The Difference Between a Real Estate Investor and a Real Estate Agent
Many people have a hard time making the distinction between a real estate investor and a real estate agent. After all, they both work in real estate and make money from properties, right?
In reality there are more differences than similarities between these professionals. And if you’re interested in selling your house in Portland, it’s in your best interest to understand these differences and so you can choose to work with the one that’s best for you.
Okay, let’s start some basic definitions…
What is a real estate investor? Someone who purchases, owns, manages, rents, and/or sells real estate for profit. Making repairs and improving of the property is typically involved as part of the real estate investment strategy.
Real estate agent: Someone who arranges the buying and selling in real estate transactions for clients. This person makes a profit by requiring a percentage of the sale/purchase amount.
Right off the bat, you’ll notice quite few differences. But there are even more differentiating factors to dig into beneath the surface. Let’s do just that.
1. Agents work under brokers, investors do not
A real estate agent works under a real estate broker. Real estate statutes say that brokers must supervise and be responsible for their real estate agent’s actions. However, because agents are considered independent contractors and not employees, the broker is legally not allowed to control certain aspects of their work.
Investors, on the other hand, are not controlled by a broker. They are running their own business and may or may not have their own employees.
What does this mean for you?
A real estate agent, in theory, understands the service standards and requirements of their broker. However, because of this lack of control over agents, the broker cannot ensure a consistent customer experience. That means it’s always a bit of a gamble when choosing an agent.
Since a real estate investor has a personal investment and interest in their business, they’re much more likely to maintain consistent quality. Additionally, they have more freedom and flexibility to meet the individual needs of their clients.
2. Agents have a license, investors don’t need one
To do business, Portland real estate agents must be licensed in Oregon. However, you only need a license if you’re representing someone other than yourself in the purchase or selling of properties. With that in mind, real estate investors do not need a license.
Although getting a real estate license involves taking and passing a difficult exam, it should not be taken as an indication of expertise. More important is the number of homes they’ve successfully helped their client’s sell or purchase.
In fact, the National Association or Realtors reveals that around just 10% of agents are doing 90% of business.
A huge number of agents have little or no experience.
Real estate investors, on the other hand, could not stay in business without being successful. Instead of a license, this type of real estate professional has a few different measurements of expertise:
- Client reviews
- Portfolio of past projects
- Years in the business
3. Agents run on commissions, investors make money on the investment
Both real estate agents and real estate investors earn money on real estate — they just do it in different ways.
Real estate agents work off of commission. In Portland, investors earn an average of 5.2% commission on every sale they facilitate. Real estate investors do not work on commission (they are the ones making the purchase, after all!). Instead, investors make money from a piece of real estate by…
- Renovating and selling the property
- Managing the property as a rental
- Bundling the property with a handful of other properties and selling the entire batch in bulk
4. Agents want to help you sell, investors want to buy what you’re selling
There’s another key difference between these two types of real estate professionals — one is acting as a middleman to help you sell a house, the other wants to buy the house from you directly, eliminating the need for a middleman.
Yes, a real estate agent wants to help you sell your home, but that’s because there’s something in it for them. This can be good or bad, depending on your specific situation.
A real estate investor streamline the entire process (and as we learned above, eliminate your commission costs) by purchasing your home directly from you.
Which brings us to the next and final big difference…
5. Agents use a slower process, investors specialize in fast cash sales
In Portland, it can take 2 or more months to sell a home — but that’s only if the house is in great condition. Houses that need repairs can sit on the market for much longer.
During this time, a real estate agent will be working with you to set up various open house and individual showings. They’ll help you work through offers, negotiations, inspections, and all the other processes involved in selling your home with a real estate agent.
This process is thorough and can be effective, but it’s not for everyone — especially when you need a fast sale or a cash sale.
Real estate investors are known for providing fast offers. They’ll come to look at your home, and make you a cash offer within 24 hours. If you accept, you can close the deal (and have cash in hand) in as little as 2-3 days.
An investor may also be willing to provide flexibility in the purchase. For example, if you need to live in the house for a bit longer. Depending on your situation, you may even be able to negotiate a lease-back agreement.
Choosing between a real estate agent and a real estate investor
As you’ve learned, agents and investors are quite different. In fact, a better comparison might be between a real estate investor and a traditional buyer. (We’ve done that for you, here!)
If you’re selling your home, the route you choose will depend entirely on your situation. If you’re not in a rush, and your home is in perfect condition, it may make more sense to work with an agent.
Other times, if you’re looking for the fastest sale, want cash, or don’t want to spend time and money on repairs, staging, or commissions, an investor may be the most convenient and effective choice.
Interested in selling to a real estate investor?
At Columbia Redevelopment, we buy homes in any condition for all cash, without any fees or inspections and have years of experience in the community.
If you have any questions about how we work or are interested in getting a cash offer for your home, give us a call at (503) 406-9874. We would love to chat with you about the process and answer any questions.