Why Your Agent Should Know BOTH Sales & Leasing

March 15, 2018

I recently sold a multi-million dollar luxury home in a sought after neighborhood in San Francisco. The day I held the first open house, a buyer’s agent called me that his client just walked out and and was submitting an offer that evening. Since it was the weekend, his offer included a contingency clause that gave them two days time to investigate their ability to make the renter vacate since the property was tenant-occupied. Well, I knew for a fact from years of leasing experience that the tenant could be given notice to vacate and certain city rent control laws did not apply in this situation given the circumstances.

Even though the price was acceptable, my seller rejected the offer at my advice because it would be disadvantageous to tie up the property, especially so early on in the process, while the agent verifies certain city rent control laws with his attorney. The next day, we received more open house exposure and buyer interest momentum grew. The first agent re-submitted his buyer’s offer removing the rental investigation due diligence clause because as I expected and initially explained to him, his attorney said their was no rent control protection. At the same time, a clean, non-contingent higher offer came in from another buyer’s agent that the Seller accepted at my advice. The first agent’s buyer potentially could have gotten the deal had the agent knew SF tenant rights and rent controls law from the beginning. Timing is critical in real estate.

Unlike most agents, I’ve done a lot of BOTH sales and leasing. Why? Because decisions by buyer investors I have represented are informed by numerous factors such as cap-rates, return on income, turnover costs, vacancy loss, tenant protection/rent controls laws, remodeling costs, PITI costs (payment, interest, taxes, and insurance), property management fees, gentrification potential, nuisance factors (e.g. neighbors, nearby construction), potential additions/modifications to maximize rental income, rental market conditions, etc. Further I have represented many landlords who have had to sell or are deciding whether they should sell their rental-income property and consideration is given as to how this affects their overall investment portfolio, short and long-term goals, or lifestyle (e.g. perhaps they prefer to invest in a passive-income index or mutual fund than deal with the higher-maintenance issues involved in owning real property.) We compare net returns and evaluate predicted outcomes based on different sets of circumstances.

It boils down to this: owners want to MAXIMIZE their net return and MINIMIZE their risks, while having as much financial upside as possible (within their budgetary constraints) with as little headache as possible.

I have also done both sales and leasing because there have been situations where buyers I have represented were in transition and first needed to rent a property while seeking a more permanent home. By building this relationship, I became more familiar with their needs (home features, floorplan, criteria, location, commute, timing, financing restrictions and much more.) For tenants who are busy, it can be annoying to have to work with a separate tenant’s agent and a separate buyer’s agent where issues have to be constantly re-explained. There can also be unique family dynamics with multiple parties (e.g. extended family) involved in the financial decision-making which requires more tact and moderation. There could be spouses going through a separation or an adult child needing to explain to his parents they are getting older and need to rent out or move-in. These transitions can made easier, emotionally and logistically, when an agent involved is knowledgeable about BOTH sales and leasing.

I can keep going on.

One issue that drives this point home is when property owners or real estate agents try to sell me on their listings being a “great investment”. This term is thrown around loosely so often, I hear it all the time. I have worked with lenders on foreclosures, short sales, and evictions. I’ve analyzed, researched and appraised properties for deeds of trust. I have worked for real estate developers selling new home construction and seeking property (either land for ground-up construction or fixer-uppers). I can tell you that once you get into the nitty gritty numbers, you’ll realize that the “great investment” these agents or sellers were pitching are actually crap that could seriously put you or your buyer client at financial risk. I prefer not to waste clients’ time presenting them with property prospects unless I have already screened the property and there is real potential, based on their unique circumstances.

Further, if an owner-occupant is moving out of their home and is considering whether to rent or sell, they should also be informed about certain capital gains tax exemptions they may qualify for which require the property be owner-occupied  at least two of the last five years preceding the time they sell. An owner stands to lose serious money if they are unknowingly locked into a long-term lease or if he/she lets this timeframe pass without having been informed of the owner-occupancy tax exemption implications. (I am not an accountant, please consult with a CPA.)

I have seen and been through a lot with regards to real estate the last 15 years and this is why having both sales and leasing experience can make a huge positive difference when the left hand “knows” what the right hand is doing. I don’t always do leases, it depends on the situation, but I have done enough the last where it has massively widened my perspective and amplified my ability to think critically in real estate and beyond.