Buying a Home 101: Why You Need the Right Real Estate Agent!
00:00:00.000 | whether you want to build a portfolio of 20 homes, whether you want to buy multi-family homes,
00:00:03.760 | commercial properties, or you just want to buy a primary residence, at the end of the day,
00:00:06.880 | you got to find the home, you got to buy the home, you got to decide if it's a good deal,
00:00:10.240 | you got to close on it, you got to fund the purchase unless you want to buy it with cash,
00:00:14.720 | which I'm guessing most people don't. So maybe let's jump into that process
00:00:18.880 | and kick off with just someone who's like, "I'm not really sure what I'm doing."
00:00:22.080 | You've been an agent. Let's talk a little bit about that process of partnering with someone
00:00:27.280 | to help you go through this process instead of just trying to wing it on your own. And when
00:00:32.480 | that makes sense, or maybe when it doesn't. Yeah. And if you're going to buy a property,
00:00:36.240 | you don't know much about it, you definitely want to use a real estate agent in the beginning.
00:00:39.840 | And when you're buying, here's something people don't realize, you don't have to pay your agent.
00:00:44.640 | If you're buying a house off of the MLS, this would be any property you see off Zillow or Redfin,
00:00:48.960 | something like that. The seller has already predetermined a certain amount of money
00:00:53.600 | they are going to pay the buyer's agent for bringing you to the property.
00:00:57.440 | So you have a lot of questions. There's paperwork you're not going to understand. You don't know
00:01:01.200 | what the process is. It's intimidating. You find a real estate agent and I'll add,
00:01:04.720 | they're not all the same. There's good agents and bad agents. There's good lawyers and bad
00:01:08.240 | lawyers, good doctors and bad ones. You really want to find somebody who's good at what they do.
00:01:11.520 | They can take a lot of the fear that you have right out of it. It's amazing when
00:01:16.640 | you take this scary process and there's a person like me that does this so often it's boring to me.
00:01:21.360 | Like, "Oh, another one of these. I've walked this path so many times."
00:01:24.080 | It's definitely not scary. So that's something that every person who wants to buy a home should
00:01:28.640 | know right off the bat. Find a buyer's agent. They're going to answer a lot of the questions
00:01:32.320 | that you're going to have and they're going to protect you in ways you didn't even know
00:01:35.520 | that you needed to be protected. And maybe we can go through what the actual escrow process
00:01:39.520 | looks like or the process from start to finish of what to expect when buying a home if you'd like.
00:01:44.080 | If you're a little bit more experienced, you bought homes before, one thing that people will
00:01:48.400 | look at, especially in a competitive market like ours, Chris, we just realized that we're neighbors,
00:01:52.000 | we live pretty close to each other, probably I can power in some change away, is you can go
00:01:56.400 | directly to the listing agent and you can say, "Hey, I will let you represent me on this deal,
00:02:01.280 | but I'm going to need some kind of an advantage. I need you to get my offer accepted over the other
00:02:05.680 | people. Or I'd like a little bit of a discount on the price if you're getting to represent me here."
00:02:10.400 | So there are people who buy a lot of real estate that has said, "Hey, I don't think I need my own
00:02:14.400 | buyer's agent, necessarily. I still need someone to handle the paperwork." But they go right to
00:02:18.480 | the listing agent, they look for an advantage. And that is pretty popular in the Bay Area,
00:02:22.640 | where most listings are getting several offers on all of them.
00:02:25.440 | Yeah, actually, I have bought 2 homes in the Bay Area and both times I've used the seller's agent.
00:02:30.400 | So we can talk about that a little bit more because I have some thoughts about it. But maybe
00:02:34.240 | rewind a little. You said, "It's important. Not all agents are the same. You got to pick the right
00:02:37.760 | one." Obviously, not everyone lives in the Bay Area. So you're not going to be the perfect agent
00:02:42.800 | for everyone. How does someone find that perfect agent?
00:02:45.280 | First thing to look for, find a person that sells a lot of houses. A lot of agents don't. In fact,
00:02:49.600 | most agents don't. I'd say 90% of agents sell a couple houses a year or less.
00:02:54.400 | And it's unpopular to say this. The agents get angry because they're offended right now.
00:02:58.800 | "Just because I only sell 2 houses a year doesn't mean I'm not good." Okay, I know.
00:03:02.720 | However, tell me anything that you do twice a year that you get really, really good at.
00:03:06.560 | In general, that's how life works. If you snowboard twice a year for your whole life,
00:03:11.520 | you never really get that good at snowboarding. Or it takes you 20 years before you're as good
00:03:14.880 | as somebody that just snowboarded every weekend for the whole first year that they got into it.
00:03:19.040 | Repetition really does develop mastery. I talk about that in the Burr book that I wrote.
