All About Real Estate Agents

Who Are They…Real estate agents are professionals instrumental in connecting the buyer with the seller.
Additionally, many real estate agents manage rentals wherein they introduce tenants to landlords and oversee the maintenance of the property on behalf of the landlords.
In most areas real estate agents are required to be highly educated, licensed and are regulated by a governing body.
Some real estate agents are also Realtors.
To use the title Realtor, a real estate agent must be a member of the National Association of Realtors which in addition to a number of other requirements, requires Realtors to adhere to a strict code of ethics and offers Realtors additional educational and designation opportunities.
Though not required by rule or law, it might be a wise decision to seek the services of a Realtor.What Do They Do….Real estate agents bring together two or more interested parties, perform those steps necessary to successfully conclude a transaction and charge a commission for their services.
For sales transactions, they charge commission to the seller while for rentals, commission is typically charged the landlord.
Real estate agents generally calculate their fee as a percentage of the selling price (in the case of a sale) and as part of the rent for rental units.How Do They Do It…People who want to sell or rent their property leave details of their property with the real estate agent.
Along with all property details the real estate agent will typically have keys to the house to facilitate showings.
The other interested party (i.e. the buyer/tenant), gets access to this information and to the property by contacting the real estate agent.
That’s how the real estate agent becomes a hub of information.
Contrary to some common misconceptions, real estate agents typically represent the seller or the buyer but rarely both.Why Should I Use One…First and foremost, to protect yourself. Real estate transactions are highly regulated, highly paper (document) intensive transactions.
The real estate agent possesses an in depth knowledge of the laws, rules, regulations, disclosures and documentation necessary to successfully complete the transaction to the satisfaction of the buyer, the seller and the law.Because real estate agents are most familiar with local real estate market conditions, it is wise and makes sense to seek the advice of one to get an idea of the current trends and pricing for properties within that market.
A good real estate agent will know the prices (or price range) of various properties of different types and at various locations within the region.Because of the real estate agent’s knowledge and expertise, property sellers often get a few thousand dollars more for their property.Many home seekers, including seasoned real estate investors use the services of real estate agents to locate the best real estate bargains in the easiest and quickest manner.Furthermore, the best agents analyze the wants and needs of a home buyer/tenant and provide valuable input as to the kinds of properties available to them within their budget. Therefore, a good real estate agent will not just present a list of available properties to the buyer/tenant but will actually discuss their needs and make suggestions.The good real estate agent, working in this manner benefits in at least two ways…
First and most obviously, when the real estate agent is able to successfully complete the transaction the commission is earned and the real estate agent is paid…
and secondly, if they make the customer/client happy they earn a good reputation and often receive referrals (hence more business).Worth Noting…It is worth noting that there is a myth floating around that real estate agents only work on behalf of the seller, buyer beware.
This is not written in stone nor is it always the case. Real estate agents are, in most regions, highly regulated.
With few exceptions, real estate agents work either for the seller (as is the case with many listing agents) or for the buyer (as is the case for a buyer’s agent).
Additionally, some areas allow for dual agency where an agent can work for both the seller and the buyer or as a transaction broker where the agent represents the transaction itself and neither the seller nor buyer individually.
However, in the case of dual agency/transaction brokerage, note that rule, regulation (law) and ethics do not permit the agent to act in favor of either party while in detriment to the other.
If you are unsure of the relationship between you and your real estate agent, do not hesitate to ask.

Why Investing in Real Estate Made Me a Millionaire and Investing in Stocks Didn’t

Martin, our money man and main investing partner, emailed us last night and said simply “I’ve pretty much lost it all”. We’d been shopping for a commercial property to buy to diversify our investments. Martin was once again partner with us on the deal we found, assuming he was comfortable with the numbers.At least he was planning to before the markets crashed and Martin lost his six figure down payment! Now, sitting on pennies (o.k., not quite, but definitely not enough to make a down payment on a million dollar industrial property), Martin is probably really wondering what so many other people do, “Is real estate a much better investment than stocks?”My answer is always a resounding “It depends” or “Diversification is best”… but if you change the question and ask me where my money is invested, 90% of my money and my net worth resides in real estate (even excluding my current home).And yes, I am young – I’m in my early thirties! I am also a millionaire and it’s all thanks to real estate. It’s not to say that stocks won’t make you rich, Warren Buffet is one extreme example of the wealth that can be created through stocks, but I like real estate because:

You Can Kick It! Real estate is tangible. You can drive by a property and tell your friends or family that it is your property. You can also check up on how it’s doing. That is not as easy if you just own shares in a company. There’s nothing to show your friends and family, and most company’s won’t let you sit in on their meetings to see how they are doing!

