Chicago Real Estate: Why Investors Should Use Realtors
When investing in Chicago real estate, our main motivation for going down this path in the first place is…well…money. We are looking to build wealth and maximize profits. In order to do so, many investors who are starting out (including me) tried to find every way possible to cut costs, including avoiding realtors at all costs. In the end, I didn’t get very far. Now that I am a licensed realtor, it all makes sense to be as to why I didn’t get far. Below are 5 reasons why as investor, especially if you are just starting out, should use the services of a realtor.
1)Realtors Can Offer Expertise That You May Not Have
Before I got into real estate, I did as much research as I could possibly do. I read all the books, watched all the youtube videos, and read all the investor blogs out there. When I finally made the decision to jump in and make my first deal…I ran into a few issues that I did not expect. For me, it was passing the village inspection (for my 2 flat in Berwyn, IL, if you were curious). Before I closed on the property, I was given a list from the village describing all the repairs needed. I handed this list to my contractor, who then factored it into the budget, and all was supposed to be well. Boy, was I wrong. Here’s what I didn’t know: just because they gave you this list doesn’t mean that’s all the repairs you have to make. The inspector can come back and find something else after the fact, then force you to repair it. After I closed, the inspectors added close to 10k more in repairs than the original list they gave me! Once I became a realtor, I found out that this happens all the time in the cook county suburbs.
This is where having a realtor who knows the ropes in the Chicago real estate market can help you out. You especially want to seek out a realtor who has worked with investors before, who can warn you of these types of issues that can drain all the profit out of a good deal.
2)For Buyers, They Are Free!
I hear all the time from investors that they only want to work with the listing agent, and they refuse to deal with a buyer’s agent. This really doesn’t make sense to me, and let me give you my reason why. In the Chicago real estate market, if a property is listed with a listing agent, that seller has a contract to pay that agent a certain percent. That agent then splits that percentage with the buyer’s agent as compensation for bringing a buyer. That means that the client of the buyer’s agent does not pay anything. You get the services of the buyer’s agent for free!
Now you may be thinking that if you work directly with listing agent, you can get some sort of discount. If there is no buyer agent used, that listing agent simply keeps all the money for themselves. It is already stated in a contract when percent the seller is paying to the agent, so that agent is getting that money no matter what. If you don’t use a buyer agent, you are basically paying the listing agent double while they are negotiating for their client, and against you.
Bottom line, use a buyer’s agent. They are free, and will prevent the listing agent from ripping you off.
3)Will Save you time, So You Can Focus Your Efforts Elsewhere
There are many books out there that talk about why you should delegate all the tasks you can to someone else and focus on the most important money making activities. (“The 4 Hour Work Week” by Tim Feriss and “The 80/20 Principle” by Richard Koch are two great reads). While it is possible that investors can find ways to sell homes on their own, the truth is that it can be a lot of work. How are you going to show the property? Who is going to take of the pictures and put together all the ads and the marketing? Who is answering the questions of all the potential buyers? This can take up a lot of your day, especially if you have more than one deal. This is time that would be better spent putting together more deals.
Also, this is all assuming that the everything will go well with the property. What if the property takes longer than 30 days to sell? Going back and forth with potential buyers for that long will get real old, real quick. You can easily make up the cost of paying a realtor by putting together 2 or 3 more deal at a time.
4)Pricing Your Property Correctly
If you are trying to sell a property, the main thing that will determine how fast you can sell your property is choosing the right price. A lot of investors (or sellers in general) often have a hard time separating their emotions from the deal. They have put all this work into a particular property, therefore they start to think that their property is worth more than any other property in the area. However, if you price a home too high, it will not attract buyers, no matter how beautiful the property is. On top of that, if a property sits on the market for too long, then buyers will start to wonder what is wrong with the property, driving down the demand for your property even more.
This is where a good realtor steps in. They know how the market operates, and can give you a non-biased opinion on what potential buyers think your property is worth. This way can make sure your property is listed at the right price to sell quickly and for top dollar. Also, if there are and sudden changes in the market (which can happen fast in the Chicago real estate market), or if the home is not generating enough demand, your realtor can make quick adjustments to get your property under contract.
5)Connections
Real estate investing can be a lot easier for you if you have the right people in your corner. If you are just starting in Chicago real estate, you may not have all the connections you need in order to be successful. Do you have a good real estate attorney? Do you have a trusted mortgage lender? What about your contractor? While you may not have all these connections, chances are an experienced realtor will. A good realtor will easily be able to get you connected to the right people to make sure your deal runs smoothly.
Please feel free to reach out to me with any questions or comments. Also check out all the multi unit properties for sale in Chicago. Thanks and have a great day!