sells the house, the Buyers agent receives a percentage of the sales commission. Simple.

Working directly with the Listing Broker (or Listing Agent) may seem like a great way to get to the chase and make a deal close quickly, and it may work out that way, but unless you have an agent working on your behalf that is NOT the Listing Agent, you have no one looking out for your best interest. By Law, the Listing Agent's responsibility is to his/her client. If the Listing Agent negotiates for both the Buyer and the Seller, the Listing Agent cannot provide advice to you, the buyer, cannot disclose inforation that he/she is privilidged to, does not and will not have your best interest in mind.


What Exactly is a Real Estate Investors Buyer Agent?

Buyers' agents are Licensed Real Estate Agents who are experienced in and specialize in representing Investors in their pruchase of Real Estate.

Almost everyone has bought a car from a Car Dealer, so lets use this analogy:

Lets say that you are in the market to buy a very specific car (i.e. a Black Chevrolet Suburban 4x4 with tan leather interior) and walk into a local Chevrolet dealership to find one. Guess who those "friendly" sales people work for? The dealer, of course. They're all trying to get you to buy using every pressure tactic in the book. Do you feel comfortable? Of course not.

Now, what if you could hire an independent vehicle consultant to find you that exact vehicle from amongst all the regional Chevrolet dealerships. Someone to handle all of the negotiation, at your direction. Someone who knows the market and the costs associated with buying this vehicle as well as how long a dealer typically takes to sell this car. All of this info is vital to you getting the best deal. To get all of this at no cost to you, you simply sign an agreement with that individual that outlines the following obligations:

* That the consultant is to look out for your best interest (They are legally bound to do so).

* You agree to allow your consultant to be paid a pre determined finders fee from the dealer from whom you decide to buy.

* That the consultant will help you find the best deal. Performance based compensation. If they don’t find you what you want…they don’t get paid.

* You agree to work exclusively with that consultant. (This helps ensure that there is no pressure on you to buy because that consultant knows that he / she will eventually be rewarded for their effort to help you).

* You agree to only buy from dealerships that will pay your sales person a finders fee.

Now substitute the car for a house and the consultant person for a real estate investors buyer’s agent and you've accomplished the same thing, which in real estate is known as buyer agency.


Services That Buyers’ Agents Offer to Their Clients:

*Reliable advice and information is perhaps the key factor in making a "good decision". As your buyer's agent, they will provide you with information such as:

* The original purchase price of the house.

* Evaluating improvements that the sellers may have made to the house.

* Comparative market analysis for similar houses in the neighborhood.

* The average closing help paid by sellers of other similar houses in the neighborhood.

* The average drop from list price to sold price.

* How many days the property has been on the market for sale.

* The co-relation between tax assessed value and market value.

* Computerized what if scenarios on spreadsheets to allow you to make sound financial decisions.

* Introduction to reliable mortgage lenders, home inspectors, settlement attorneys etc.

* They will help you take care of all the small details for your purchase.


A Performance Based Service that you do NOT have to pay for. What could be better?

Where to Invest? What to Buy?

A question I am often asked from investors new to our market is, Where would you recommend investing? If only there were an easy answer to that question. The answer is an open ended one: It all depends... Most people I deal with are investing in residential property, so we will tackle this area and leave the commercial properties out of it.

To answer that question, you need to know what your investment goals are, your risk level, and your financial status.

1. Investment Goal: Are you interested in properties that produce a positive cash flow or are you ok with breaking even to paying a few hundred dollars a month to cover the mortgage? The majority of the properties that cash flow are older homes in established neighborhoods. They can be bought for less but will probably need some repairs or updates. New homes tend to produce little to negative cash flow (with traditional interest only or 30 year fixed mortgages). The plus side is that they are new and should not require repairs.

Do you want to stay in a rental price range most people can afford? Or are you targeting more affluent tenants or corporate leases? The price point that has the most amount of prospective tenants is the under $1000 a month rent.

2. Risk Level: How much risk are you willing to take? Are you interested in good neighborhood, with good schools and working professionals? Do you want a neighborhood that is in transition? Or do you prefer low income or assisted housing?

3. Financial Status: How much of your own money are you willing to invest? Do you have a good amount of cash and great credit? Are you low on cash but have good credit? Or are you cashless with terrible credit? No matter what you answered, you can own real estate, it will take a lot more work on your part if your funds are low and your credit is bad.

Where to Invest and What to Buy? If your interest is good schools, good neighborhoods and suburban, family orientated areas, here are few:

North of town: The Woodlands, Spring, Conroe
North East: Kingwood, Attascocita and Humble
North West: Tomball, Cypress
West: Katy
South West: Sugarland, Missouri City
South: Pearland
South East: Friendswood
East: Baytown

Closer to down town, transition neighborhoods:
The Heights
Midtown
The Med Center
University of Houston
Myerland
Bellaire

Houston is a large city. There are many more places than the ones I have listed. My favorite? The ones that make money :).