00:03:23.840 | So the first thing I look for is an agent that sells a lot of homes, period. The next thing I
00:03:27.680 | want is an agent that owns real estate themselves. At minimum, they got to own their own house. But
00:03:32.480 | ideally, I want them to own investment property. It gives a completely different perspective
00:03:37.280 | when you've bought a home and you believe in it. And you just get a different set of goggles to
00:03:42.400 | look at real estate through. I don't have any kids. I love kids. We were talking about that
00:03:46.080 | before the show. But each of you as a dad, I am sure, sees something different when you look at
00:03:51.840 | a kid than I do. I don't immediately freak out when they start putting something in their nose.
00:03:56.480 | I haven't had enough experience of seeing how that could go wrong.
00:03:58.800 | Rob has seen some of that. So he's going to have a much different emotional response
00:04:04.240 | to that marble or that Play-Doh getting a little bit close to the nostrils.
00:04:08.240 | Real estate agents that own real estate have that sixth sense. They can recognize that's
00:04:12.080 | a bad neighborhood. That's not the right tenant. That's not the right floor plan. That's not the
00:04:16.080 | right structure. You really want to go to this house that may not look as pretty in the pictures,
00:04:20.800 | but will be a better deal. The third thing that you want to look for is an agent that
00:04:25.760 | understands the financial component of real estate. Many real estate agents are
00:04:30.640 | geared to cater to their clients' emotions. They want to be liked.
00:04:33.840 | They're very high on as an eye on the disprofile. This is how they make their money by being
00:04:38.320 | likable. Most people reach out to the agent who's the nicest, the friendliest, the warmest. That
00:04:42.320 | doesn't mean they're the smartest. So when you're having conversations, I always want to hear agents
00:04:46.400 | that are approaching real estate from a financial perspective. I want to hear them telling me,
00:04:50.400 | "This is the part of town that's being redeveloped. This is the next up and coming area.
00:04:54.560 | This is where all the money is going into. This is a property that would function as a rental
00:04:59.120 | if you moved out." Even if that's not necessarily what you're looking for,
00:05:03.200 | you just want to buy a home. If your agent sees things that way, it is very good to hedge your
00:05:07.760 | bets in the future because you never know when you have more kids, need more bedrooms, get a new job,
00:05:11.520 | want to move for some reason. You don't want to be locked into a situation where it's hard
00:05:15.200 | to sell that home or it can't be used as a rental property if you want to leave it.
00:05:18.480 | David, let me ask you something. Does the requirement of having an agent that owns real
00:05:24.320 | estate, is that as important if you're just buying a primary residence? Do you weight that
00:05:29.760 | a lot heavier for people that are looking to buy investment properties?
00:05:32.640 | No, it's the same for a primary residence. Let me tell you why. The first house I ever bought,
00:05:37.760 | my agent did not own any real estate. And I bought this house in the very end of 2009,
00:05:42.720 | great time to buy real estate like you were saying, Chris. My agent did not tell me that
00:05:47.360 | the property taxes in that area had special assessments assigned to them and were much higher
00:05:52.480 | than the normal property taxes. In fact, they ended up being about $250 a month higher.
00:05:57.760 | So I was expecting $300, they were $550. Now I was buying this as a rental property,
00:06:03.120 | but even if I had bought buying it to live in... And again, I remember at the time,
00:06:06.960 | the total mortgage was like $1,300. So bumping it from $1,300 to $1,550 was a pretty significant
00:06:12.400 | chunk. It's like a 20% increase almost in my overall payment because they overlooked that
00:06:17.360 | property taxes were higher. Now, agents who own real estate themselves would be familiar with the
00:06:23.040 | fact that property tax bills come. There's more expenses than just your principal and interest
00:06:27.280 | on your mortgage. They would see angles like insurance can increase in this area because
00:06:31.680 | it's in a flood zone. I really think she missed it because she had never paid a mortgage on her
00:06:37.120 | own. She never had her taxes and her insurance escrowed into her mortgage payment. The next
00:06:43.040 | time I bought a house, it was with an agent that had been selling houses for a very long time and
00:06:47.120 | sold a lot and owned a lot of real estate herself. And as we went through the process, she educated
00:06:52.080 | me. You don't want to buy in that part of town because you're going to pay extra money to get
00:06:56.000 | the better school districts. You don't want to buy over there because the taxes are higher.
00:06:59.280 | You don't want to buy a house like that because with that kind of a roof, your insurance is going
00:07:02.640 | to be a lot higher. I learned so much about investing in real estate just from the person
00:07:07.280 | that was getting paid to help me. It was like free advice and free knowledge. And it really
00:07:11.920 | gave me a different perspective of what to look for and what to avoid.
00:07:15.120 | I love it. Okay. So I just sent a link to you. There's this guy in Northern California. Maybe
00:07:20.800 | you know him. Stanley Lowe. Number one agent in Northern California for 10 years. Looks like and
00:07:26.240 | is commonly described in San Mateo County as the Asian Elvis of real estate agents.
