Here are 8 comparisons with the TV shows and real life as an agent:
1. Most Real Estate Agents are rich.
FALSE. In reality, the median income of a Realtor (an agent who regularly pays dues) was slightly above $45,000 in 2014. The figure becomes even more depressing when you factor in all agents with a Real Estate license. When I first started in Real Estate, I was shocked by the amount of agents that had financial troubles: Bankruptcies, collection calls, bad credit….. you name it.
However, that doesn’t mean that you can’t get wealthy in Real Estate. They just have to be the top producer in their area and that’s not easy.
2. Real Estate Agents often have heated exchanges with each other in person when negotiating.
My mother was a Broker in the 1970’s and would tell me stories about how they would negotiate in person and use Multiple Listing Books to find homes. Even back then, contracts were negotiated on the phone the majority of the time. Today, technology makes the “in person” negotiation obsolete. In some cases, especially on Bank-Owned properties, the listing agent wouldn’t even have verbal contact with the buyer’s agent and the majority of communication is done via text and email. We would make jokes in my office whether or not the agent actually existed.
As far as drama is concerned, it depends on the agent’s personality. A novice or insecure agent will be looking for ways to direct conversations about themselves. On the other hand, a seasoned, high producing agent usually doesn’t have time for petty arguments. When negotiating, nothing is taken seriously until it’s presented on paper in form of an offer, counteroffer, addendum, or demand. In a sharp contrast to television, a “low ball” offer doesn’t result in an angry phone call from an “offended” agent. They just won’t have their call returned.
That doesn’t mean the high producing, level-headed agent doesn’t care. They know how to pick their battles and make transactions about their clients.
3. Managing a client’s emotions can be a full-time job.
While an escrow usually lasts only 1-2 months, it can feel like years emotionally. Strong feelings should be expected by buyers and sellers. For sellers, in addition to the stakes of their most valuable asset on the line, there are emotional ties to a home. A seller might have grown up in a particular house and have a strong attachment. When the panic arrives, a good agent can become a good psychiatrist while a bad agent will “fight fire with fire” and yell back at their client. Thick skin is a requirement in this business or the agent won’t last long.
4. A home that needs work will always result in a savings.
FALSE. While I know the TV shows do a good job of showing investors actually LOSING money on a fixer upper renovation, the message to the viewers usually results in them thinking anybody can do it. I’ve worked for several investors and the losses are real. Bad renovation estimates, unforseen damages, court fees, evictions, hidden liens, etc are a regular occurence to savvy investors and they learn to account for the incidents.
Additionally, if the home is in a highly-sought after area, there can be multiple offers on the home driving the price up. I’ve some some cases where the fixer upper home exceeded the sales price of a move-in ready home that sold only a few days prior.
Yes — a savings is possible. But don’t kid yourself in thinking there aren’t any risks.
5. Real Estate bargains are easy to find.
FALSE. If I were to call a listing agent and tell them I’m sending over an offer that’s 20% below market, they’d probably laugh at me or hang up. The reality is, the majority of homes purchased on shows such as “Flip or Flop” go way beyond just simply calling an agent and low-balling them. Most of the homes are from Trustee sales or short sales where something “a bit more complicated” was involved. Behind all scenes, the agent teams featured are very sophisticated with their techniques in finding deals and are well connected to the local agents. I personally know the “money guy” for one of the teams featured and he always shares with me the “dark side” of flipping: frequently getting outbid at an auction, last second lis pendens filed on title, evictions, and theft by the prior homeowner. As soon as I obtain a short sale listing, they have an offer ready as part of their system. In other words, these aren’t strategies that the casual buyer buying one home can duplicate or compete with.
While bargains still happen from mistakes from the listing agent and/or seller, they’re far from easy.
6. You should always update the kitchen to maximize your profit.
FALSE. Our listing above had a common dilemma for many sellers who want the most money: They had an outdated kitchen. In their case, they were better off leaving the kitchen alone and doing the work that has a better return on investment: professional staging, deep cleaning, and paint.
Why make a $30,000 investment to increase your value by $15,000?
Every property is unique and there are different strategies to make a home sell for top dollar. There are plenty of fix and flip investors that rarely renovate the kitchen. Many try to do only “carpet and paint flips” where their repair investment is a few thousand dollars. While it makes sense financially, it would make for a boring TV show. That’s why we end up with the lavish kitchens with quartz countertops.
7. Most agents are slick, talk too much, and are arrogant.
FALSE. While this holds true for many of the “diva agents” in every marketplace, a good agent must learn the art of keeping their mouth shut and actually listen to their what their clients have to say. I remember winning several clients simply because I put them at ease by not hovering over them when at an Open House.
8. If you poorly decide, you’re stuck with the home.
FALSE. On many television shows, you’ll often see the heroic shot of the agent using power tools to give an “all hands on deck” feeling to a crisis scene. The show script often involves the home being over budget or drama with the contractor.
In reality, a normal purchase using a Realtor’s contract allows a “due diligence” period where the buyer can cancel without penalty if the home isn’t in satisfactory condition. Ask any Realtor if they like investor deals. They’ll tell you that many of the so-called “cash” offers (which usually end up in 11th hour hard money loans) from investors result in cancellations because the numbers didn’t pencil out. For homes that are purchased at the Trustee Sale auction, the investor has the option of selling the home via “wholesale” to another investor and cut their losses.