Why Detroit Real Estate Agents Can Not Be Trusted

I get a lot of folks asking me for Detroit real estate agent recommendations, or even people wanting me to help find them a rental property on the MLS. 

While I do work with a lot of real estate investors to get started in Detroit, shopping MLS deals is not what I choose to focus on.

But not everyone has the capital or willingness to do off market Detroit BRRR’s. Instead, they want to find an investor friendly Detroit real estate agent to work with.

That’s understandable. And I’ve been there myself!

But almost everyone I talk to that wants a recommendation for a real estate agent in Detroit wants it for the wrong reasons.

They expect that an investor friendly agent is going to help guide them through the Detroit market and assist them in finding a sound investment.

Sadly, yet understandably, this could not be further from the truth. 

This post is going to dig into why relying on your Detroit real estate agent is a mistake. I’ll also tell you what prospective Detroit real estate investors can do to make sure they are setting their real estate agent relationship up for success.

Detroit Real Estate Agents Are In The House Selling Business

I know what you’re thinking.

No kidding!

And as obvious as that statement seems, it’s equally crazy how quickly people forget it.

They expect their Detroit real estate agent to be able to tell them what areas to invest in even though these agents are not financial advisors and may not even own investment properties themselves.

Even the ones that do own rental properties may not understand the city as a whole. Afterall, Detroit is about 150 square miles and extremely block-by-block. 

And while your Detroit real estate agent can likely give you some broad direction, they really don’t want to get too specific.

Why?

There’s a very real risk of crossing that line into financial advice. They could even be at the risk of breaking the law with what is called “steering”, an illegal practice of directing homebuyers toward or away from certain areas. 

And to be quite honest, Detroit real estate agents don’t have the time to get in the weeds and educate investors on the market.

Why? 

Because not only are Detroit real estate agents in the house selling business, they are in the volume business as well.

Detroit Real Estate Agent Commissions Are Small

Similar to Detroit property managers having to make their businesses work with lower rents, Detroit real estate agents have the same challenge.

Today, the median price of a home in the city of Detroit is somewhere around $76,000. 

If we assume an agent is making 3% commission and keeping 50% of that after their broker’s share, that leaves the agent with just $1,140.

That’s not a lot of money, especially since they work as a contractor without health and other benefits!

As a result, a real estate agent in Detroit may very well need to do 5 or more transactions per month just to make ends meet.

That’s more than one a week!

But small commissions aren’t Detroit agents’ only challenge.

Real Estate Investors Can Be A Finicky Bunch

Real estate investors can be demanding and tough to work with.

I believe you can say the same thing about anyone buying a home. 

But when you’re dealing with a higher priced sale it’s easier to tolerate demanding clients because the commission is worth the effort.

But when investors come to you expecting market education, deal analysis, direction, and perhaps even advice on contractors, property managers, etc… The juice just isn’t worth the squeeze.

Then, real estate investors don’t just want to buy something… they want a DEAL. 

And they have no problem asking agents to submit offer after offer until they get the RIGHT deal.

It’s no doubt exhausting and an impossible task. 

In fact, I have a friend in Detroit that’s an investor and a real estate agent. He’s helped me with a few boots-on-the-ground needs.

I wanted to return the favor by referring non-cash buyers to him.

He immediately said, “I’d happily welcome the leads as long as they’re already educated about the market and know what they want!’.

How many leads have I been able to send to my friend?

Zero.

What’s it all boil down to?

Detroit Real Estate Agents Are Forced To Play A Volume Game

This makes perfect sense when you start doing the math on commission sizes.

Real estate agents in Detroit need to make a living and the only way to do that is by doing as many deals as possible.

Detroit Agents Have Little Time For Market Education

That means there is little, if any, time for market education or hand holding.

And this is a major disconnect for prospective Detroit real estate investors.

Heck, I had the same disconnect even when I was there, on-the-ground, as a local. I was working with one of the most respected investor friendly real estate agents in Detroit.

And I was supremely frustrated with the lack of help I was receiving.

Finally, I started driving areas and neighborhoods on my own for hours on end, taking notes, and figuring things out for myself.

Here are some of those original Detroit area notes from 2019:

Only then did I finally do my first deal. And soon after that I was sourcing my own off-market properties. 

I was doing 99% of the work anyway, why not get an even better deal?!