 

Leverage: If you have $16,000 to invest (which is what I started with 7 years ago), you can buy $16,000 worth of stocks and bonds. But, if you buy real estate, you can buy a property worth $160,000 (which is exactly what I did). While some stock investors are able to buy on margin (when you only put down a portion of what the stock is worth), this is a sophisticated and high risk move that only experienced stock investors typically make.

If your stocks go up in value by 5%, you’ve made $800. But if your property goes up by 5% you’ve made $8,000! This is on the same $16,000 investment. This doesn’t even take into account the other ways you can make money from real estate….which leads me to my third reason I love real estate.

 

There are three ways to make money from real estate: Appreciation, which we discussed above, rental income, and other people’s money (your renters) paying the mortgage down. Even if your property is decreasing in value, you are still getting paid rent and that rent is paying down the mortgage, and the surplus after expenses are paid is hitting your pocket!

 

Control: As a shareholder of a company, you have no control over your investment. And, you never really know what’s happening behind closed doors. I don’t need to start naming the corporate disasters of the last decade like Nortel, Enron and WorldCom for you to really understand what I am saying! But with real estate you do have control! If electrical bills are too high you can change the light bulbs to more efficient ones, seal the windows, and take other measures to reduce the costs. If you are losing money, you will know it very quickly! And you will be able to take measures to improve this situation. With shares, what can you do if your shares in Nike drop 15%? You can sell more or you can buy more… that’s it.

 

Creative ways to make money. A simple stock investor has two ways to make money from stocks… appreciation in their value and dividends. I owned stock with dividends once. The $30 cheque once per year was incredibly rewarding.

Because you have control over your property, and there are three different ways to make money from the property, there are plenty of creative techniques to try to make more money from your asset. Some people rent out the garage separate from the house. In the right location, you could sell advertising space or just get price reductions on work done in exchange for some advertising (ever asked a painter what kind of discount you can get on their work if you put up one of their signs on your lawn??), you can add vending machines or laundry facilities, you can change the density of the property (add more units… more units means more rent), or you can change the usage of the property to sell it to someone who can make better use of it (if you are in a commercial area, an office developer might want to pay big bucks for a properly zoned property to develop on). There are dozens of ways to turn a simple house into a money making machine with creativity. The same can’t be said for stocks.

 

Access to the Equity without selling the asset. In the example of the $16,000 I used to buy my first investment property, I was holding most of that money in mutual funds and GIC’s. When I cashed out, I had to pay tax on the gains! So, while I actually had just under $20,000, after the government took their share, I only had $16,000. With real estate, when you need a chunk of cash, you can refinance a property or take out a secured line of credit against the equity you’ve built up in the property. This means that you get to continue making money from the rental income on that property AND someone else continues to pay down you mortgage AND if property values are appreciating, you will continue to have an appreciating asset AND you get the money you need – without taxes to pay too!

 

And speaking of taxes… real estate has a lot of tax advantages. Taxes vary by province and state so I won’t get into all of the different advantages… but suffice to say that there are plenty of opportunities to write off expenses against your income, write off the interest on your mortgages, and reduce capital gains taxes.
With so many reasons to love real estate, I haven’t been able to go back to the markets. It’s not to say you should do that too! Real estate isn’t a very liquid investment, and once you own it you still have work to do (unlike stocks). It’s a personal choice, but I know Martin, our money man, is wishing he’d never put his money in the hands of his trusted stock broker. Even in our absolute worst real estate investment we broke even…and in less then 2 months he lost 40% of his money…and worse for him is he lost a significant portion of the down payment he was going to use to buy the commercial property. Maybe some of the stocks will come back, but he’s afraid that a lot of his money is lost forever.