Customers You Can’t Afford to Ignore

Some real estate practitioners are hesitant to work with real estate investors. But that attitude can hurt your business. Here’s why.

September 1, 2007

Are you watching your number of transactions dwindle? If so, it’s time you do something about it.

It’s time to rethink, regroup, and go after a new segment of clients. Instead of dealing with the angst of the credit-crunched first-timer, the bloodthirstiness of the bargain-hunter, or the denial of the seller, it’s time you start working with investors.

Skeptical of this niche? Many real estate professionals are. Not too long ago, I heard a practitioner sniff, "If a home buyer tells me he's an investor, I run the other way."

The Upside of Investors

Admittedly, some practitioners have been burned by investors who take advantage of their knowledge and experience and then cut them out of the transaction. But that’s generally only true of the short-sighted amateur investor; professional investors think long term. They want your help and are willing to pay for it. So start setting any mutual distrust aside and realize you both need each other.

But, you argue, investors buy 20 percent or more below market price and bring comparables down in the immediate neighborhood.

There's an upside you’re missing, though. Once the home has been repaired and remodeled, it raises values in the neighborhood, possibly setting off a chain reaction that can revive an entire community.

Rehabilitated homes serve a greater purpose by setting new local standards for habitation. The positive side of that is obvious. If the homes aren't rehabilitated, their values will continue to go downward. If the homes are fixed up, they sell for higher prices, inviting new interest to the neighborhood.

By teaming up, practitioners and real estate investors can make great things happen.

Case Study: Working Together in Harmony

Take for example, HomeVestors, a national franchisor that sells its unique brand to franchisees — professional housing investors. You've probably heard of them: The company buys ugly houses and has a caveman as its mascot.

HomeVestors supports its franchisees with prodigious training that covers it all, from how to buy and rehab older homes to how to put together a contracting team and get the homes marketed once its been cleaned up, repaired, and remodeled.

The company’s suggested formula for success is to buy older homes below the median price for the area, typically the low to mid-$100,000s, then rehab the home to appeal to first-time or credit-challenged home buyers.

HomeVestors was founded by a REALTOR® — the late Ken D'Angelo. Therefore, it’s not too surprising that the company not only encourages its franchisees to work with real estate practitioners, but credits much of franchisees' success to partnering successfully with practitioners.

"The relationship between HomeVestors and REALTORS® is contrary to the stereotypes of real estate investors and REALTORS® as strict competitors," says John Hayes, CEO of HomeVestors.

Based on its entire franchise network, here are some survey findings that illustrate that close bond even more:

  • 78 percent of HomeVestors offices use a real estate practitioner (either in-house or out of house) to sell their properties.
  • 44 percent of HomeVestors offices use a practitioner to help them find properties to purchase.
  • 88 percent of the properties that HomeVestors offices rehab are sold through REALTORS®

Yes, HomeVestors is just one company in a world of real estate investors. But there’s a greater lesson to be learned: The next time you run across a home buyer who turns out to be an investor, think again before turning the other way.

Investors, after all, have to buy homes or they logjam their income stream. And that’s one customer relationship that has the potential of being long and prosperous.

Learn More

Investment Real Estate: The Nice to Master (REALTOR® Magazine, September 2007)
By developing the skills to serve clients who want to invest in real estate, not just live in it, you position yourself to serve the full spectrum of their real estate needs — and build a more consistent, more profitable business model for yourself.

(c) Copyright 2007 Realty Times. Reprinted with permission.

Blanche Evans is a writer/editor and CEO of evansEmedia. Formerly, she was a senior editor with Realty Times, where she was named by REALTOR® Magazine as one of the most influential people in the real estate industry.