00:07:31.920 | And so when you first said, "Look for someone who sells a lot of houses," I was looking at...
00:07:37.360 | I know this guy. I get the flyers in the mail. He sells all the houses. High volume,
00:07:43.840 | high throughput, not just low income property, all kinds of price ranges.
00:07:47.600 | Does that mean that if I were looking for a real estate agent, would he be the right guy?
00:07:53.120 | Should I consider him even though it might not feel like someone's personality? Maybe that's
00:08:00.080 | not the personality I would want as my real estate agent. But do the numbers speak more than
00:08:05.120 | a personality? How do you think about that? And if anyone's curious, greenbanker.com is this
00:08:10.240 | real estate agent's website. Green without the E.
00:08:13.600 | He's got it down. I will say that. The marketing, the cowhide blazer, and the big
00:08:19.440 | circular glasses. I mean, I'm in, personally.
00:08:22.480 | That's funny. That's because I'd be running the other way the minute I saw this.
00:08:25.680 | So he does sell a lot of homes, I'm sure. And so he probably does have some experience.
00:08:31.200 | My gut would tell me as someone who has worked with a lot of clients and knows a lot of realtors,
00:08:36.400 | this is probably not someone who's actually going to be representing you.
00:08:39.600 | He's going to have staff that are going to be handling a lot of it. You're not going to
00:08:42.640 | be talking to Stanley. And he's going to likely make up for a lack of negotiation ability and
00:08:49.600 | focus on saving you money or making you money if it's a listing with his personality.
00:08:54.320 | So he's a great marketer and the top producing agents are always the best marketers. This is
00:08:59.040 | a problem in our industry. The best agents don't make the most money. The ones that are best at
00:09:04.240 | getting the phone to ring make the most money. But that doesn't mean that they're the best when
00:09:07.280 | it comes to representing you. So you want someone that sold a lot of houses, but maybe you don't
00:09:11.200 | necessarily want the person who markets themselves as the person who sold the most houses.
00:09:15.840 | And so it's that sweet spot of maybe like the 60th to 90th percentile, but not the very top.
00:09:23.600 | There's a lot of things people fall for. I sell the most houses in this neighborhood.
00:09:27.440 | Realtors will use that as a way of saying, "I'm the best. Don't fall for that."
00:09:30.640 | It makes sense to our perspective when we're listing the home. "Oh,
00:09:34.000 | you sell all the houses in the neighborhood. You know how to get me top dollar.
00:09:37.040 | You just don't realize until you think about it, the buyers don't care.
00:09:40.480 | The buyers don't care who's selling that house. They are never going to look at who the listing
00:09:44.480 | agent is when they're writing their offer. They just care about the house.
00:09:47.200 | The buyer's agent needs to know the neighborhood. The buyer's agent needs to know
00:09:51.040 | the amenities. When you're looking to buy somewhere, you want an agent that knows the
00:09:54.560 | area very well. When you're looking to sell, it will never matter how many homes in the
00:09:59.200 | area that agent sold. In fact, the only reason they sell a lot of homes in the same area
00:10:03.280 | is they put their sign in all the yards and then they go, we call it farming,
00:10:06.000 | knocking on all the doors and meeting all the people, getting their name out there.
00:10:09.600 | They're just able to utilize a listing to build leverage to get more.
00:10:12.880 | But there's no competitive advantage when it comes to representing a seller if you've sold
00:10:16.800 | other homes in the area. I wanted to add one thing to that. Well, hey, it sounds like if
00:10:21.120 | they're putting signs in everyone's yard, it sounds like they're good marketers,
00:10:24.080 | which goes back to what you were saying. But I did want to say that one really important
00:10:28.560 | piece to agents, just from a consumer side, and as someone that relies on agents pretty heavily,
00:10:34.560 | is them having a really thorough Rolodex of vendors that I can use to help me run
00:10:40.880 | my properties, whether I'm living in it or not. If I'm buying a short-term rental, for example,
00:10:45.280 | I know I need a contractor, cleaner, landscaper, pool maintenance person, pest control,
00:10:51.520 | and probably a plumber, electrician, and all that type of stuff.
00:10:54.320 | So when I'm calling a realtor, and this goes into how many houses have they sold,
00:10:58.720 | if they've sold a lot of houses over the last 5-10 years, they probably have a pretty thorough
00:11:03.360 | Rolodex. I mean, outdated term. If they use the term Rolodex, maybe they're not with it.
00:11:08.080 | But if they have a very big contact list of all these different vendors,
00:11:12.160 | that's what I'm personally looking for in a realtor. Because a lot of the times,
00:11:15.520 | I really need a firsthand referral to know that I can successfully
00:11:20.240 | either live in a property or execute a rental.