Ultimately, I felt like a bit of a fool for entrusting such a big decision to an agent. 

It seems so obvious in hindsight.

But it took rolling up my sleeves and doing the hard work myself to realize how ridiculous it was to expect my agent to be the one to educate me on the market.

Detroit Real Estate Investors Often Won’t Show You Properties Themselves

This was another big surprise to me when working with a real estate agent in Detroit. The prominent agent I initially worked with never once showed up to a house to show it to me.

I tried working with another agent that would actually meet and walk houses with me. But he was 22 years old and, looking back, was completely confident in what he was telling me and equally clueless.

I would have been better off had he not showed up!

And when I say my realtor wouldn’t show up I don’t mean he would have his assistant meet me or something like that.

I mean there wouldn’t be anyone there to show me the house. You know, unless it’s tenant occupied and the tenant decides to let me in.

Here’s my first-hand account of showing up at one of my first investment properties I purchased, the First Buy Bungalow.

If the house is empty your agent will likely lead you to believe they’ll be there. But when you arrive and text them, asking where the heck they are, they’ll reply with the lockbox code.

All of this was par for the course for me while investing in Detroit. 

Obviously, this can’t happen when you aren’t local and can’t see the property in person. While some agents might be able to arrange video walkthroughs for you, most won’t. 

Ironically, the ones that are able to spend the time doing this are generally the least successful and least educated about the market.

Oof!

Instead, you’ll be left to make decisions based on some photos or videos and expect to know what you’re doing.

And It Still Happens Today

While some people might tell me things have changed, it’s simply not the case. 

I was reminded of this the other week when a Keller Williams Detroit real estate agent was coordinating a walkthrough for me and my buddy.

She acted like she would be the one showing us the home.

And when my friend showed up at the scheduled time I was abruptly reminded how silly I was for thinking she would be there:

Nothing has changed.

And it’s not surprising, again, given how little these agents are making.

It’s frustrating and hard to deal with but at the end of the day it’s really tough to blame Detroit real estate agents for acting this way.

They almost have to.

The Right Way To Deal With Detroit Real Estate Agents

If you want to have a strong, successful relationship with your Detroit real estate agent you simply need to do one thing.

You must have market knowledge. 

That means not relying on your agent to provide it for you.

The absolute best way to do this is with my Detroit real estate investing course. It’s by far the best money you can spend on educating yourself on the Detroit market.

And chances are you’ll understand the market even better than whatever Detroit real estate agent you decide to work with.

Investing a small amount of money into your education will absolutely save you a ton of money down the line. 

The Return Trap

One example of Detroit deals investors get duped into is something I call the “return trap”.

Take for example this listing that I dig into as part of the course:

It’s a duplex that was initially listed for $200,000 and I rip into exactly why it’s a terrible deal that all investors should avoid. But it’s the exact type of deal out-of-state real estate investors get sucked into.

The worst part?

I know for fact that some “reputable” Detroit real estate agents were pushing this deal to their lists of out-of-state investors.

Some of these agents don’t actually understand the city of Detroit and generally operate in the suburbs (but are now expanding into Detroit, largely due to demand).

And some just don’t care about pushing bad deals.

Yikes!

The listing is still on the MLS and has gone through multiple price reductions and is down to $147,500. 

Spoiler, I STILL would not buy it at that price!

The encouraging thing is I believe investors are slowly getting wise to this. Or at least, I’m making enough noise to help folks avoid these types of deals.

I had at least half a dozen people reach out to me to ask my opinion on this specific listing before my course even went live.

Luckily, I was able to save them from a bad deal.

My point is you need to be able to recognize why this is a bad deal so you can avoid being the oh-so-common out-of-state sucker that ends up stuck with it.

And you can’t rely on your Detroit real estate agent to keep you away from stuff like this.

Putting It All Together

I know doing your own research is hard and a lot of work.

But you absolutely have to do it if you want to be a successful Detroit real estate investor. 

I also know there isn’t a ton of stellar information out there about investing in Detroit real estate.

That’s a big reason why I’ve started this blog!

Now that you understand exactly why you can’t simply rely on your Detroit real estate agent, hopefully it’s a wakeup call on doing some more homework to better understand the market.

I’d love to be able to send my real estate agent buddy some strong leads. 

So if you end up doing your research and want a solid realtor, please feel free to reach out!